[Mary Frances]

We have an outside company do a Quality Control Review of our secondary market loans. We are in a bit of a disagreement with one of their exceptions that was noted on a file. We had a loan that was originally a construction loan and the house was complete and the borrower was getting permanent financing. We had a final inspection fee that we included in the finance charge. The company doing the QC Review noted this as an exception due the service being performed prior to closing (1026.4). I researched this as well and found the same thing in 1026.4(c)(7). I have always been taught that the inspection fee, whether it is the inspection fees during the construction phase or the final inspection fee, is included in the finance charge. So, have we been looking at this incorrectly?

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[jholzknecht]

On a construction loan inspections typically take place after closing, therefore, as stated in 1026.4(c)(7) the fees are included in the finance charge. On your permanent loan the final inspection occurred prior to consummation so the charge is excluded from the finance charge. Overstating the finance charge, as you have done, is not a major concern. Understating the finance charge is what leads to problems, such as reimbursement.

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