A borrower's mortgage payment includes principal, interest, taxes, insurance, and a monthly HOA fee collected by the lender. Which components are included in the finance charge calculation?
Correct Answer
A) Principal and interest only
Under Regulation Z Section 1026.4, the finance charge includes the cost of credit. Property taxes, insurance, and HOA fees are specifically excluded as they are not charges for credit but rather property-related costs, even when collected by the lender.
Why This Is the Correct Answer
Under Regulation Z Section 1026.4, the finance charge includes the cost of credit. Property taxes, insurance, and HOA fees are specifically excluded as they are not charges for credit but rather property-related costs, even when collected by the lender.
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