1. What are the potential violation pitfalls of only charging credit report fees to borrowers whose loans go to closing but not to those whose applications don't close for whatever reason?
2. Can anyone offer any guidance on the appropriateness of using a negotiated credit report flat fee from a credit agency that has factored in the anticipated costs of all credit reports and add on charges and is designed to recoup those costs only from closed loans? I am concerned that there may be regulatory issues with passing on the overhead credit report costs incurred in the deal that died to the borrowers whose loans do close. I've read Krupa v. LandSafe, Inc., 514 F.3d 1153 (11th Cir. 2008)which basically states it isn't a violation of RESPA section 8 (with a few caveats), but I am interested to know if there is any more recent guidance or any other regulations that need to be considered.

Are you talking RESPA or non-RESPA loans?

RESPA loans.

1) Unless you have some sort of contract with the customer, how would you ever expect to collect any fees from an applicant if the loan does not go to closing?

2) The fee is the fee. If they are charging you a flat fee, that is the only one to disclose.

Thanks rlcarey. Most lenders in my area do not charge for credit reports. We have considered it a "cost of doing business" and not charging for them unless the loan goes to closing. It's looking like we are all going to have to change to a policy of charging every applicant a fee for credit report pulls since it's the only charge we can charge at the time of application for all applications.

This is getting particularly more important to decide whether to do this as we are finding out that credit counselors, non-profits and even the media are telling consumers who want their credits score for whatever reason, to go to a lender that doesn't charge for credit reports and apply for a prequal or preapproval even though the client may not actually be interested in a mortgage at all. That way the client can get their true credit scores for free as opposed to paying one of the credit agencies much more for a consumer score that may not be the same one lenders see. Essentially they are gaming the system that was designed to protect legitimate applicants denied or subject to risk-based pricing. In the end the cost of pulling the credit and the fee we will recover is tiny compared to the total overhead and resource costs needed to handle the increasing volumes of insincere applications. Collecting that credit report fee is the only thing lenders can do to mitigate at least a small amount of the costs of the federally mandated version of "MyFreeCreditScore.com" that we are trapped in right now.