Hello, The loan I am having issues with is in Arizona and is a Title-Escrow fees are also considered Title-Settlement fee correct? In which are finance charge. When we include the title-Escrow fee as a APR fee the finance charge test fails by the exact amount of the Escrow fee. The client is disputing the finding saying its not a APR fee and provided the Reg 1026.4(C)(7)-2. Everywhere i have looked a Escrow fee is considered a PFC charge.

They are looking at the wrong citation, if this fee is for closing the loan (people call fees different names for different things, so you need to know exactly what service the fee represents) .

1026.4(a)(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor:

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.


So, if the bank is requiring that the loan be closed by the settlement agent, then it fails .4(a)(2)(i). The only way a closing fee is not a finance charge would be if the lender will close the loan in house, and the borrower says, no I would rather this close at a title company and then only if both .4(a)(2)(ii) and (iii) do not apply.

The three requirements to exclude a closing fee from the finance charge are separated by an "or" and not an "and".

If they want to attempt to explain it away under the lump-sum exclusion, then they need to give you an itemized list of exactly what they are doing to earn this fee and that likely is going to vary from transaction to transaction.