The Federal Housing Administration is getting out of the business of telling lenders what fees they can charge borrowers to close a single-family loan.FHA lenders "may charge and collect from mortgagors those customary and reasonable costs necessary to close the mortgage," according to Mortgagee Letter 2006-04. Explaining that the agency "thought the regulation of closing costs was discouraging business," FHA consultant Bud Carter said the new policy brings FHA practices closer in line with those of the conventional market. The FHA still does not allow tax service charges, and origination fees are limited to 1% of the loan amount. However, FHA lenders can charge a separate underwriting fee, Mr. Carter said. Nevertheless, the mortgagee letter warns lenders that they cannot "mark up" the costs of services provided by third parties. "Only the actual cost for the service may be charged by the mortgagor," the FHA said.

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