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#184383 - 04/27/04 11:06 PM Flood - Finance Charge
Suzie Offline
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Suzie
Joined: Apr 2002
Posts: 662
Far North
According to Z, the flood determination fee is not a finance charge. It is when I read the commentary that I get confused, specifically: 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.

So is it acceptable to lump the determination & life of loan fees & treat both as a finance charge or not?

I have one area treating life of loan as a finance charge & another disclosing both the determination & life of loan as finance charge .
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Lending Compliance
#184384 - 04/28/04 01:22 AM Re: Flood - Finance Charge
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:

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.




Yes, but you should be consistent. Why would one area know what the LOL fee is and another not know?
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#184385 - 04/28/04 03:07 AM Re: Flood - Finance Charge
Anonymous
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We had that same issue before. 1/2 of our branches were using one lump sum and the other 1/2 of our branches were splitting the fee 1/2 and 1/2. The basic determination fee was $10.00 and LOL $20.00. They made the assumption that LOL coverage was $10.00 & the initial determination $10.00. However, the billing from the flood service provider did not split out the charges for LOL as it was one flat fee ($20.00).

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#184386 - 04/28/04 05:45 PM Re: Flood - Finance Charge
Life-Of-Loaner Offline
Member
Life-Of-Loaner
Joined: Mar 2004
Posts: 50
Houston, Texas
The flood vendors are taking advantage of the circumstances. A small number of elite flood vendors have been making big money as a result of unintended regulatory consequences. Flood fees are typically overlooked because they are among the smallest on the closing statement. But if you look at the forest rather than the trees, the numbers justify some attention. You are right on track to be asking about how to 'bifurcate' these flood certification fees.

Technically, the portion of the fee that is for the “Basic” determination is not a finance charge, and the portion of the fee that is for “Life of Loan” monitoring is a finance charge. The incumbent flood vendors are not going to cooperate with disclosing the true split.

Want to hear the solution to this issue?

Originators should only order low-cost (but guaranteed) “Basic” flood certifications at origination, from the vendor of their choice. Basic certifications have everything necessary for the originator to be in compliance.

Separately, originators and servicers should make arrangements for monitoring of their loans against post-origination flood map revisions; IF they do business with investors/others that require it. This service should be contracted for separately, apart from the Basic certifications.

This approach is more consistent with the spirit and letter of the applicable regulations than today's Life of Loan business model. There are numerous compelling advantages that I would be happy to elaborate on, if anyone is interested.

Many originators are overpaying for so-called “Life of Loan” flood certifications, which they don't need; in a way that can actually do more harm than good (except from the perspective of the big flood vendors).

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#184387 - 04/28/04 06:55 PM Re: Flood - Finance Charge
Suzie Offline
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Suzie
Joined: Apr 2002
Posts: 662
Far North
Thanks for the gracious responses.

I will have everyone splitting thoses flood fees --
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"Whales get harpooned because they surface to spout."

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#184388 - 04/29/04 12:54 PM Re: Flood - Finance Charge
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
LofL,

I'm sorry, you going to really have to convince me why I should start recommending to clients that they need to start dealing with two separate companies to do initial determinations and the life of loan trackings, when the current cost for this process is minimal, the customer pays for it, and the current life of loan tracking is assignable.

I know that you are involved in selling some flood product and seem to have a beef with the "big vendors". But you are really going to have to put forth a more compelling argument to get me on your side.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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