Skip to content

Inspection Fee a Prepaid FC?

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 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 by Dan Persfull: No.

First published on 3/7/05

First published on 03/07/2005

Filed under: 
Filed under lending as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics