Disclosing the Flood Certification Fee
by Andy Zavoina, BOL Guru Guru BIOS
Question: I read briefly somewhere that the flood determination fee that we charge should be broken down. If our fee is $25.00 and the actual determination costs $15.00, we should list the $10.00 fee we make under pre-paid finance and the other $15.00 down under other finance charges. Is this the case?
Answer: The flood certification fee may generally be excluded from the finance charge under 226.4(c)(7). However, that applies only to the flood determination. If you also have life of the loan coverage, that is a service that will extend beyond closing. It therefore, should be broken down and added as a finance charge. You do have the option of not braeking it down at all and of adding it all to the finance charge.
Reg. Z OSC 226.4
3. Charges assessed during the loan term. Real estate or residential mortgage transaction charges excluded under §226.4(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.
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