Our third party settlement service providers charge a lump sum settlement fee for doc prep, title services, attending the closing, and disbursement of checks. The majority of the fee is for services that are excludable from the finance charge.

We were including the fee as a finance charge until a recently when examiners indicated that we incorrectly included the fee in the finance charge.

This is a lump sum fee, so we do not have a breakdown of the amounts that apply to each service provided. Should the fee be excluded from or included in the finance charge?

Comment 1026.4(a)(2) - 2

I reviewed that section, and 1026.4(c)(7)(2) of the commentary, and it would seem, based on that, that a lump sum settlement fee for title services, doc prep, attending the closing and disbursement of funds would be excludable from the finance charge.

We are getting push back from a secondary market investor who is requiring that the lump sum fee be included in the finance charge, or they will not purchase the loan. This is contrary to how our examiners said the fee should be handled (exclude from the FC).

Investors make their own rules. If you are selling the loans - follow their rules. Examiners should not be including them in your examination anyway once they are sold.

Since 1969, two general principles of Reg. Z have been:
1. all charges and fees are Finance Charges unless properly excluded by the regulation, and
2. "if in doubt, disclose"

If you or any other stakeholder have ANY doubt about the classification of a charge, call it a FC and thank the examiners for their opinions.