Tag Archives: junk fees

What You Need to Know About Title Fees

Each title company has their own set of fees. Some charge one flat fee. Others add a couple junk fees. Some pile on a stack of fees that may add up to an extra $300 to $700.

The ones who charge multiple fees say, “We like to break it down for the buyer, so you know where everything goes.”

That sounds fine, but when the total of the break-down is significantly more than the flat-fee company, something is fishy.

And, there shouldn’t be double-charges. Such as a messenger fee and an overnight fee. Both of those fees are to transport the signed docs back to the lender. Which are you using, a messenger or FedEx overnight? And why are you charging $75 when Fedex overnight by 10:30 am (2 lbs) is $28.05?  3 lbs is $31.40.

Can You Object to Title Overcharges and Junk Fees?

You can always object to title fees, but if you’re far into the loan process or almost at closing, you have no leverage and will likely have no success. They will say no, and then what? It’s too late to start over with another title company.

The best solution is to know from the start which title company you want to use. That way, you write it in on your purchase offer.

The Law and the Seller

Federal lending law states that the choice of title company belongs to the Buyer. However, when a listing agent places the home on the Multiple Listing Service, he/she includes the legal description of the property, and they get that from the title company. Thus, the listing agent chooses a title company right from the start.

No actual work has yet been done by that title company, so at this point, it is no problem to switch companies. There is no reason you can’t say, “I’d like to use Y Title,” even though the listing shows X Title. Truly, it’s no problem.

How Do You Find Title Company Fees?

Use Google to search for your title company + zip code. Some companies have a fee calculator on their site you can use. For the others, call and ask. You don’t need a written quote. The title agent can provide the quote over the phone in just a few minutes.

Personally, I prefer to use the same company for both title and escrow settlement. This is because (1) many offer a 10 percent discount for doing so, (2) you avoid the sub-escrow fee, (3) avoid expensive little independent escrow companies–which in California can be double what the national title-and-escrow companies charge, and (4) possibly save time at closing.

If you are in a state where an attorney is used for settlement closing, then the above doesn’t apply to you. But do take the trouble to find a good and reasonably priced attorney.

When Good Folks Ask Me About their Closing Costs

I appreciate where people are coming from when they email me a list of their closing costs and ask, “Am I getting ripped off?” However, I cannot answer this question without seeing the actual Closing Disclosure. I don’t know the price of the home, their state and zip code (which affects the title cost), or what fees they might not have noticed hiding in a different section, or if the seller or lender are providing a credit. When I do a review, I spend time ahead of our consultation comparing local title fees for their exact situation, and this takes time out of my day. This is why I charge for my service. It’s not that I’m trying to be greedy, but a review-and-consult takes a good hour. If I do that for four people, that’s four hours of my day, so you get the idea.

I encourage you to do your research ahead of shopping for a house. That way, you will be empowered with knowledge and make a good choice for a title company right from the start.

Some Realtors say not to “rock the boat” and let the Seller choose the title company. In a super-competitive market where multiple offers are coming in, there’s some wisdom in that. If you’re bidding $25,000 over asking price, why worry about paying an extra $500 or even $1,000 for title? Your objective is to beat out five other buyers and get the house.

Thank you for reading. Remember, I am state licensed in California and Washington. (NMLS 1284134) I am a mortgage broker, so I am legally bound to find you the lowest interest rate, best pricing, and best loan program I have from my list of 50+ wholesale lenders. ApplyHere

Are You Paying Too Much for Title and Escrow?

I hate bogus, unnecessary fees. telecom-junk-fees-rip-off1

Take a look at this list one of my book readers sent me today. She is buying a home in Southern California. The title and escrow company was chosen by the real estate agent, even though federal law says it is Buyer’s choice.

See if you can pick out the unnecessary fees:

TITLE CHARGES

Lenders Policy for $844,000   —  $1,074
E Recording Service Fee  — $15
Sub Escrow Fee — $100
Messenger/Overnight — $30
Endorsements — $150

Ÿ ESCROW CHARGES

Escrow Fee — $2,302
Loan Tie-In Fee — $250
Email Document Fee — $100
Archive Fee — $50
Document Handling — $50
Notary/Sign up Fee — $200

Wow!!! What a lot of fees, right?

This is like going to a restaurant and ordering a hamburger. Then you get charged extra for mayo, ketchup, lettuce, pickle, salt, and the bun. I mean, come on! Isn’t your $15 hamburger enough without collecting more for every tiny thing that is standard and should be included?

