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#2138230 - 07/14/17 04:13 PM Want to Start Charging an Inspection Fee
ATLbanker Offline
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Registered: 09/07/05
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Loc: Georgia
We want to start charging an inspection fee for construction loan draws. Our plan is to charge a $50 fee as we get the draw requests. Some customers want a draw weekly, some less frequently. What amount do you include in the finance charge calculation?

Thanks


Edited by ATLbanker (07/14/17 04:13 PM)

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TRID - TILA/RESPA Integrated Disclosures Rule
#2138231 - 07/14/17 04:16 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
John Burnett Offline

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An estimated total of the fees to be collected at closing. If you think it's 6 inspections during the construction phase, use $300. If you think it will be four inspections, use $200.
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#2138234 - 07/14/17 04:17 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
rlcarey Offline
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Inspection fees for inspections after consummation are always finance charges. So all of them. It is going to force into a CD addendum also when the TRID amendments become final.
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#2138315 - 07/17/17 09:47 AM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
RR Joker Offline
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ATL Banker. From my own experience, it's easier to settle on a standard fee [come up with your average number of inspections based on recent CL's] and just charge that fee for inspections on all CL's. It will make your life much, much simpler.
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#2138408 - 07/17/17 01:24 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
ATLbanker Offline
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Registered: 09/07/05
Posts: 328
Loc: Georgia
I have a few more questions.

If we do a standard fee as RR suggests, then we do not have to count the inspections and refund if the customer uses less inspections? Can we place a limit on the number of inspections?

If we decide to charge per inspection and charge at the time of the inspection, then we only need to be concerned if the number of inspections exceeds the number we used in our estimation of the fee for the finance charge? If the customer uses more, then we have to pay for those out of our pocket and if the customer uses fewer inspections there is no fee to refund because they were not charged?

I was asked to post this question: Since 100% of the fee is being passed onto a third party, does the fee have to be included in the finance charge?

I appreciate everyone's responses.

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#2138415 - 07/17/17 01:39 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
rlcarey Offline
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It is not a "standardized fee" that is being referenced. You estimate the number of fees required based on the specific project and loan amount and multiply your inspection cost by the number of anticipated inspections. Whether those fees are refundable or if you can charge more is a matter of your construction loan agreement. Whether you collect upfront or as you go, you are still going to have to go through the same exercise and include the estimated construction fees as a finance charge, either a prepaid FC if collected at or before closing or a FC during the course of the loan. Most LOS systems do not have the ability to handle non-interest post closing finance charges.
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#2138419 - 07/17/17 01:48 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
Beachbum, CRCM Offline
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Originally Posted By ATLbanker
We want to start charging an inspection fee for construction loan draws. Our plan is to charge a $50 fee as we get the draw requests. Some customers want a draw weekly, some less frequently.


Since this will be a new procedure for your bank, you may to consider producing an inspection and draw schedule for your construction loans. We provide 2 copies of the schedule with the early documents so the customer can give one copy to the builder and keep one for themselves. This allows us to know exactly how many inspections we will charge for.
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#2138424 - 07/17/17 02:14 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
RR Joker Offline
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Loc: The Swamp
Our's actually is a standardized fee. We charge a flat fee based on history of costs to inspect a project/type of project.
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#2138445 - 07/17/17 02:51 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
rlcarey Offline
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We charge a flat fee based on history of costs to inspect a project/type of project.

Therefore on different types of projects, the fee is different? That was my point. It is not a "standardized" one size fits all.
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#2138472 - 07/17/17 04:03 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
ATLbanker Offline
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Registered: 09/07/05
Posts: 328
Loc: Georgia
So if we charge a flat fee, we don't have to worry about number of visits and if we need to refund fees or absorb fees? We want something as simple as possible, while trying to cover our expenses. The fee could be based on property type, square footage, estimated construction time, but it is a flat fee, not a per visit fee and it is a finance charge when calculating APR.

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#2138476 - 07/17/17 04:09 PM Re: Want to Start Charging an Inspection Fee [Re: ATLbanker]
rlcarey Offline
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Registered: 07/16/01
Posts: 64016
Loc: Galveston, TX
You can charge any fee for any amount that you want that is allowed under State law. Your first stop is your legal counsel and then to design your agreements. TRID is a disclosure regulation - it doesn't tell you what you can or cannot do as far as fees go. You figure out what you are going to do first - then figure out how to disclose it.
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