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We are looking for guidance on loan modification fees. Is there a cap on how much we can charge a borrower for a modification of a home equity line of credit (HELOC) or an in-house mortgage loan modification? – IBA Compliance Connection

IBA Compliance Connection

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We are looking for guidance on loan modification fees. Is there a cap on how much we can charge a borrower for a modification of a home equity line of credit (HELOC) or an in-house mortgage loan modification?

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Generally, banks in Illinois may charge mortgage modification fees that are agreed to by the borrower, and we are not aware of a cap on such fees. Further, OCC regulations state that national banks may charge customers non-interest fees, and the amount of such fees is a business decision to be determined “according to sound banking judgment and safe and sound banking principles.” However, banks are prohibited from charging modification fees on “high-cost mortgages” as defined in Regulation Z or “high risk home loans” as defined in the Illinois High Risk Home Loan Act.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.34(a)(7) (“Prohibited acts or practices for high-cost mortgages. . . . (7) A creditor, successor-in-interest, assignee, or any agent of such parties may not charge a consumer any fee to modify, renew, extend or amend a high-cost mortgage, or to defer any payment due under the terms of such mortgage.”)
  • Illinois High Risk Home Loan Act, 815 ILCS 137/90.5 (“Modification and deferral fees prohibited. A lender, successor in interest, assignee, or any agent of any of the foregoing may not charge a consumer any fee to modify, renew, extend, or amend a high risk home loan or to defer any payment due under the terms of the loan.”)
  • OCC Regulations, 12 CFR 7.4002(a) (“A national bank may charge its customers non-interest charges and fees, including deposit account service charges.”)
  • OCC Regulations, 12 CFR 7.4002(b)(2) (“The establishment of non-interest charges and fees, their amounts, and the method of calculating them are business decisions to be made by each bank, in its discretion, according to sound banking judgment and safe and sound banking principles.”)