We have a situation where a customer, about a week before closing decided that he didn't want to close a new loan to cash out some money on his residence because his loan was going to be sold. Does he still owe us the paid fees such as the appraisal fee or are we required to waive that for some reason?

That will depend if you use a processing agreement. Technically they would owe the fees and you are not obligated to waive them. But without a processing agreement you may not have any documented means of collecting the fees. This is why we use a processing agreement and also collect those fees up front.

If you push the issue he could decide to go ahead and close the loan and then rescind. If that happens then you are obligated to refund ALL fees paid by him in relation to the transaction.