Refinance Fee/Loan Extension Fee

I feel like this has been discussed previously, but after going through 43 pages of my past postings, I failed to see it and gave up.

If a creditor charges a "refinance fee" on a construction loan, i.e. a fee for the borrower going with another lender for the permanent loan, or an extension fee on a construction loan (let's say 9-month construction only loan needs more time for completion), is this something that needs to be disclosed on the LE/CD for the initial construction loan? Or, is this considered a subsequent event that does not require disclosure? Obviously, the difficulty here with disclosing is it is unknown whether the fee will actually be assessed or not. Nobody knows if the borrower will choose a different lender or if the construction won't be completed on time.

The "refinance fee" as you have described it is a fee for a subsequent event. Under §1026.17(e), it's not required to be disclosed, although you should provide for it in your loan agreement.

An extension of the construction loan term would also be a subsequent event, and the fee not disclosed under Reg Z. Assuming that the extension is accomplished by a modification only extending the loan maturity (or the construction phase of a single-close construction/perm loan), you won't be refinancing, so no Reg Z disclosures here, either.

Thanks, John! That's what I remembered from the previous discussion as well.

What if the construction loan needs to be increased, but the maturity date will not be changing?

If the loan officer wants to charge an origination fee on the increase in funds (ex 1% on $50,000 increase or $500), in addition to filing fees for modifying the existing mortgage, can we just do a modification, or would we need to do all new disclosures under a refinance of the existing loan?

I've looked for previous posts regarding Increasing an Existing Construction Loan (TRID covered) and not been able to find this situation.

What you can charge a consumer is a State law issue. How you document the loan modification is a question for your legal counsel.

Unless what you do triggers a refinance under 1026.20(a), it does not trigger new TRID disclosures. If you are not extinguishing and replacing the current obligation or adding a previously undisclosed variable rate feature, then it is not going to be a refinance under 1026.20(a).

Thanks Randy!