Be Aware of Hidden Lender Fees

This is a very common trick used by a large majority of lenders and brokers out there. Instead of being straight-forward, and saying “Mr/Mrs Borrower, I am charging you 1% of your loan amount as an Origination Fee”, they will try and hide their profits from you by breaking them into “junk fees”.

They give them cute names, like “broker fee”, “application fee”, “administration fee”, “processing fee” and so on. Don’t get me wrong, sometimes some of these fees are valid. You can almost always expect a reasonable processing fee on your loan. However, I have heard people brag about how their broker didn’t charge them any “points or loan origination fees” on their loan, but when I looked at their Good Faith Estimate, I could see why. The lender was making $4,700 on miscellaneous junk fees!

Keep your eyes open for excessive fees, read the entire Good Faith Estimate, and ask your broker or lender to explain where the money is going so you can know if you are being charged the norm, or if they are trying to suck every last cent out of you in a very devious manner.

Shawn Headlee

Columbia Mortgage


5 Comments on “Be Aware of Hidden Lender Fees

  1. Don’t take this personally, Shawn, but a lot of us out here would rather deal with a used-car salesman than a mortgage broker at this point. I’d really prefer to avoid both of ’em, but if I was forced to choose between the two… Well, it’s stuff like this and things like YSP that make you guys unpopular.

  2. I read an article on yahoo recently that talked how the mortgage industry has gone from highly respected to little respected. Unfortunately the Republican Congress from 1995-2006 had much to do with this.

    I will say that I got a better mortgage rate (2% difference) through my bank than by a mortgage broker, and closing costs are quite minimal. Odd.

  3. We’ve used Shawn personally for a few of our loans.

    I think a buyer needs to shop around for a loan as much as they do anything else. I’ve seen banks beat brokers and brokers beat bank for the same product.

  4. Everyone I know who has bought a home recently used the broker suggested by the realtor. Some of my friends insist that no fees were charged for brokering the loan. When I ask them what type of loan they got, most do not know. Judging from the fact that some of the loans were 0-down, I suspect they were of the toxic variety. I wonder what percentage of PDX loans are option-ARMS?

  5. I wonder what percentage of PDX loans are option-ARMS?

    I know back when I was looking to buy last Fall/Early winter, I talked to a couple of mortgage brokers and one of them in particular was really pushing option ARMs as a means to “control cash flow”. This was at a pretty mainstream lender (not a subprime outfit). I’ve educated myself about this whole mortgage mess since then and now a shiver runs through my spine when I think that back then I almost thought that this kind of loan was possibly a good option.

    Also: was invited over for dinner by some friends a few weeks back. The topic turned to the housing market after they asked if I was still looking to buy. I went on to explain that I thought now was not the time to buy due to all of the mortgage woes out there, the rising foreclosure and vacancy rates, etc. And then I got into option ARMs and how a lot of people got those loans who probably shouldn’t have and how a lot of people only pay the minimum amount every month thus leading to negative amortization. At that point it got really quiet, then one of our friends says: “I think that’s the kind of loan we have. We generally try to pay more than the minimum every month, but sometimes we can’t…”.

    I shudder to think that most people out there buying have no idea what they’re getting into when they get into an option ARM. And remember option ARMs aren’t subprime loans, they’re Alt-A.

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