There were several posts regarding Subordination fees last year, and I have to agree with the conservatives that these fees should be treated as finance charges.

But what about the SUBRODINATION RECORDING FEE? This is the fee paid to record that document, and it is paid to the county. I think it would be excludable from the finance charge calculation.

One of the big lenders in the country has said that it is a finance charge. What do the experts think?

I'm no expert, but FWIW, I agree that it is a finance charge. I'm looking in the commentary at 226.4(e)(1)(ii). How do you interpret "If the obligation is between the creditor and a third party..."?

This position is echoed by one of our secondary market sources, and they've stated that they expect a subordination fee AND a subordination recording fee to be included in the f/c calculation in order for them to purchase the loan.

Normal recording fees are not to be included in the finance charge. Fees for recording assignments are to be included in the finance charge. 226.4 of TILA states the following for items excluded from the finance charge:


"Taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisying a security interest."

I have a really dumb question. What is subordination recording fee? I am try to refinance my first mortgage and I see a Subordination Recording Fee of $175 on the HUD statement. When I asked my lender, she told me that it's a recording fee for my Second Mortgage Loan, which I'm keeping open. Doesn't make sense to me, but hey, what do I know?

If you are leaving your second mortgage open, that lien holder must resubordinate their lien. That means they need to put in writing that 1) they acknowledge there is a new first mortgage or lien and 2) thier lien will be in second position, or subordinate, to the new first lien you are obtaining. That document must be recorded along with the documents for your new first lien. There is a cost to that, which is the recording fee.