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#84276 - 06/02/03 02:49 PM Finance charge
KJ Offline
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KJ
Joined: Feb 2003
Posts: 23
Lone Star State
It's always been my understanding in a real estate transaction that an application fee charged to the borrower was included as a finance charge when calculating the APR. However in reading 225.4C(1) "Application fees charged to all applicants for credit, whether or not credit is actually extended" is excluded as a finance charge. Have I been wrong all this time? I've noticed that the attorney's office includes it as a finance charge when preparing the final TIL. I want to get someone's opinion before I say anything. Thanks for any input.

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#84277 - 06/02/03 02:56 PM Re: Finance charge
Andy_Z Offline
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That is not a change. If you charge the fee and do NOT refund it if the applicant is denied, as an example, the fee can be excluded from the FC.

Many times you'll find waivers of the fee and for this reason, inclusion is the best route since it isn't universally applied.
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#84278 - 06/02/03 03:37 PM Re: Finance charge
golffan Offline
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Joined: May 2003
Posts: 32
Can the appraisal fee be excluded if it is paid to the bank, instead of a third party???

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#84279 - 06/02/03 03:41 PM Re: Finance charge
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Yes, it can be excluded from the FC, however it would have to be included in the fees and charges test for HOEPA.

And to add to Andy's comments about the application fee not being uniformilly applied. IMO he's absolutely correct. If one fee is waived then you no longer charge it to "all" applicants.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#84280 - 06/02/03 04:13 PM Re: Finance charge
KJ Offline
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KJ
Joined: Feb 2003
Posts: 23
Lone Star State
Thanks a bunch, though one more question/confirmation. Staying with the same sec 226.4 regarding special rule;closing agent charges. If the borrower is paying the settlement fee then this should be included as a FC, correct? I don't see this included in the APR calculation I'm looking at from the atty's office. Thanks again!

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#84281 - 06/02/03 04:24 PM Re: Finance charge
Dan Persfull Offline
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Dan Persfull
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Posts: 46,762
Bloomington, IN
You'll get mixed "reviews" on this one. I for one am in the camp that includes them in the FC.

Here's one thread that discusses the issue and if you do a search on closing fees or settlement fees you'll find additional threads to review.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#84282 - 06/02/03 05:08 PM Re: Finance charge
KJ Offline
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KJ
Joined: Feb 2003
Posts: 23
Lone Star State
Thanks Dan, that cleared that up!

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#84283 - 06/02/03 06:11 PM Re: Finance charge
SouthoftheBorder Offline
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Joined: Feb 2002
Posts: 335
The South
If you're collecting fees up front for appraisal, credit report and/or flood certification I've instructed lenders to say "fees paid at time of application" versus application fee. Some lenders keep the application fee and charge separately for appraisal, etc.......We refund the appraisal fee and flood cert., for example, if loan will be denied due to bad credit or if the applicant withdraws the loan request prior to us spending any money provided to us at time of application......But...if you charge everyone the application fee and you do not refund it to ANYONE....that application fee is not included in the APR calculation..... And BTW - the flood certification would be the only item included in our APR calculation - we do not break out determination fee and life of loan coverage fee.....

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