Origination fee, processing fee, settlement fee, oh my! (loan officer, interest rate, escrow)

[Korillian]

Okay, so I just got my GFE back from my lender. There is a 1% loan origination fee, as expected. But there is also a processing fee of $699.00 and a settlement/closing fee of $225.00. That seems a little excessive to me. I remember reading somewhere, I thought on this board, that there are 'junk fees' often included in mortgage processing.

So, here is my question: what is the loan origination fee? Should the costs of processing my loan and closing on my loan be included in that?

Thanks!

[citigirl]

Junk fees to pad their profit. Tell them you want to shop another morgage company.

[mbmouse]

Originally Posted by Korillian

Okay, so I just got my GFE back from my lender. There is a 1% loan origination fee, as expected. But there is also a processing fee of $699.00 and a settlement/closing fee of $225.00. That seems a little excessive to me. I remember reading somewhere, I thought on this board, that there are 'junk fees' often included in mortgage processing.

So, here is my question: what is the loan origination fee? Should the costs of processing my loan and closing on my loan be included in that?

Thanks!

Well the 1% is a good/ standard origination amount a percentage of this is how your mortgage broker gets paid. The processing fee however I would ask about, I would ask who gets paid that and what service are you paying for. For example, I have to charge my clients $395 processing fee that my company gets that covers the expenses for a few things, 1. insuring I have not made any mistakes before closing. Our company does a state and federal pre closing audit to insure everything has been done properly and disclosed. That fee also covers storing your loan file in a secure manner. It is helpful when a situation like your house floods or burns (God forbid!) and you can get a copy of everything in that file which includes W-2's, appraisal, and other important info you may need at some point. $699 seems very high to me. On the other hand, the $225 for settlement fee seems low. This is what the title or closing agent charges and usually covers: Tile search, doc prep, wiring fees, the fee for actually closing the loan and insuring your note and deed get filed properly. My agent charges $445 and that is rather low for this area.
I would ask your LO what Yield spread they are receiving from the lender. If it is over 1 point, then ask them to remove the processing fee and cover that with there front point. The settlement fees your LO can not do anything about as they are 3rd party fees that will get paid to someone else at closing.

[UseJeff]

First to answer your main question. The origination fee is what is charged to do the loan. It's basically their fee to make money, so they can pay bills, commissions, etc. The costs of processing, closing, admin, title/escrow, county recording will not be included in that typically. It's really about the preference... they could charge you 2% points, and no other fees other than title and escrow. While many fees are real and do apply, it's really about the bottom line dollar of costs. (keep in mind settlement charges, and closing costs are different. Closing costs are the costs of the loan. Settlement charges are the costs of the loan plus prepaid interest, and impound accounts {taxes/ins} if you decided you wanted them)

It's really dependent on if your lender is a lender, or if they are a broker. The lender a broker chooses almost always has fees for having the loan underwritten, and are out of the broker's control. A retail lender will have these fees also. For a typical first mortgage you can expect to see fees ranging from 600-1000 (average about 795). These fees can be called "underwriting, administration, closing, etc." A processing fee is typically charged by the broker, and they can range from 295-895. Many brokers force their loan officers to charge a set fee to cover operation costs, ie processing, admin etc... Typically the loan officer won't have any control over this, and they won't get a commission from these extra fees.

It's really up to you to see if they are excessive. To be honest if you're paying 1 point, and $924 in lender fees, then title/escrow/recording it's not that outa whack. Since it is a concern, ask them if those fees are paid to the lender or the broker (assuming you're dealing with a broker). If they are paid to the broker, you can negotiate them. (they may knock off the 225). Assuming you have a good rate, your closing costs are below average. (what rate did you get?). If they are a retail lender, or the fees go to the lender, then the only thing you can negotiate would be that 1% origination. If that's all your being charged, I highly doubt they will drop much off because they are not charing much at all. (unless your loan amount is over $500,000).

