Honest Mortgage Answers

Junk Fees...

What are junk fees?
Have you ever been rate shopping (and after talking with few Mortgage Shops) talk with someone who quoted you an usually low rate without points? Why do you think this is so?

The practice of charging "junk fees" is more and more common in today's mortgage world. Mortgage Brokers usually charge a processing fee in addition to their points or YSP. That is to be expected. However, sometimes a mortgage professional will undercut another Broker's rate or fee but make up the difference in junk fees. I have seen all too often a settlement statement or good faith estimate that has a schedule of fees that look like this:

broker fee: $2650
origination fee: $1000
processing fee: $495
administration fee: $395
underwriting fee: $595
tax service fee: $125
document fee: $200
document prep fee: $195
wire fee: $25
courier fee: $50
credit report: $50

In addition to the above, there is often a YSP from the investor of $1500-$2500+. THIS IS RIDICULOUS! There is no other word for it. Why does this mortgage professional think they can charge $7000+ for originating and processing a residential loan? Some may argue that it is a subprime or bad credit loan. Some may say it is due to the loan size or loan program. There really is no excuse for it in residential lending. Commercial lending may be different, but in today's world, I don't see any circumstance where a Mortgage Pro is justified in charging that much to obtain financing for a client.

Now keep in mind that the above is my opinion. Others may feel differently. All I can say is this....I have had clients and rate shoppers come to me with settlement statements that look like the above and I get sick to my stomach when I see them. There is just no reason for it.

Just my $.02

Posted by Jason Lash at 12:17 PM