[mdunker]

I am trying to figure out if two charges that we charge are subject to the finance charge rules in 1026.(a)(6). We charge a life of loan flood charge and a tax tracking fee. How can I determine if these fees would be subject to this rule?

[rcooper]

1026.7(a)(6) states you must disclose the amount of any finance charge debited or added to the account during the billing cycle, using the term finance charge.

You look to 1026.4 to determine if a fee is a finance charge. I think Comment 1026.4(c)(7)-3 best addresses the fees you mentioned.

Charges assessed during the loan term. Real estate or residential mortgage transaction charges excluded under §1026.4(c)(7) are those charges imposed solely in connection with the initial decision to grant credit. This would include, for example, a fee to search for tax liens on the property or to determine if flood insurance is required. The exclusion does not apply to fees for services to be performed periodically during the loan term, regardless of when the fee is collected. For example, a fee for one or more determinations during the loan term of the current tax-lien status or flood-insurance requirements is a finance charge, regardless of whether the fee is imposed at closing, or when the service is performed. If a creditor is uncertain about what portion of a fee to be paid at consummation or loan closing is related to the initial decision to grant credit, the entire fee may be treated as a finance charge.

Let me know if you still have questions.

[Kgreene]

Our institution is new to HELOC loans. We are just starting out and have a question. We will be charging the customer a $395.00 origination charge at closing. If we allow the customer to draw that fee off their line we are understanding the regulation requires this fee to be reflected on the billing statement. Can we show the $395.00 as disclosed at closing for the origination fee or do we have to disclose the breakdown of our costs to do the loan that come out of the origination?

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