Topic: Finance Charge
-
For an auto loan, we charge a document preparation fee and a lien recording fee. Both fees are added to the loan amount requested and then withheld from the amount given to the borrower. Are either of these fees considered a finance charge or a prepaid finance charge? Should we include the fees in the amount financed?
—
by
We believe that a document preparation fee would be considered a finance charge, as it would not be charged in a comparable cash transaction and is not otherwise exempted from the definition of a finance charge (because the loan is not secured by residential real estate). In addition, the document preparation fee is a prepaid…
-
Is a Lender’s Closing Protection Letter fee considered a finance charge?
—
by
We believe that a closing protection letter fee charged by a title insurance company should not be considered a finance charge under the Truth in Lending Act (TILA), based on two separate exemptions. First, Regulation Z specifically exempts certain real-estate related fees from the scope of finance charges, including fees for title insurance “and similar…
-
When a title company charges a fee for a certificate of compliance with the anti-predatory lending program in Cook County, is that fee considered a finance charge?
—
by
No, a certificate of compliance fee likely should not be included in the finance charge calculation, subject to the discussion below. Regulation Z exempts certain real-estate related fees from the finance charge calculation, if the fees are bona fide and reasonable in amount. Fees for title examination, abstract of title, title insurance, property surveys, credit…
-
In our area [Cook County], title companies charge a “Tax & Indemnity” fee when the company holds funds for property taxes that are due within 60 days of a mortgage loan closing, generally in situations where the tax bills for the upcoming installment have not yet been issued. Should we include this fee in the finance charge calculation?
—
by
No, we believe this Tax & Indemnity fee should be excluded from the finance charge calculation, since it is a title insurance-related fee that is part the title insurance process. Regulation Z exempts fees for “title examination, abstract of title, title insurance, property survey, and similar purposes” from the finance charge calculation. Title companies charge…
-
Should we include a title company’s “closing fee” in the finance charge calculation? The closing fee is charged for the service of conducting the real estate closing. We thought that a closing fee should be excluded, since we do not require the imposition of the charge, nor do we require the use of a particular title company as closing agent. Moreover, cash transactions also have closing fees, and fees that are charged in comparable cash transactions are not required to be included in the finance charge.
—
by
We believe that a separately itemized fee for conducting a loan closing should be included in the finance charge calculation if it is a required service, even though your institution permits borrowers to select the service provider. Regulation Z and the accompanying Official Interpretations include fees charged for a conducting or attending a closing in…
-
Our mortgage closings are handled by a title company. All funds, including recording fees, are paid to the title company, which then pays the recording fee to the county recorder. Since we are not directly paying the recording fee to the public official, should we include the recording fee in our finance charge calculations?
—
by
No, this fee can be excluded from the finance charge calculation, provided that it is itemized and disclosed and the title company pays the entire fee to the public official. Regulation Z's finance charge calculation excludes fees “that actually are or will be paid to public officials” for recording a mortgage, among other similar fees.…
-
We recently raised our document preparation fee, and our examiners are now questioning whether the fee should be excluded from the finance charge. We think they are suggesting that the fee is not “bona fide and reasonable.” One of our lenders told us that his former employer charged the same higher fee. Can you confirm that the fee should be excluded from the finance charge?
—
by
If your examiners are questioning whether the fee is bona fide and reasonable, they may conclude that it should not be excluded from the finance charge. In general, Regulation Z exempts from the definition of a finance charge your “fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents,” but only…