[compliancegirl2012]

Can a bank charge the customer for an in-house evaluation prepared by the bank? If so, is this a finance charge?
If an appraiser prepares a valuation for us and charges a fee, can we “upcharge” and the bank gets the extra money? If so, is this a finance charge? (not my idea or desire to do this)
If the bank is the settlement agent and we charge a settlement/closing fee, is this a finance charge?

[compliancegirl2012]

Also, we currently have a statement on our loan docs about future lien releases. We currently don’t collect them at closing but rather when the loan pays off. The problem is when we have a customer use our mobile app it doesn’t include late charges and lien release fees. Our Chief Financial Officer wants to know if we can charge our current loans a lien release fee by adding it to the loan balance.

[jholzknecht]

Hey Compliancegirl,

These are both great questions.

Regulation Z deals with the disclosure of fees. The regulation does not determine whether a fee is allowed or not. The legality of a fee is generally determined under either state usury law or by the terms of the loan agreement.

In-house evaluation fee – Generally you should be able to charge the fee, assuming it is not prohibited by state law, but you want to make sure the borrower is aware of the fee.
• Providing a loan estimate that discloses the fee assures the consumer is aware of the charge before consummation.
• Section 1026.4(c)(7) of regulation Z states that property appraisal fees or fees for inspections to assess the value or condition of the property may be excluded from the finance charge if:

o The service is performed prior to closing;
o The transaction is secured by real property or is a residential mortgage transaction (a loan to buy or build the borrower’s principal dwelling); and
o The fees are bona fide and reasonable in amount.

Future Lien Releases – Much like the in-house evaluation fee you generally should be able to charge the fee, assuming it is not prohibited by state law, but you want to make sure the borrower is aware of the fee.
• Providing a loan estimate that discloses the fee assures the consumer is aware of the charge before consummation.
• Section 1026.4(e) provides that if itemized and disclosed, taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest may be excluded from the finance charge.
• Charging the fee or adding it to the loan balance at origination for new originations should be fine.
• Adding the fee to the loan balance on loans currently outstanding may be a problem, if it will be part of the balance to which the finance charge will be imposed. You are modifying the borrower’s existing agreement and should receive the borrower’s consent when doing so.
• It appears the mobile app needs some attention. If it quotes incomplete payoffs, an attempt to collect a higher amount could be a unfair or deceptive act or practice.

[compliancegirl2012]

So if a third party provider prepared an evaluation for us and charged the Bank $75, could we charge the customer $200? If so, do we separate the fees?

[Author]

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