If you don't disclose it, you shouldn't charge it.

Also, it is easier to get these fees up front rather than trying to chase it down when the loan is paid off.

Amen, Kaybee.

Ksc:

"I read it to mean that we would be require to disclose the fee. RESPA and Regulation X define settlement as a process, not a time-specific event and that the fee should be disclosed on HUD & HUD1A line 1201 as an estimate but would need to be disclosed before we could begin charging it."

You said that this was going to be a fee charged at pay-off. This is a subsequent event and would not be reflected on the HUD-1 as it is not part of the settlement transaction. If your loan contract supports the fee, you can charge it. It would be no different than other future requirements, such as paying their insurance or taxes annually.

KB

"Also, it is easier to get these fees up front rather than trying to chase it down when the loan is paid off."

On this specific fee I disagree. If you collect a fee for the release of the lien at the time the loan closes, what are you going to do with it? You can't take it into income as it is slated for a future event and you would have to hold the fee in an in-process account until the lien was released. Reconciling this account would be a nightmare. I also believe it would be a finance charge at account origination, as the fee was not being paid to a public official (it could be more or less at the time of pay-off).

Another consideration is that you would not know the reconveyance fee until the timeframe in which the loan paid off. That may be 30 years out!

It is disclosed as a finance charge on consumer loans. I see lots of banks do that. On commercial accounts, those who collect it have it in a separate account and deal with it correctly.

Alternatively, just make sure you have priced it into your loans as a standard cost of doing business and be done with it!

You'll spend more chasing someone for it than the fee itself.

This has been discussed before here.

I hate to beat a dead horse... So if the loan is a real estate mortgage transaction. We have not charged the fee at the time the loan is closed & funded but we decide now that when we quote a payoff we will include a recording fee to file the release. The deed of trust contracts for other fees (as applicable by law) but doesn't Regulation Z & RESPA require you to disclose it even if you aren't collecting on the front end?

As I recall the discussions, the answer to your question is no.

That's because we are offering the borrower the option of sending the release directly to be filed. It is an option, not a requirement of obtaining the release or the mortgage. If they choose not to pay the fee, we will send the release to them directly. Reg Z applies for fees that are a requirement of obtaining the mortgage.

Check any applicable state law. In the state of IN the financial institution is responsible for recording the release. See IC 32-28-1-1 and 32-28-5-1.