If our borrower is getting any kind of service/inspection per the purchase contract, and is paying any part of the fee, then we disclose it on the LE (whether we find out about it by the contract or verbally, ect.) If our borrower is getting a service outside of the contract (such as a survey for a fence, or Cert of Elevation for Flood Ins), then do we disclose for those? I thought we didn't, but now I am going back and forth on it. Citation from the rule?

1026.37(g)(4) and its Commentary.

If you know about such a cost (for a service not required by you, the lender) at the time you're preparing the LE, it goes on the LE in Section H, if the borrower will be or is likely to be paying for it. And as you said, it matters not how you learn of the facts.

"fees for inspections not required by the creditor but paid by the consumer pursuant to the property contract"

1. The Reg goes on to say that these inspections, while not imposed by the lender, are NOT disclosed with the description "(optional)". I thought they were? Now I'm all kinds of confused on this "optional" business.
2. If the said inspection is NOT "paid by the consumer pursuant to the property contract" and in fact, not part of the contract whatsoever (nor a lender requirement), then we do NOT disclose the fee at all on the LE?

So we are confident in our decision that inspections are not labeled "(optional)" as we previously thought. But we're not sure on this other question. Any thoughts?

The way I'm reading it is that you put "optional" when the Lender is not requiring and the Consumer is not required as part of the sales contract. Therefore, on a home inspection it was have "optional" since the Bank is not requiring and the sales contract is not requiring it. If the sales contract required a home inspection (but usually never does), then you would not mark it as "optional". I understand the confusion because the Official Interpretation states:

37(g)(4) Other.
4. Examples. Examples of other items that are disclosed under § 1026.37(g)(4) if the creditor is aware of those items when it issues the Loan Estimate include commissions of real estate brokers or agents, additional payments to the seller to purchase personal property pursuant to the property contract, homeowner’s association and condominium charges associated with the transfer of ownership, and fees for inspections not required by the creditor but paid by the consumer pursuant to the property contract. Although the consumer is obligated for these costs, they are not imposed upon the consumer by the creditor or loan originator. Therefore, they are not disclosed with the parenthetical description “(optional)” at the end of the label for the item, and they are disclosed pursuant to § 1026.37(g) rather than § 1026.37(f). Even if such items are not required to be disclosed on the Loan Estimate under § 1026.37(g)(4), however, they may be required to be disclosed on the Closing Disclosure pursuant to § 1026.38. Comment 19(e)(3)(iii)-3 discusses application of the good faith requirement for services chosen by the consumer that are not required by the creditor.


But I read that as only providing an example of when the fee is consumer obligated. An inspection fee not consumer obligated would receive the "optional"

At least thats my take

I interpreted (g)(4) to say that if the lender has knowledge that the consumer is likely to pay for a certain service, then it needs to be disclosed. In my market, a borrower will almost always purchase a home inspection, but the bank does not require this. In Texas, a residential sales contract allows a buyer to have the property inspected, but does not specify if for sure one will be done.
That said, I do think I need to disclose a home inspection on the LE since it is common practice for the buyer to have one. Other less common services (such as a survey for a fence) I will not disclose, unless the buyer tells me up front that he will be using such service.
Just my interpretation, but I welcome any additional thoughts or advice!

Pretty sure has become more confusing than before!

So disclose a fee regardless if its in the contract if you know about it. Got it.

But what is labeled "(Optional)" and what isn't? Insurance, HOA transfer fees, RE commission fees = NOT Optional. Inspections paid by the borrower per the contract = NOT Optional. Inspection paid by the borrower, but NOT part of the contract = Optional.

Does that sound right?

I agree with Monica. But thats my interpretation

Ok I think I am following this logic now... I didn't see Dcomply's post until I had already responded, & now I think I'm a bit more confused than before. I can see the interpretation D is getting at, since the examples specifically include the statement "pursuant to the property contract."
BUT let me play devil's advocate here... the examples are included in the "Official Interpretation." ii of (g)(4) says this: "The parenthetical description “(optional)” shall appear at the end of the label for items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products." It doesn't leave room for anything but the items listed.
Would love for a guru to chime in on this, since I've seen them say before that the actual regulation wording trumps the interpretations. This seems like a very gray area to me...

I definitely agree with this also! Its like they're limiting the "optional" label for "coverage" like products. And an inspection, whether in the contract or not, wouldn't fall into that type of product category.

If you don't know the amount of the home warranty, are you still required to disclose on the LE? If so, what amount do you use?

Call a home warranty provider.