Lenders in one of our markets would like to provide "their builders" with an introduction letter to hand to prospective home buyers. The letter is on bank letterhead and introduces the MLO to the prospective buyer. The letter states that the Banks origination charge is (for example) 1%. Is that a trigger term which would require more disclosures? 1026.24 (d)(iv) states "the amount of any finance charge." But in the commentary, it seems to imply that if the "amount" can be determined by the advertisement, that would be the same as disclosing the amount.

Can anyone help me?

I agree, it is a trigger under comment 4 at .24(d)(1). I would be just as concerned with why this would be allowed for one officer and one builder?

I had the same thought, Randy. As I started reading the post, I expected the topic to be Section 8...not Reg. Z.

It IS one officer.....as far as I know.....but multiple builders. As you well know, MLOs and Marketing do all kinds of things without checking with compliance first. I've seen this with MLOs and marketing at three banks......despite trying to tightly rein it in.

OK.....so I am meeting opposition regarding the disclosure of a 1% origination charge being a trigger term. The commentary (mentioned above) states this:

4. Finance charge. i. The dollar amount of the finance charge or any portion of it includes statements such as:
A. “$500 total cost of credit.”
B. “$2 monthly carrying charge.”
C. “$50,000 mortgages, 2 points to the borrower.”
ii. In the last example, the $1,000 prepaid finance charge can be readily determined from the information given. Statements of the annual percentage rate or statements that there is no particular charge for credit (such as “no closing costs”) are not triggering terms under this paragraph.


The marketing director doesn't think that stating a 1% origination charge fits into the above comment. How can I explain it to him?

1026.34(d) Advertisement of terms that require additional disclosures. (1) Triggering terms. If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (d)(2) of this section:

(iv) The amount of any finance charge.

So, your marketing director is saying that an origination fee is not a finance charge. Maybe they should stick to marketing and leave compliance to you.

I guess he's thinking that the charge is not an amount, but a percentage. But a percentage is easily converted to a dollar amount.

The commentary is pretty clear: "the prepaid finance charge can be readily determined from the information given"

You don't ask a financial analyst to do neurosurgery. And you shouldn't let marketers decide matters of compliance.

And I agree that there can be a RESPA Section 8 violation hiding in there, but you need more information to make that call with confidence.

What about highlighting discount points in an advertisement? Do they fall under the "amount of finance charge" trigger term rules?

Depends on what you mean. There is a difference between saying there is an option to pay discount points to receive a lower interest rate and saying by paying one discount point you can lower your interest rate by .50%.

They are stating a point is equal to 1% and then providing an example.... "On a $200,000 mortgage, one discount point would be $2,000." Makes me nervous because "figures" are being quoted in the example.

Well, a point is a finance charge and once you mention a dollar figure or percentage, you have the right to be very nervous. Without knowing the context of the entire advertisement, I would say it needs a hard look.

OK, now they are saying "up to $750 off closing costs". Would it be acceptable to remove the dollar figure and make a general statement "reduced closing costs"? Trying to avoid additional disclosure here.

What does "up to" mean and how is that determined. I do not see that statement as a specific trigger, but it needs a full explanation.

I agree that "up to" should be removed, since it's somewhat vague.

When providing a specific amount off of closing costs (i.e., $750), how does that fall under the (iv) the amount of any finance charge? I understand if you are referencing a certain fee/charge, like the processing fee, but "closing costs" is so general.