In the past, my bank has considered inspection costs for construction loans to be part of the origination charge......our origination charge covers the cost and the bank simply pays for the inspection when one is needed.

Now management wants to change that. So.....I am at a loss. How do you disclose and collect these fees? I am ignorant on the topic. Do you collect the inspection fees at closing, anticipating how many inspections there will likely be? If so, where is the inspection money "stored" until needed? What if all of the inspection money is not used?....sounds like an accounting nightmare.
How would these "collected upfront" inspection fees be disclosed on the CD? Are the fees figured into the APR?

Can someone point me in the right direction?

We collect ours at closing anticipating how many are needed. If we do not use all of it, we refund to the customer. We keep a spreadsheet to keep track. This fee is included in the APR and we show in Section B - Services you cannot shop for.

We ran into the same issues a few years ago, so we decided to go with a flat inspection fee that wasn't dependent on the number of inspections actually performed. We haven't run into any problems yet.

The fee only goes into section B if a third party is performing the inspections. Most of the time, we do our own inspections, so our fee generally goes in section A.

^^True. We use a 3rd party for all of our inspections.

Does anyone collect inspection fees subsequent to closing?.....like when it's time for an inspection, hit the borrower for the money?

You can collect the average costs and charge them for more later or refund the funds not used. Both are subsequent events which do not impact your CD.

Thanks to everyone for my education.

Final question......

Inspection fees, if charged at or before closing are prepaid finance charges regardless of whether or not a 3rd party is used or the bank conducts the inspections?

But if charged subsequent to closing....not subject?

We take our inspection fees out of the disbursement being requested.

Inspection fees for inspections that are performed after the closing are finance charges regardless of when the fee is collected. See 12 CFR 1026.4(c)(7)(iv) and related Commentary for details.

They are ppfc's if collected at or before closing. However, if you charge for more than what you collected for initially based on more than a predetermined number, I'm pretty sure your legal docs would need to provide conditions for that.

We collect a flat fee to cover inspections, regardless of how many there are. They are disclosed in A if we are doing the inspections and B if the appraiser is.

So if the "flat fee" ends up being more than what the inspections actually cost, is this not an upcharge?

Also, how you determine what the flat fee will be?....an average calculation based on usual inspection costs?

We have an 'inspection fee'. Just like we have an 'in-house appraisal' fee.

I will check, but I think our inspections are done by a third party.

Are your inspections performed in-house by an employee or by a third-party? I know the un-used fees (i.e. collected for 9 months, but only used 6 months) need to be refunded if the inspection is performed by a third-party, but not sure if the inspection was performed by the bank.