Property Lien Release Fee

Question: We are planning to charge customers for a lien release fee that we must pay when releasing a lien on property securing the loan. This will be charged after closing - at payoff, actually. Will this fee be a finance charge? If so, how do we include it in the finance charge calculations when we don't know for sure what the fee will be?

Answer: This is a fee that can be exempted from the finance charge if you itemize it and disclose it. It is a fee related to the release of the lien that you pay to a government entity. To keep it out of the finance charge, include it in your disclosures given at closing. You can only estimate the amount, especially on a 30-year mortgage. A best practice would be to disclose the current amount of the fee and indicate that this is an estimate.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 6, 6/04