Is the cost of overnighting the payoff amount on a refinance (from another financial institution) included in the APR calculations? I'm looking at the reg and see that it says that charges imposed on the consumer are finance charges if the creditor requires a particular service for which we are charging. Would this bring it under the reg? I appreciate your thoughts and comments.

My thought is if the fee would be charged even if there was no financing involved (ie. cash purchase of the property) then the fee would not be included as a finance charge. This may not work for all fees, but can be used an an indicator.

What does anyone else say?

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Robert Marx
Opinions stated are not necessarily that of my employer.

If you have a compliance library that goes back to 1994, search on "Rodash". This was a case of charging a fee for overnighting documents. And while the cost of FedX'g would be less than the daily accrual, it was deemed a finance charge. It was ready to invoke class actions lawsuits all over the country.

As a result, amendments were made to "Z" so you could exclude some fees paid to 3rd partys if you didn't require their use or retain part of the fee. Done correctly, it is excludable.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

[This message has been edited by Andy Z (edited 01-15-2002).]

So, Andy...if we required the refinance amount to be here tomorrow, we would be requiring the use of an overnite courier, however, we are not specific as to which overnite courier they have to use. Plus, we are only charging the customer the cost of the overnight charges, nothing more. So, you're saying that based on the above info it would not be a finance charge because we are not specific about the courier and don't charge additional fees above the actual costs. Please let me know if I have understood you correctly! Thanks!

Even if the consumer can choose the 3rd party, it can be a FC if you require the sevice. If the customer requests it, that is another matter and they will usually "request" it if you say that you are adding $20 per day for interest per diem to allow for the snail mail, times 4 days, or FedX is $15 and the customer saves $65. They'll request it.

One of the results of the Rodash amendments was to put in place a tolerance level for certain types of loans. On your new real estate loans you have a $100 tolerance before you'd have a reimbursable violation. So in a way it is moot.

From the ABA Exec. Update, June 1996:
Exclusion of specific fees. Under the 1995 Legislative Amendments, the following fees are excluded from the finance charge with respect to mortgage transactions:

· Fees imposed by third-party closing agents that are neither requested nor retained by the lender (§ 226.4(a)(2));

· Fees for preparation of loan-related documents (§ 226.4(c)(7)(ii));

· Fees for pest infestations or flood hazards conducted prior to closing (§ 226.4(c)(7)(iv));

· Certain taxes paid as a precondition to recording an instrument securing the evidence of debt, if itemized and disclosed (§ 226.4(e)(3)).

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

[This message has been edited by Andy Z (edited 01-15-2002).]