It is my understanding that all fees paid from the line as a draw at closing must be itemized on the initial periodic statement as either a Finance Charge or Other Charge 1026.6(i)-(ii). An example would include Doc Prep Fee as a Finance Charge and the Appraisal Fee as an other charge. I want to make sure I am interpreting the regulation correctly.
The following explains the special handling required for finance charges paid from the first draw. Comment 7(a)(6)(i) 8 states, “Start-up fees. Points, loan fees, and similar finance charges relating to the opening of the account that are paid prior to the issuance of the first periodic statement need not be disclosed on the periodic statement. If, however, these charges are financed as part of the plan, including charges that are paid out of the first advance, the charges must be disclosed as part of the finance charge on the first periodic statement. However, they need not be factored into the annual percentage rate. (See § 1026.14(c)(3).)”
However, document prep fees are generally excluded from the finance charge. Comment 4(c)(7) states that, “in a transaction secured by real property or in a residential mortgage transaction” certain fees can be excluded from the finance charge if the fees are bona fide and reasonable in amount. Excluded fees include:
(i) Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.
(ii) FEES FOR PREPARING LOAN-RELATED DOCUMENTS, such as deeds, mortgages, and reconveyance or settlement documents.
(iii) Notary and credit-report fees.
(iv) PROPERTY APPRAISAL FEES OR FEES FOR INSPECTIONS TO ASSESS THE VALUE OR CONDITION OF THE PROPERTY IF THE SERVICE IS PERFORMED PRIOR TO CLOSING, INCLUDING FEES RELATED TO PEST-INFESTATION OR FLOOD-HAZARD DETERMINATIONS.
(v) Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.