When calculating HOEPA fees it's my understanding that you only count fees PAID by the borrower. Our institution has a closed end RE secured loan where we pay all closing costs. We are actually getting reimbursed by HUD for some of the closing costs due to the GREEN nature of the loan program which we are a part of. Seems like a no brainer but I am getting some feedback from a Loan Officer that sent me the following which she got from the St Louis Fed.

I dont see this exact language in Reg Z anymore and was wondering if § 226.4(c)(7)was repealed or revised? Also,if we compensate our affiliated Title company for their services for the secure loans, would this come into play?

Here is the language she sent me:

"In the high cost mortgage worksheet, please see "Certain Non-Finance Charges Under § 226.4(c)(7) – Include fees paid by consumers only if the amount of the fee is unreasonable or if the creditor receives direct or indirect compensation from the charge or the charge is paid to an affiliate of the bank. (See the example in § 226.32(b)(1)(ii) of the commentary for further explanation.)

What concerned her was that we would be directly or indirectly be compensated by HUD grant funds for appraisals, credit reports, etc. Any thoughts appreciated!

Thanks

From 226.32:

(ii) The total points and fees payable by the consumer at or before loan closing will exceed the greater of 8 percent of the total loan amount, or $400; the $400 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index that was reported on the preceding June 1.

And also form 226.32:

(iii) All items listed in Sec. 226.4(c)(7) (other than amounts held for future payment of taxes) unless the charge is reasonable, the creditor receives no direct or indirect compensation in connection with the charge, and the charge is not paid to an affiliate of the creditor;

Would you be paying these fees if you were not going to be reimbursed for them under this program?

I'm not familiar with the program, but is the bank reimbursed for the fees or is the borrower given credit for closing costs under the program?

Based on the facts as known I think I would have to side with the loan officer since the bank is being compensated for the charges.

We give the borrower a credit for the closing costs then we would seek reimbursement from HUD to cover the fees. Yes, we would cover the closing costs even w/o the reimbursement from HUD.

However, we NORMALLY have a clause that states the borrower will have to pay back the fees if they pay off their loan prior to two years. That would not be an issue here so it would not be included.