| (a) Applicability. (1) Finance Code, §34.203, and this section apply to: (A) closed end first lien residential real estate loans; (B) loans other than for personal, family, or household use (i.e., commercial loans including all commercial real estate loans); and (C) loans for personal, family, or household use that are repayable in a single installment (i.e., single pay consumer loans). (2) Finance Code, §34.203, and this section do not apply to a consumer loan payable in two or more installments that is subject to Finance Code, Title 4, Subtitle B. (b) Reasonable fees authorized. A bank may require a borrower to pay all reasonable expenses and fees incurred in connection with the making, closing, disbursing, extending, readjusting, or renewing of a loan subject to this section, including fees paid to third parties as well as charges and fees paid to the bank itself for the services of the bank employees. However, such charges may not include fees paid by the bank (in addition to regular salary or director's fee) to an officer or director for services rendered within the course and scope of his or her employment with the bank. Subject to limitations of other law, possible fees and charges which may be charged and collected under this section include fees for underwriting, appraisal, document preparation, title insurance or abstract and opinion, insurance (including casualty coverage for collateral and credit products), credit reports, escrows, and filing fees, among others. (c) Calculation of reasonable fee. (1) Authorized loan fees must be reasonably related to the costs incurred by the bank. In establishing loan fees, a bank may establish fixed fees for underwriting activities for various categories of loans. In establishing such fixed fees, the bank may take into consideration its average costs in various activities, including but not limited to the average cost of taking an application, obtaining necessary reports and documentation, review of credit reports, analysis of the loan proposal and the prospective borrower's ability to repay, preparation of documents, loan review, and closing activities, plus a reasonable overhead factor. In lieu of conducting its own analysis, where relevant a bank may accept as reasonable and rely on the functional cost analysis prepared by the Board of Governors of the Federal Reserve System. (2) This section does not require a bank to charge its borrower the full, true cost of accepting and consummating a lending transaction. For example, a bank may choose to assess a lower than actual cost loan fee on smaller consumer single pay loans in the interest of making loans more affordable to low to moderate income borrowers, or may deliberately underestimate its actual costs to provide a margin of security regarding compliance with law. (3) Fees and expenses charged and collected in accordance with the Finance Code, §34.203, and in accordance with this section are not considered interest or compensation charged by the bank for the use, forbearance, or detention of money. However, fees and expenses which do not comply with these requirements may be characterized in litigation as interest. (d) Collection of fee. Loan fees may be collected separately or added to the amount of the promissory note and financed as part of the loan. |
