Which fee is allowed in a loan that meets the requirements of Section 32 or 35 of the Truth-In-Lending Act?

The correct answer is the late fee capped at 4%. Under the Truth in Lending Act (TILA), particularly in relation to Section 32 or 35, there are specific limitations put in place to protect borrowers from excessive fees. These sections are particularly relevant to high-cost mortgages, which aim to ensure that borrowers are not subjected to predatory lending practices.

In high-cost loan scenarios defined by Section 32, lenders are permitted to charge certain fees, but they are also restricted in how much they can charge for late payment fees. The law mandates that late fees cannot exceed a fixed percentage of the payment amount—specifically, a 4% cap is one standard that has been established. This limitation helps in ensuring that borrowers are not overwhelmed by penalties and have a clearer expectation regarding their obligations in the event of late payments.

Other fees mentioned—such as appraisal fees, loan modification fees, and payoff statement fees—can have different regulations and do not carry the same specific caps established under Section 32 or 35. This is why the late fee, with its cap, is recognized as allowable under those sections of the Truth-In-Lending Act.