Are These Fees Considered Finance Charges?

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Question:

We have recently seen an increase in the variety of fees charged to our borrowers at closings by settlement/closing/title agents. For example, "special tax search" for a search done by the agent regarding pending tax assessments (separate fee from title exam fee), "transfer handling fee" charged by the agent for processing deed transfers through government auditing and recording entities, "hold signature fee" charged by the title agent for title update prior to signing off on Title Policy, etc. Are these fees considered finance charges per Reg Z Truth-in-Lending? The affected loans are real estate secured residential mortgage loans.

Answer:

Lenders dream up junk fees every day. Your best approach is to set an iron-clad rule that ALL fees are Finance Charges until the lender can convince the bank's compliance officer that there's a specific exemption in Section 226.4. If the lender can't convince you, then neither of you will be able to convince the examiners.

First published on BankersOnline.com 6/19/06