I posted this earlier, but had not logged on, so it went in as anon-- with no responses! Please comment. We use LP as our Automated Underwriting System on some loans (saleable on 2ndary market). Other loans we do a full loan underwriting review. All loans are assessed a processing fee (included as til fee for APR purposes). We have taken the stance in the past that the fee is part of the processing fee and have not detailed the fee on the HUD or GFE as a "POC" since the bank eats the fee. Our residential lending department polled other institutions using the same origination software and their responses were mainly that it was included in other fees and not disclosed separately on the HUD or GFE, but some did show it as POC on the HUD/GFE. Does anyone out there have experience from FDIC in their treatment of the fee during the examination process? I can see issues if we show this as a POC for saleable loans and not reduce the processing fee on non-saleable loans to compensate for the amount. We consider this as a cost of business to sell to our investors.

If you pay any of your "processing", "application" or "whatever you call it" fee to a 3rd party, you must show to whom it was paid.

Also, any 3rd party fee the bank "eats" must be disclosed as POC.

This document should be of some help.

Thanks, Dan - That is the response I anticipated.

I hope this adds favorably to the discussion:
It seems to me that if you charge this fee on all loans made, it would belong to the bank.
If the fee belongs to the bank, it should be disclosed that way on the RESPA docs -- as a fee charged and retained by the bank. The fact that you charge the fee on all loans does not lead me to believe that it is collected solely for the purpose of paying the processing fee associated with secondary market sales. If it were, you'd have a problem explaining it for loans that you did not intend to sell. If it were solely for paying that third party, then I'd think you would disclose it as a fee paid to the third party (as Dan has stated).

Based on your explanation, I'm inclined to believe that the processing fee that you pay to the purchaser is part of a secondary market transaction (not an expense that was collected from the borrower at closing) and not subject to RESPA disclosure requirements at closing.

I think this is consistent with Dan's position.