[UseJeff]

Originally Posted by citigirl

Junk fees to pad their profit. Tell them you want to shop another morgage company.

They "can" be junk fees, but it's not a given that they are. Those fees could be paid directly to the lender, and if that is the case the brokerage is only charing 1 point, which is very low. Granted this all depends on the type of loan and interest rate as well. If they are a well qualified borrower, getting a 6.75% 30 year fixed, then they could get away without paying 1 point. If they are getting a 6.25% 30 year fixed, then 1 point is a very good deal.

It's not wise to jump the gun and tell them you want to shop another mortgage company. You could however go ahead and shop around anyways, without telling them initially. They've already pulled credit, and most brokers/lenders these days can use the credit they pull for the actual loan. So there's no harm in shopping at this point.

[TuborgP]

Varies by state the attached enables you to compare your state with others.

Mortgage closing costs: Average closing costs by state

[renriq02]

remember only to compare fees on the 800 lines....settlement/closing fee should be coming from your attorney/title company, and has NOTHING to do with the lender.

Every lender will have different numbers for the 1100 lines...but you need only to compare the 800 lines...

The attorney/title company will fill in the 1100 lines with their fees.

BE CAREFUL WITH THIS.....because a lender CAN PUT 3000 in the 800 lines...and few hundred dollars on the 1100 lines...making the total around 3800.

Another lender can put 2000 total in the 800 lines...and put 2500 in the 1100 lines..making the total 4500.

Most ppl read the bottom closing costs....and you would think Option #1 is better....

This is why you should only look at the 800 lines when speaking to the lender.
Speak to the attorney about the settlement, escrow, title fees, title insurance, property taxes, etc. You also want to get a FIRM quote for your hazard insurance.

You should have a better idea of what you will pay at closing if you do it this way.

Of course this applies MAINLY to purchase mortgages

Originally Posted by Korillian

Okay, so I just got my GFE back from my lender. There is a 1% loan origination fee, as expected. But there is also a processing fee of $699.00 and a settlement/closing fee of $225.00. That seems a little excessive to me. I remember reading somewhere, I thought on this board, that there are 'junk fees' often included in mortgage processing.

So, here is my question: what is the loan origination fee? Should the costs of processing my loan and closing on my loan be included in that?

Thanks!

[rwally]

Originally posted by TuborgP
"Varies by state the attached enables you to compare your state with others.
Mortgage closing costs: Average closing costs by state"

Just so you'll know the costs shown for North Carolina at the site you referenced are WAY off.....
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Originally posted by banker0679
"Speak to the attorney about the settlement, escrow, title fees, title insurance, property taxes, etc."

the lender decides escrow items and amounts; property taxes are set by the governing authority. what will asking an attorney about these accomplish?

[renriq02]

the only thing that the lender DECIDES is the reserve amount.

the attorney/title company will receive the information on how much taxes are due...and if they were paid or not....and when they are due.

the attorney/title company gets the tax value etc from the county.....and then gives it to the lender.

also, if the attorney charges 400-500 for closing this has NOTHING to do with the lender. same thing with title insurance, title fees, etc.

Originally Posted by rwally

Originally posted by TuborgP
"Varies by state the attached enables you to compare your state with others.
Mortgage closing costs: Average closing costs by state"

Just so you'll know the costs shown for North Carolina at the site you referenced are WAY off.....
---

Originally posted by banker0679
"Speak to the attorney about the settlement, escrow, title fees, title insurance, property taxes, etc."

the lender decides escrow items and amounts; property taxes are set by the governing authority. what will asking an attorney about these accomplish?

[rwally]

Originally posted by banker0679
"the only thing that the lender DECIDES is the reserve amount."

no, you're wrong. the lender stipulates which items are to be escrowed and for how many months.
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"also, if the attorney charges 400-500 for closing this has NOTHING to do with the lender. same thing with title insurance, title fees, etc."

I've been in the mortgage origination business long enough to know what an attorney's responsibilities are thank you.