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Inspection Fee a Prepaid FC?

Question: 
We are reviewing a loan called a One-Time Close Construction loan. The construction loan and long-term financing are closed at the same time. I am wondering if the lender’s inspection fee can be included as a prepaid finance charge when calculating the APR. From what I read in Staff Commentary for Reg Z (Section 226.4(a)(1), this fee should be a finance charge. In our case, the inspection fee is paid to a third party. Does that make any difference? I just need clarification.
Answer: 

Answer by David Dickinson: If the fee is earned AFTER closing, it is a prepaid finance charge (PPFC). If the fee is for services BEFORE closing, it is not. For instance, a flood determination is not a finance charge, but the life-of-loan monitoring is a PPFC.

When is the service performed for the inspection? If before closing, it is not a PPFC. If the inspection is after closing, it is a PPFC.

Answer: 

Answer by Dan Persfull: No.

First published on BankersOnline.com 3/7/05

First published on 03/07/2005

Filed under: 
Filed under lending as: 

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