Upon a recent visit to the Hud web site there is a reference to the fact that a document prep fee by a non-affiliated third party is not a finance charge - however if the bank itself should charge this for documents it has prepared then it should be included in the origination fee and would then be considered a finance charge as a result. Any help with this issue? We have historically placed it on line 809, described it as a document prep fee paid to the bank and not considered it a finance charge.

Can you post a link to this reference?

226.4(c)(7)(ii) exempts fees for preparing loan related documents in a real estate transaction. (If bona fide and reasonable in amount.)

Here is the information:

http://www.hud.gov/offices/hsg/sfh/ref/sfhp2-15.cfm

DOCUMENTATION PREPARTATION If performed by a third party the mortgagee may not charge this fee if they perform this service themselves. This is included in the 1% origination fee (Please see: HUD handbook 4000.2: 5-3-6) Customary Charge Yes

http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=HSGH&s1=(4000.2)[no]&op1=AND&l=100&SECT1=TXT_HITS&SECT5=HEHB&u=./hudclips.cgi&p=1&r=7&f=G

G. Document Preparation may only be charged if performed by a third-party not controlled by the mortgagee. The mortgagee may not charge if it performs this service itself.

Linda, if I remember correctly the links you cite deal with the ability to charge these fees in connection with a HUD mortgage loan. You may want to research or review RESPA Reg X for the answer. I believe you will find they require the doc. prep fee to be included in the prepaid financne charge if the Bank charges and keeps the fee. We were not doing this and just got rung up for it.

Linda, I only gave this a quick read but I think what this is intended to reference is if you charge an origination fee the document preparation fee should be considered a part of that fee and a separate document preparation fee should not be charged. Anyways that my take on it.

We rarely charge an origination fee and when we do we do not charge the doc prep fee, but in all other cases we do and I have never taken any heat for charging the doc prep fee and disclosing it as a doc prep fee on the settlement statement.

I agree - now that I review this site further - it must pertain to the HUD Mortgage Loans. However to your second point about getting in trouble during a recent exam, both an FDIC examiner and our outside consulting firm referred to Reg Z (226.4(c)(7)(ii) exempts fees for preparing loan related documents in a real estate transaction. (If bona fide and reasonable in amount.)) and said it did not matter if the bank kept the fee - it is not a finance charge. Did they site any reference in your exit?