When? It would have to be built into your construction loan agreement and agreed to at the time the construction loan is made. It sounds little draconian to me. Whether this fee could possibly create a usury situation is a complex question. You need to sit down with your legal counsel. I am not sure what the Mortgage Department is trying to accomplish here. Either the customer applied for a permanent loan or they did not. Once approved, them going elsewhere would be highly unusual. If customers are going elsewhere, then it says your products are not competitive. Also, the bank should have already collected the majority of the costs to make the permanent loan when making the construction loan.
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