Separate Itemization of Appraisal Fee and AMC Fee

Question:

Must a lender separately disclose (or itemize) the Appraisal Management Company’s (“AMC”) fee from the actual appraisal fee on the Loan Estimate (“LE”) and Closing Disclosure (“CD”)? 

 

Answer:

Yes, the TILA-RESPA Integrated Disclosure Rule (“TRID”) and commentary thereto specifically use the appraisal fee and the AMC fee as examples of fees that should be itemized separately on the LE and CD:

  • Loan Estimate – 12 CFR Part 1026.37(f)(2) requires under the subheading “Services You Cannot Shop For” an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop and that are provided by persons other than the creditor or mortgage broker. 
    • The Official Interpretation to this section specifically uses the appraisal fee and AMC fee as examples of the services and amounts to be disclosed pursuant to this section. Further, Supplement I to Section 37(f)(2) requires creditors to label loan costs using terminology that describes each item using clear and conspicuous language that describes the service or administrative function the charge pays for in a manner that is reasonably understood by consumers.
  • Closing Disclosure – 12 CFR Part 1026.38(f)(2) indicates that under the subheading “Services Borrower Did Not Shop For” a creditor must include an itemization of the services and corresponding costs for each of the settlement services required.

In addition, while “property appraisal fees” are specifically excluded from the definition of a “finance charge” under 1026.4(c)(7)(iv), AMC fees do not have such an exclusion. Lumping these fees together will likely result in an overdisclosure or underdisclosure of the APR. State regulators review for this requirement as part of examination procedures. Failure to itemize these fees may result in monetary penalties against a creditor, as well as refunds to the borrower, which could include the entire amount of the AMC fee for each loan funded during an examination period.