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Mortgage Loans, Credit & Appraisal Costs, and Application Fees

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Question: 
If a bank requires an upfront deposit on a mortgage loan application for appraisal and credit report fee costs, is this considered an application fee that must be charged to all applicants even if the application is declined prior to incurring the charges? Reg Z seems contradictory on this issue since appraisal and credit report fees are generally not to be considered finance charges in a real estate transaction.
Answer: 

Your analysis is sound. Reg Z describes numerous fees that can be excluded from the finance charge. The real estate exclusions in 226.4(c)(7) are very specific and appear to apply to your situation. Fees, such as your appraisal and credit report fees, can be excluded from the finance charge if the transaction is secured by real property or if the transaction is a residential mortgage transaction and if the fees are bona fide and reasonable in amount.

First published on BankersOnline.com 3/4/02

First published on 03/04/2002

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