We charge our customers a fee to release a lien when their loan pays off and place the fee in Block 7 on the GFE and the 1200 series on the HUD-1.

We are being challenged by our title company that this fee should be placed in Block 3 of the GFE and in the 800 series on the HUD-1.

Which is correct?

Does it matter if the fee is going to a third party to manage this task for us in the future?

I'd say yes, it does matter and that's what the title company is basing their argument on too.
Compare it to the credit report fee.
Both your release fee and the cbr fee are costs associated with the loan but they're being paid to a third party.
I'd put both in Block 3.

In my opinion, the fee has no real impact on the loan you are making today. You have two choices. One of them involves tricky accounting and I won't even go there.

The second is to consider it a part of your overhead and include it in with your origination charge.

I do not agree that it would go in Block 3 regardless...you are not paying a 3rd party for services connected to today's loan. It may be 30 years before you ever ultimately pay it out!

ETA: And if you are really paying it today to a 3rd party to handle this for you 30 years later...then I would say it WOULD be in Block 3...but honestly I've never heard of this type of 3rd party service arrangement...interesting!

As Joker said...interesting!
Paradise, could you explain this a bit more please.
Are you giving the release fee to this third party at the time of closing for them to track and hold till you tell them to release the loan?

Not paid when loan closes, would be in the future when the loan pays off. So I agree with RR Joker that it would not go in Block 3 as it could be a different company used to assist with the lien release than what we use today.

So sounds like you both concur that we should not place in Block 7 on the GFE. Right?

If so, then I think placing it in with the origination charge is the only place left to place that fee, right?

Sounds like it is nothing but an additional bank fee (read junk) being tacked on by the bank. As such, it is nothing more than a block one charge and a PPFC.

If the fee is actually for the future payment of lien release fees, then these fees should be held in an escrow type of account until such time that the loan is paid off. Under GAAP rules, the bank would not be able to take these fees into income and would have to hold them for future use. Reference Joker's comment about tricky accounting.

Agree. Thank you all for chiming in.

And what Randy said is why we consider it 'overhead', 'junk'
'cost of doing business' and add it to our already lower than normal loan fee.

It definitely does NOT go in 7. It goes in 1 unless you want to deal with GAAP.

Could someone help me with a defense on this. Perhaps somewhere in GAAP? How do I convince loan ops that the following reference to 'actually are or WILL BE paid to" is speaking to current releases (think warranty deed in a seller's name)and not to future releases of our own security interest.


(e) Certain security interest charges. If itemized and disclosed, the following charges may be excluded from the finance charge:
(1) Taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest.


(e) Certain Security Interest Charges
1. Examples. i. Excludable charges. Sums must be actually paid to public officials to be excluded from the finance charge under §1026.4(e)(1) and (e)(3). Examples are charges or other fees required for filing or recording security agreements, mortgages, continuation statements, termination statements, and similar documents, as well as intangible property or other taxes even when the charges or fees are imposed by the state solely on the creditor and charged to the consumer (if the tax must be paid to record a security agreement). (See comment 4(a)–5 regarding the treatment of taxes, generally.)

ALSO, for a filing fee to be excluded, it must be reflected inside the FED Box area, correct? Not just on a separate Itemization of Amount Financed?

(o) Certain security interest charges. The disclosures required by §1026.4(e) in order to exclude from the finance charge certain fees prescribed by law or certain premiums for insurance in lieu of perfecting a security interest.

ALSO, for a filing fee to be excluded, it must be reflected inside the FED Box area, correct? Not just on a separate Itemization of Amount Financed?

From the Commentary.

18(o) Certain Security Interest Charges

1. Format. No special format is required for these disclosures; under §1026.4(e), taxes and fees paid to government officials with respect to a security interest may be aggregated, or may be broken down by individual charge. For example, the disclosure could be labeled “filing fees and taxes” and all funds disbursed for such purposes may be aggregated in a single disclosure. This disclosure may appear, at the creditor's option, apart from the other required disclosures. The inclusion of this information on a statement required under the Real Estate Settlement Procedures Act is sufficient disclosure for purposes of Truth in Lending.

I probably shouldn't have tagged on to this thread...this is Z in general and not RESPA at all.

What I'm up against is a filing fee for a UCC and a future release of that same UCC.

We have 'filing fee' in our fees and if you enter a fee there it is reflected in the FED Box.

So, for non-RESPA loans, I have an 'itemization of amount financed' and the fees will reflect on that form, but I thought anything considered a filing fee or a non-filing insurance fee was to be reflected inside the box.

We also have separate listings for:

UCC Filing Fee
UCC Release

If you enter the fees in the above list, it won't show in the FED Box. Just on the Itemization.

I'm thinking this release is for a current release (maybe another lender, for instance). NOT for a future event. I need backup on that, however.

I'm thinking this release is for a current release (maybe another lender, for instance). NOT for a future event. I need backup on that, however.

Well, which is it. Only you can tell us that. IMHO, if it is for some fee in the future, how can you know what that fee might actually be?? The State may raise the fee before the release or even heaven forbid, eliminate it.

If it is for release of a current lien, it is a cut and dried issue.

The regulation is worded that way, Randy.

(e) Certain security interest charges. If itemized and disclosed, the following charges may be excluded from the finance charge:
(1) Taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest.

will be paid to public officials

Unless those fees are held in an escrow account until the loan is paid off you are going to have a hard time making the argument that those specific fees went anywhere except to the bank's bottom line.

Thanks, Randy. I just wanted my memo to be accurate because I know I'll likely get some backlash. I had handled this on RESPA loans, but just discovered a "future fee" on UCC's as well. It's always something.