Mortgage Release Fee
Question: In disclosing mortgage release fees that we will pass along to the customer at the time of payoff, what document should the release fee be on and how should we disclose it? Is putting it on line #1201 of the HUD-1 acceptable? If not, where should it go?
Answer: For purposes of Truth in Lending, fees charged for services provided after settlement, such as mortgage release fees, are finance charges unless disclosed. There are two issues in disclosing them.
First, you don't always know the exact amount. For this purpose, use the best number available. That number would be the fee currently imposed by the government entity charging the release fee.
Second, there isn't a clear place to make the disclosure. This is compounded by automated systems that pick up numbers from a variety of places and include them in calculations. Truth in Lending defers to the HUD-1 for itemization of the amount financed. Because the HUD-1 has all of the information required for itemizing the amount financed and more, it serves that purpose in mortgage disclosures. This means that items such as the mortgage release fee can be disclosed on the HUD-1 and fulfill the TIL disclosure requirement. Now the problem is keeping it out of the settlement calculations. Enter the P.O.C. technique. Use this or a similar technique to disclosure this figure but keep it out of the calculations.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 9, 9/04
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