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condition; evaluating and recording guarantees,
collateral, and other security arrangements;
negotiating loan terms; preparing and processing loan
documents; and closing the transaction. The costs
directly related to those activities shall include only
that portion of the employees' total compensation and
payroll-related fringe benefits directly related to
time spent performing those activities for that loan
and other costs related to those activities that would
not have been incurred but for that loan.
7. All other lending-related costs, including costs
related to activities performed by the lender for
advertising, soliciting potential borrowers, servicing
existing loans, and other ancillary activities related
to establishing and monitoring credit policies,
supervision, and administration, shall be charged to
expense as incurred. Employees' compensation and
fringe benefits related to those activities,
unsuccessful loan origination efforts, and idle time
shall be charged to expense as incurred.
Administrative costs, rent, depreciation, and all other
occupancy and equipment costs are considered indirect
costs and shall be charged to expense as incurred.[20]
It is clear that the costs at issue are only those directly
related to the creation of the loans. They do not include costs
associated with loans that were not completed, nor do they
include costs incurred after the closing of a loan.
Short-term Benefit of Expenses
Petitioner presented the testimony of several witnesses at
trial in an attempt to prove that the value of credit reports and
20Appendix C to SFAS 91 defines the term "incremental direct
costs" to mean "Costs to originate a loan that (a) result
directly from and are essential to the lending transaction and
(b) would not have been incurred by the lender had that lending
transaction not occurred."
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