Academic journal article ABA Banking Journal

Construction Loan Survey Fees. (Mailbox)

Academic journal article ABA Banking Journal

Construction Loan Survey Fees. (Mailbox)

Article excerpt

Q. Let's say a hank is granting a construction loan. A second survey is needed to determine that the foundation will be correctly positioned on the lot before the foundation is laid. Is the fee for the survey considered a finance charge under Regulation Z, or is it an excluded charge?

A. 12 CFR 226.4 (c) (7) 3, Commentary states: "Real estate or residential mortgage transaction charges excluded under [section]226.4(c)(7) [in the regulation] are those charges imposed solely in connection with the initial decision to grant credit [emphasis added]. This would include, for example, a fee to search for tax liens on the property or to determine if flood insurance is required. The exclusion does not apply to fees for services to be performed periodically during the loan term, regardless of when the fee is collected. For example, a fee for one or more determinations during the loan term of the current tax lien status or flood insurance requirements is a finance charge, regardless of whether the fee is imposed at closing, or when the service is performed. …

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