What are Prepaid Finance Charges for HUD?

Question:

We use title insurance companies to disburse funds on our refinances, as this is a requirement in order to obtain a closing protection letter from the title insurance company. In our itemization of title services on HUD line 1101, there is a wire fee for the outgoing payoff and also a disbursement fee. Are these considered prepaid finance charges or not?

Answer:

First, don't confuse RESPA and TIL requirements. You can't look at the Settlement Statement and determine what is or is not a finance charge, as many fees are lumped together on the Settlement Statement.

Both the wire and disbursement fee are finance charges. If they are withheld from the proceeds or are paid up front by the customer, they are prepaid finance charges.

First published on BankersOnline.com 11/29/10