“What are your lender fees?” I asked. A simple enough question, one every loan officer should know the answer to. Then to clarify, I added, “I am interested in the fees that go to your company only, not third party costs such as appraisal, credit report, flood certification, and such.”
“Is this for a purchase loan or a refinance?” the loan officer replied. Clearly, he was skirting my question, because lender fees do not change based on the loan type.
Nevertheless, I thought I’d humor him. “The fees for a purchase loan,” I replied.
“And what loan amount are you interested in?”
I could see where he was going. He was trying to segue into taking a loan application. I wanted to be honest, so I said, “I am not looking for a loan at this time; I just want to know what your company’s lender fees are.”
“I don’t do surveys,” he said.
“So you won’t tell me what your lender fees are?” I asked.
“If you know anything about mortgages, you would know that there is a lot more to it than rates and fees.”
“I think it’s odd that you won’t tell me your lender fees, but that’s okay. I will call someone in your other office and find out,” I said. Then I bid him a good day and hung up.
My husband had been listening in. He said, “They must have very high fees if he won’t tell you what they are.”
I called another lender and asked the same question. This time the loan officer did a verbal dance. Three minutes later, he still hadn’t told me what his lender fees were.
I called another lender and the lady hung up on me. I called right back in case it was an accidental drop, but she let my call go to voice mail.
Twenty minutes of phone dialing later, I came upon a loan officer who said simply, “Our lender fees are $995.”
How refreshing! An upfront, honest loan officer. That is one I would do business with.
Even now with the huge stack of new lending laws that are supposed to protect the borrower and make everything transparent, it’s not so easy finding a loan officer you can trust, who will answer your questions in a forthright manner.
As I explain in Mortgage Rip-Offs and Money Savers, the best way to compare loan offers is to ask for a written estimate. We used to ask for a Good Faith Estimate, but now, thanks to the Dodd-Frank Act, we have to ask for a Cost Estimate or Fees Estimate. That worksheet is what used to be called the Good Faith Estimate, and it is more specific and clearer than the new GFE designed by the feds.
Don’t worry about getting a GFE when you’re shopping for a loan, because Dodd-Frank states that their (convoluted) GFE is to be given after the loan officer has received six pieces of information:
1) Property address
2) Property value
3) Loan amount
4) Borrower’s name
5) Social security number (for pulling credit)
6) Borrower’s income documentation
How can you determine whether or not you like the lender’s pricing if you cannot see what their pricing is? Especially since the majority of them won’t give you a verbal quote over the phone? You do not know the property address when you are starting your house search.
The answer is, skip the GFE and ask for a Cost Estimate. Some lenders call it an Initial Fees Worksheet, a Loan Worksheet, or whatever. We don’t care what title they put at the top of the page. All we care about are the numbers on the estimate.
Here is an actual example from a lender in Texas, in the same order as listed on their Itemized Fee Worksheet:
Document Preparation Fee $200
Administration Fee $1,340
Origination Points .5% $1,599.60
Adjusted Origination Charges (Total) $3,139.60
The junk fee is quite obvious. It is the $200 doc prep fee. The lender is charging $1,340 to process and underwrite the loan, so why do they need to add another $200? And, why are they listing it separately? Is it because they don’t want to scare away borrowers with a $1,530 fee?
The .5% origination point is for the interest rate that is slightly below par rate. The borrower can choose to eliminate the half point by taking an interest rate that is an eighth (.125%) higher if desired. So that is not a junk fee.
My next blog post will be more about junk fees. There are still plenty of nonsense fees out there — and they are being charged by both lenders and closing agents. I cordially invite you to subscribe to this blog if you’d like more information on this topic. As always, thanks for stopping by.