We recently started doing Fannie secondary loans. We collect a $300 app fee with we use to pay for the credit and the appraisal, but those vary according to what DU calls for. On the HUD how should you handle? For example, if my appraisal is $250, but my credit report only is $22 that adds to $272, we have collected $300. Lending wants to keep additional $28 and not apply as a POC credit to anthing else of the buyers costs. My concern, I know I don't have to include the appraisal fee or the credit fee in the finance charge, but what about the $28 left. Do I have to show as a separate entry? These will vary alsmost on every customer, what is the best way to handle.

I think I'd just show the $300 app fee and then not anything else, no credit report or appraisal. What you pay with that fee is then up to you, and you've disclosed to the borrower that you're charging an app fee of $300.

Do you keep this fee whether the loan is closed or not and do you charge everyone? If so, from what I remember that's not a prepaid finance charge.

From:

HUD’s Response to Questions from the Massachusetts Bankers Association

Q: The bank collects an application fee. These monies are for the appraisal and credit report. The GFE show the fees paid on line #808. The designated providers are given at application. On line #800 on the HUD -1, is the bank also required to enter the names of the providers on line #808 of the Settlement Statement?

A: The amount of the “application fee” should be disclosed on the GFE and the settlement statement, on line 808 or any other blank line in the 800 series. Sicne this fee is payable at or near the time of application, it should be marked as POC and the charge should not be used in computing the totals. The specific charges relating to the appraisal and the credit report must then be broken out on lines 803 and 804. As per the instructions, these line must identify the name of the person or firm ultimately receiving the payment, and also be marked as POC (See Instructions). To assure that there is no confusion about double charges, fees listed in line number 803 or 804 should indicate that those fees are included in the “application fee” amount, or alternatively, the line in the 800 series containing the “application fee” could include an annotation clarifying that the charge includes those fees listed in 803 or 804.

Oops, Dan's right. I always forget about those stupid MAB questions. Sorry!

OK so I show the actual appraisal cost on line 803, and the actual credit bureau cost on line 804. Say those add to $275. What if anything do I do with the $25 left over. I am confused where to show this, again we wish to keep the leftover if any. This is the part I am having issue with.

You don't need to "break out" the $25. This is also addressed in the questions from the MBA. #17 page 6 of my copy. I don't have a link to it or I'd post it for you.

"The regulation specify that for all items, except those paid to and retained by the lender , the name of the person or firm ultimately reciving the payment should be shown." (See Instructions). (The see instructions is referring to Appendix A.)

Dan, is there a link to that MBA reference (the HUD Q & A's). I remember reading it, but it seemed a long time ago and I can't put my hands on it.

Thanks

Why not show the Application Deposit on line 204 and then list the Credit report and appraisal in the 800's as you normally do? This will allow the customer to see their deposit and show the fees as well. The fees offset each other. This wouldn't allow the bank to keep the extra $28, but it is clean.