Doc Preparation Fee Guidelines

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Question:

We have never charged a document preparation fee in the past, but are thinking of doing so in the future. What are the compliance guidelines that go along with a document preparation fee? Are there any disclosures involved?

Answer:

They have to reasonable and bona fide. For non-real estate secured loans they will be a pre-paid finance charge. For real estate secured loans they will be exempt if reasonable and bona fide.

Reasonable would correspond to what your current market is charging. Bona fide would be you showing a reasonable cost analysis of what it costs you to prepare the documents. It may cost you $75 for a consumer loan but $350 for real estate secured loans. You would take into consideration things such as employee time, cost of paper, ink, third party costs if you have forms purchased from a vendor, etc.

Check state law. Charging document preparation fees, especially where mortgages are concerned could be consider practicing law without a license. You may want to look at implementing an origination or processing fee within state law allowances in lieu of a document preparation fee.

First published on BankersOnline.com 1/04/10