January 19, 2016
A reader got in touch with us recently to ask a question about the allowable fees and expenses associated with FHA new purchase home loans (also known as “forward mortgages”). The gist of the question–can an FHA loan applicant be charged a tax service fee as part of closing costs or other loan-related fees and expenses?
The answer to this question and others like it can be found in HUD 4000.1, in the portion of the rule book titled Part III Servicing And Loss Mitigation. This section includes a list of prohibited fees and expenses–costs that cannot be charged to the borrower.
That list includes the following information:
“The Mortgagee must not charge the Borrower for the following services:
–costs of telephone calls, telegrams, personal visits with the Borrower, certified mail, or other activities that are normally considered a part of a prudent Mortgagees servicing activity;
–Mortgagees use of an independent contractor such as a tax service to furnish tax data and information necessary to pay property taxes or make the payments on behalf of the Mortgagee;
–preparing and providing evidence of Payoff, Reconveyance, or termination of the Mortgage;
–providing information essential to the Payoff;
–recording the Payoff of the Mortgage in states where recordation is the responsibility of the Mortgagee; or
–fees for services performed by attorneys or trustees who are salaried members of the Mortgagees staff.
As you can read from the above, tax service fees are not permitted to be passed on to the borrower. The prohibited fees list above sends a definite message–the financial institution can’t charge the borrower for the normal costs of being open for business as a lender.
These prohibited fees and expenses are not the borrower’s responsibility nor should the lender attempt to pass on normal operating costs (as described above) to the borrower.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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