In a recent seminar we were told that we are allowed to charge a fee for reviewing a potential borrowers credit report. If we choose to do this, would the entire fee (credit bureau report cost) plus the added charge be put on the same line and just reported as the credit bureau fee or would we need to split them up and reflect two seperate fees on the HUD.

What you keep would be a prepaid finance charge I think, so be careful where you put it on the HUD.

Beagle Queen,

If the fee for reviewing the credit report is charged in real estate secured transaction, it might not be a prepaid finance charge. Here's the staff commentary to section 226.4(c)(7) of Regulation Z.

Paragraph 4(c)(7).
1. REAL ESTATE OR RESIDENTIAL MORTGAGE TRANSACTION CHARGES. The list of charges in § 226.4(c)(7) applies both to residential mortgage transactions (which may include, for example, the purchase of a mobile home) and to other transactions secured by real estate. The fees are excluded from the finance charge even if the services for which the fees are imposed are performed by the creditor's employees rather than by a third party. In addition, the cost of verifying or confirming information connected to the item is also excluded. For example, credit report fees cover not only the cost of the report, but also the cost of verifying information in the report. In all cases, charges excluded under § 226.4(c)(7) must be bona fide and reasonable.

For verifying I agree, but the post just said reviewing. I saw that as different, but maybe that is what they were referring to. I just wanted to point it out if it was more of a review for underwriting as opposed to verification.

FWIW I agree with BQ - when your LO, underwriter or whoever just reviews the the report to look at the total debts, payments, past due accounts, etc. they are not verifying/confirming the information, they are simply using the information provided.

Thanks to everyone for the feedback. I was out of the office for a few days and just got your posts. The fee would be for verifying the accuracy of the information on the report. Since this is the case are you all saying that it can be listed as a single fee (including the actual report cost) on the same line of the HUD?

Who's verifying the information? If the fee is being paid to the bank then that fee should be disclosed in the 800 series as payable to the bank. If the CRA is verifying the information, then it would be included in their fee.