Construction loan survey fee

Is the fee for a survey on residential construction loan a finance charge?

The facts:
1. The survey is conducted after the basement has been dug and after the loan has closed
2. The credit decision has already been made, and the first draw may well have occurred.

In reading Reg Z commentary 226.4(c)(7) 3, it states that "Real estate or residential mortgage transaction charges excluded under §226.4(c)(7) are those charges imposed solely in connection with the initial decision to grant credit. This would include, for example, a fee to search for tax liens on the property or to determine if flood insurance is required. The exclusion does not apply to fees for services to be performed periodically during the loan term, regardless of when the fee is collected."

The answer is yes - it would be a finance charge since it was imposed for a service after the loan closed (during the loan term).

(Why wouldn't you survey the property BEFORE making the loan? After the money's out the door, it's a little late to discover title defects, liens, and other unfavorable info. Sounds like the right question might be "is it an unsafe lending practice to delay a survey until after the loan closes.")

Back to the posted question. Although this charge is a FC as described, did you known about it at the time disclosures were required? More importantly, was it required by contract? If yes, you have a problem. If, on the other hand, it's a "subsequent occurance" you have no obligation to guess what might happen after the loan closes, it's not a violation, and you have no duty to redisclose.

Seems that the title company requires the survey after the basement and yes, it was anticipated at the time of closing. Some require a survey before closing and then a second one after the basement.

I believe that it is a finance charge, but there are some who do not agree with me, so I thought I'd put it out to you, the experts. Thanks for your thoughts.

I've run into this before - they want to make sure the foundation was put on the actual property and it doesn't overlap property lines or violate set-back rules. Fees for this inspection would be finance charges in my book.

I would agree that it's a finance charge. I would consider it an "inspection fee" to insure the basement was laid out correctly, and inspeticon fees are finance charges.

We also have this charge. We call it the final survey and it is a PFC. We also have another appraisal completed when the home is complete and this also is a PFC. We call it the final certification of value.

Since you knew at closing that the fee would be imposed at a later date, you have an obligation to include it in the FC, and also to treat it as a Prepaid FC if it is deducted from an advance.

Yes it would be a finance charge. Due to the fact that it is completed after close.