QUESTION
We lend in the state of South Dakota which, by law, requires a survey.
The requirement for a survey is not a lender requirement; rather, it is imposed
by state law. That being said, we are unclear as to how the survey fee should
be disclosed on the Loan Estimate and Closing Disclosure.
ANSWER
The fee should go in Section H, “Other Costs,” as it is not for a
service the lender requires in connection with its decision to make the loan, but
rather it is for a service required by the government.
Typically, we see survey fees disclosed in Section C, “Services You Can
Shop For.” That section includes services that “the creditor requires in connection
with its decision to make the loan; that would be provided by persons
other than the creditor or mortgage broker; and for which the creditor allows
the consumer to shop in accordance with §1026.19(e)(1)(vi).”
[Official Commentary 37(f)(3)-1 (emphasis added)]
As the survey fee is not required by you as the lender in connection
with your decision to make the loan, it does not belong in Section C. So, if
not in Section C, where does it belong?
Section H, “Other Costs,” includes those services which are “ancillary
to the creditor’s decision to
evaluate the collateral and the consumer for the loan.” Included among
these costs are amounts disclosed for items “established by government
action” as well as those “based
on an obligation incurred by the consumer independently of any requirement
imposed by the creditor.” The creditor cannot retain any portion of
the disclosed other cost.” [Official Commentary 37(g)-1]
Thus, as the requirement for a survey has been
imposed by state law and no portion of the fee is being retained by you as the
lender, Section H is the appropriate place to disclose the fee.
Joyce Wilkins Pollison
Director/Legal & Regulatory Compliance
Lenders Compliance Group
