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Question: Can the bank charge a Tax Service Fee charged by a third party company that will monitor the payment of taxes thru the life of the loan on any 'first or second' lien loan secured by the residence, including home equity loans/lines, home purchases or home improvements?
Answer: Okay, let's break this out:
- First lien - okay. See Finance Code section 34.203 (which authorizes loan fees); regulation found at 7 TAC 12.32.
- Second lien at rates of 10% or less - okay. Again, see Finance Code section 34.203 and reg.
- Second lien at rates over 10% - not okay. Unfortunately the addition of "reasonable" fees in HB 955 (new section 303.017) does NOT apply to real estate secured transactions. Therefore, you are limited to the fees that are authorized in section 342.307 and 342.308.
Now let's address the home equity piece. If the charge is on a home equity transaction, it should be counted against the 3% fee cap.
FYI, chapter 342 simply applies if the lien is a second lien and is at a rate exceeding 10%. It does not draw a distinction based on purpose of the proceeds. The second could be for purchase money (down payment), home improvement, home equity, or federal or state tax lien payoff.
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