[TheBank]

We are going to use a 3rd party inspector for our construction loan inspections for the first time on a consumer TRID 1 year interest only, P & I at maturity for the construction only loan. We estimate needing 10 inspections for the project. We are fairly certain we will not need more than 10, and realize if we order any additional inspections the bank will have to pay that cost. My question is if we end up only needing 7 inspections for some reason. My understanding is since we are charging for the inspections up front, at origination, we would need to refund any portion of the inspection fees we charged if we end up not needing to obtain all of the inspections. For example if we charge for 10 inspections that cost $100 each, or $1,000 at origination, but over the term of the loan we order 7 inspections for a total cost of $700, we would need to refund $300. Is this correct, and when would we have to refund the $300? Would at maturity be sufficient? Also, would a revised Closing Disclosure be required?

[jholzknecht]

In my experience 10 inspections is more than what most lenders experience. That said your question is still valid.

Yes a refund is needed.

Section 1026.19(f)(2) states that if during the 30-day period following consummation an event occurs that causes the CD to become inaccurate, and results in a change to an amount actually paid by the consumer from the amount disclosed in the CD a corrected disclosure must be mailed or delivered not later than 30 days after receiving information sufficient to establish that such event has occurred. It appears that it will be more than 30 days after consummation before you are aware of the change in the number of inspections, so a revised disclosure would not be required.

You may want to consider charging for each inspection at the time of inspection instead of the collecting the funds in advance. You still have to disclose the estimated fees but this practice would eliminate the need for a refund.

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