Common Overcharges on
Mortgage Loans
Often called "junk
fees" and "padded fees" - both are serious problems in the
mortgage industry. The practice of charging "junk fees" or
"padding fees" is more and more common in the mortgage world.
Brokers usually charge a
processing fee in addition to their points or yield
spread premium - this is to be expected. This fee goes to
cover the costs of processing the loan, including the processor's
salary. In some cases, loan officers hire a third-party processing
company to work on the loan, so this fee is sometimes not within the
broker's capacity to revise. However this fee is sometimes inflated and unreasonable - it should never exceed $450.
Ever have a lender give
you a much better rate than another's estimate? Chances are they
will have much higher fees to make up the difference.
Junk
Fees...What to Watch For
Typical "junk fees"
include: broker fees, administration fees, underwriting fee (if
charged by a broker, they don't underwrite files), application fees,
tax service fees and document preparation fees.
There are others but
these are the most common. These fees are complete junk.
Just remember, your lender is probably charging you an origination fee
and may be making a yield spread premium also so
these junk fees are totally unnecessary and a waste of your money
- the origination should cover any of these "extra" items.
Padding
Fees...Ask for Invoices!
"Padding Fees" is
the practice of adding to the actual cost of a service the lender uses
during the course of processing your loan file. Typical areas
where "padding" is a problem are:
Credit Reports:
A credit report typically costs the lender $8-$18 (RMCRs cost about $50)
but they may charge you $65 for the report, far above actual cost.
With recent legislation it is illegal to overcharge on the appraisal and
credit reports, many underwriters now requiring invoices to ensure there
is no overcharge - but it doesn't mean they still don't try it!
Courier Fee:
Courier fees range from $40-$100 on most mortgage transactions.
Courier fees are the overnight express costs of shipping the closing
documents from the actual lender to the escrow company (closer).
However according to rates of the U.S. Postal Service, DHL, FedEx or UPS
a standard overnight express cost to anywhere in the U.S. should only be
about $25. Again, this "little extra" is just another way the
lender makes more out of your loan - more than you know.
Automated Property Valuations:
These are used in lieu of a
full blown appraisal and when used & charged correctly, they save you a
much as $300 in the cost of a typical appraisal. A prime example
is where a lender pays $100 for the automated valuation and then charges
you $150 for the same product, pocketing the extra $50. He/She
tells you that you've save yourself $200 by going this route (based upon
an average appraisal cost of $350). You are happy thinking you got
a great deal, he is happy because he just made an extra $50.
As you can see,
"padding fees" can add up - to hundreds of dollars on each loan.
Be diligent when dealing with your lender and request invoices to prove
ACTUAL costs.
What
You Can Do...
Many lenders will be
unwilling to provide these to you, but a
Residential Mortgage Advocate™ will gladly provide them! They
want to earn your trust and work in your best interests. They sign
a commitment to that effect and are
committed to removing fraud and shysters from the mortgage industry!
All members on this site have signed a
Residential Mortgage Advocate™ (RMA) commitment to be totally upfront about
their fees, rates and items they will need from you.
Been Scammed or Dealt with an Unethical Lender?
Contact Us or Report it to
Your State authorities.
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