Future Release Fees

Question:  Where should financial institutions disclose future release fees on the loan estimate and closing disclosure? 

Answer:  You might say, Section E: Taxes and Other Government Fees of both the Loan Estimate (LE) and Closing Disclosure (CD).  However, based on results of recent examination reports, you might be wrong.  In multiple recent examination reports, federal examiners cited financial institutions for TRID disclosure errors specific to future release fees disclosed in Section E: Taxes and Other Government Fees.  In these reports, examiners state future release fees should be disclosed in Section A: Origination Charges.  Regulatory support for this conclusion was not provided in these reports.  Seemingly, however, the reasoning is due to the length of time financial institutions hold the fees before releasing them.

“In these reports, examiners state future release fees should be disclosed in Section A: Origination Charges.”

History:  Before these recent citations, customary practice was to include future release fees in Section E: Taxes and Other Government Fees, especially if these fees were retained in a suspense account designated for future payout.  According to recent examinations, however, how banks account for future release fees no longer impacts where future release fees are disclosed on the LE and CD.

Next Steps: We recommend management review the placement of future release fees.  Further, we recommend contacting your federal regulator to discuss their expectations on where to place future release fees on the LE and CD.  Failure to take action could result in technical violations and possible restitution, as proven by these recent federal examination reports.  

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