We are contracting with a business to perform tracking for our insurance and taxes. This cost would be passed on to the borrower and properly disclosed on the GFE and HUD. The business has implied that it will also start tracking loans that are already on our books, but at a discount. Is this a violation of RESPA? They are charging new loans one fee while charging old loans another. But they are performing the same task.

Who's incurring the fee for the loans already on your books?

the customer

You are going to bill your existing customers for this service after the fact? I wouldn't do that unless you disclosed this fee at closing. Sounds like big trouble to me!

Those are the types of fees that you can't start charging after the fact to your existing borrowers.

When my bank first started, we used a tax service company but did our own insurance tracking. The cost of the tax service (which is one up-front fee for life of loan servicing) was disclosed and charged the to borrower. There was no fee for insurance tracking as that was in-house.

Skip forward a few years. We contracted with a vendor for insurance tracking. There was an upfront fee to my bank plus there is a monthly fee based on the number of loans we have with them. The borrower does not pay any of those fees. That's just the cost of doing business.

We recently shopped around to see if we wanted to stay with our current tax service vendor. If we had changed vendors, new borrowers would have been charge under the new fee schedule. However, the cost to move the existing loans over would not have been passed to those borrowers, even if we had gone with a company that charged monthly fees to monitor in addition to the fee to switch.

If they are doing this as enticement to get you to sign the contract you have a Sec 8 issues. They are giving a thing of value in anticipation of receiving your business for their settlement service.

Before you even think about charging existing customers the fee you better read your contracts very very closely and then consult your attorneys and then consult them again to make sure they consulted state laws. Very seldom does a closed-end contract allow a unilateral change or additional charges after the fact that were not originally contracted for. You would not want me walking into one your branches with such a bill because I would have my attorney and several deposit slips for you to complete and I would be there until you filled out one that I and my attorney thought had the right numerals and trailing zeros filled in.