Answer by Jack Holzknecht: A prepaid finance charge is a finance charge that is paid at or before closing. My advice is to assume that all fees are finance charges unless they are specifically included on one of the lists in Regulation Z that allow certain fees to be excluded from the finance charge. Each of the lists in Reg Z requires that certain conditions be met before any fee can be excluded from the finance charge. You need to study the lists included in 12 CFR 226.4(c) of Reg Z and the Offical Staff Commentary.
Answer by Richard Insley: Adding to Jack's good advice, you should not assume that the names you use for fees are the same as names used by other lenders or the HUD-1. You must determine the nature of each fee and then classify it according to Section 226.4 of Regulation Z.
Make a list of all fees your bank charges in any type of credit transaction, plus broker fees and any other third-party charges you may pass on to your borrowers. Describe (in writing) the nature and purpose of each fee. As Jack suggests, treat each fee as a finance charge until you can prove otherwise. If the fee can include an upcharge or if the fee is a bundle of more than one charge, add these details to your description. If you consider the fee to be exempt from Regulation Z, cite the sectional reference and your logic.
Distribute your list to all lenders, trainers, servicing personnel, quality controllers, and auditors. Plan to provide this list to compliance examiners, and to offer it as "Exhibit A" if you are sued.
Answer by Andy Zavoina: The OCC has a good finance charge table on PDF page 98 of their TiLA manual located here.
As noted by other Gurus, you must know what the fee is for and what you call it. They may differ, but there will also be many industry-standard terms. Especially, denote your differences to avoid confusion with anyone reviewing your files.
First published on BankersOnline.com 1/3/05