TRID and Reimbursement for Service Provider Fee

Issue/Inquiry

The Bank wonders where a tax service fee should appear on the Loan Estimate. The fee will be paid directly by the Bank to the service provider and then collected from the borrower at closing. An internally-prepared chart indicates that it should be listed in Loan Origination Fees. Is this correct?

Response Summary

For the purposes of the TRID rules, a fee is not considered paid to a person if the person does not retain the fee. Similarly, if a person retains a fee as reimbursement for an amount already paid to another party, such a fee has not been paid to that person.

Response Detail

The official commentary to the TRID rules states that a fee is not considered “paid to” a person if the person does not retain the fee. For example, if a consumer pays the creditor transfer taxes and recording fees at the real estate closing and the creditor subsequently uses those funds to pay the county that imposed these charges, then the transfer taxes and recording fees are not “paid to” the creditor for purposes of the TRID disclosures.

Similarly, if a consumer pays the creditor an appraisal fee in advance of the real estate closing and the creditor subsequently uses those funds to pay another party for an appraisal, then the appraisal fee is not “paid to” the creditor.

A fee is also not considered “paid to” a person if the person retains the fee as reimbursement for an amount it has already paid to another party. If a creditor pays for an appraisal in advance of the real estate closing and the consumer pays the creditor an appraisal fee at the real estate closing, then the fee is not “paid to” the creditor even though the creditor retains the fee because the payment is a reimbursement for an amount already paid. Official Interpretations, 1026.19(e)(3)(i) – 3.

Therefore, if the Bank orders and pays for a tax search from a service provider and subsequently obtains reimbursement from the consumer for the search, the payment would not be considered a Loan Origination Fee (i.e., a charge paid to the creditor for extending the credit), but a fee paid to the third-party service provider, which would be placed on the Loan Estimate in either “Services You Cannot Shop For” or “Services You Can Shop For.”

This entry was posted on Monday, March 5th, 2018 at 6:00 am.