Thread Options
#45409 - 11/25/02 05:55 PM Closing cost? or Not a closing cost?
Peepers Offline
10K Club
Joined: Jul 2002
Posts: 13,994
Our home equity line of credit we offer includes a $50 annual maintenance fee. In the past, we didn't collect this until after the first year of the loan. Our consumer lending department wants to collect this when the loan papers are signed but our marketing department wants to continue advertising this product as having no closing costs, then disclose a $50 fee in the fine print (but no mention of when it's collected).

In looking at Kirchman's big orange book, it's mentioned that advertising a loan as having no closing costs is a triggering term. That makes sense. We then must go on and disclose the APR, variable rate disclosure, fees etc.

My question then, is this annual fee just a fee we must disclose (a triggered term) and not a closing cost?

Or is it a closing cost because we will collect it when the note is signed? And then we can't say the loan has no closing costs.
_________________________
blah

Return to Top
Lending Compliance
#45410 - 11/25/02 06:16 PM Re: Closing cost? or Not a closing cost?
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,464
Bloomington, IN
In reply to:

our marketing department wants to continue advertising this product as having no closing costs, then disclose a $50 fee in the fine print (but no mention of when it's collected).


You have to disclose when the fee will be collected and if you collect it at closing then IMO it's a closing cost.

226.5b: Requirements for Home Equity Plans (01/01/02)

7) Fees imposed by creditor. An itemization of any fees imposed by the creditor to open, use, or maintain the plan, stated as a dollar amount or percentage, and when such fees are payable .
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#45411 - 11/25/02 06:17 PM Re: Closing cost? or Not a closing cost?
Anonymous
Unregistered

We do what might be considered a compromise. It is not collected at closing and is therefore not a closing cost. However, it is billed in the first billing cycle and therefore is disclosed on the first periodic statement. (It is also disclosed in the agreement.) Therefore, you don't have to wait a year to collect the fee. It is then charged again annually on the anniversary date of account opening.

Return to Top

Moderator:  Andy_Z