Response to the Objection

When the home buyer objected to the real estate agent (the one who chose this over-priced title and escrow company), here is what the agent said:

“The escrow officer is an amazing person. I would trust her with my kid.”

That’s fine if you’re looking for a babysitter! But what’s that got to do with all her needless fees?

The only thing I’d find amazing about her is how she can get away with over-charging home buyers and convince real estate agents to send her business! Makes one wonder… as in illegal kickbacks…? Just musing, not accusing.

Folks, it doesn’t matter if the seller’s agent has already opened title with a certain company. FEDERAL LAW says you, the Buyer, get to choose the title and escrow company.

It’s easy to do a Google search for “title insurance” + zip code. Then make three phone calls and get a quick quote right over the phone. No need to ask for anything in writing. If you shop with three, you should find a good, fair title company to work with.

Don’t bother asking Yelp or other review sites. People who post there are like the real estate agent who chose this high-priced title company because the person is “amazing” or “friendly” or “good with kids.”

As always, thank you for stopping by my blog. If you have a topic you’d like me to write about, send your request here.

 

Can You Spot the Bogus Junk Fees?

This snippet of the Loan Estimate (page 2, left column) came to me last week from a home owner who was refinancing. He wanted to know if all the closing costs were legitimate, because he had a suspicion that there were bogus junk fees included. Take a look and see if you can spot the needless fees.

CLOSING COST DETAILS

A. Origination Charges
Administration Fee  $995
PIW Fee (FNMA only)  $75

B. Services You Cannot Shop For
Credit Report Fee  $35
Flood Certification Fee  $10
Tax Service Fee  $68

C. Services You Can Shop For
Title – Doc Prep  $150
Title – Endorsements  $125
Title – Fee/Sub-Escrow  $90
Title -Insurance/Lenders  $625
Title – Messenger/Courier  $50
Title – Misc. Fees  $25
Title – Recording Service  $13
Title – Settlement/Closing  $595
Title- Signing Fee  $175
Title – Wire Fee  $50

Under Section A, there is a lender fee that is competitive and appropriate. The PIW fee stands for Property Inspection Waiver. Because this home owner has so much equity in his home, an appraisal was not called for. The small fee is to pay for the online market evaluation. You could argue that the fee is unnecessary — and I wouldn’t disagree — but I am not going to complain about it, because it is saving the home owner a $350 appraisal report.

Under Section B, the three third party fees are for required services. No problem there.

Under Section C, we see a boatload of garbage. And it all comes from the title/escrow company the loan officer chose. (With a refinance, there is no sales contract that dictates the title/escrow company. In this case, it is the home owner’s choice; but if you don’t designate a certain company, the loan officer chooses.)

To prove that the so-called services were junk fees, I obtained a quote from a good national title and escrow company that I have worked with in several states over the past couple decades. The quote I obtained is for the same address, same loan amount.

There were only three fees: title insurance/lenders, settlement/closing, and recording.

Total savings: $893

Here are the offending fees, in red:

C. Services You Can Shop For
Title – Doc Prep  $150
Title – Endorsements  $125
Title – Fee/Sub-Escrow  $90
Title -Insurance/Lenders  $625
Title – Messenger/Courier  $50
Title – Misc. Fees  $25
Title – Recording Service  $13
Title – Settlement/Closing  $595
Title- Signing Fee  $175 (optional, if you require a mobile notary to come to you)
Title – Wire Fee  $50

Additionally, the title insurance and settlement/closing fees were less with the good company.

CONFRONTING THE LOAN OFFICER

Next, the home owner called the loan officer and politely said he wanted to switch to First American Title and Escrow.

The loan officer asked why and then said, “But those are not all of First American’s fees.”

So the home owner called First American and obtained a written quote. They were all the fees.

Confronted with the truth in writing, the loan officer offered to lower the cost of settlement/closing and waive the signing fee. But wait! How can he do that? He represents the mortgage company, not the neutral, third party escrow company. Right?

Wrong! The so-called neutral third-party escrow company was an affiliate company, also owned by the mortgage company. On top of that, the title company with the long list of garbage, was also owned by the mortgage company. Bedfellows!

My personal complaint in all of this scenario is the loan officer (a) chose an over-priced escrow and title company for his client, (b) tried to convince the client that the competitor’s fees were not all there, (c) and then finally came clean and waived some fees.

I ask you this: Would you consider this loan officer to be an honest advocate for the home owner?

Folks, just because it is 2016 and there are over 1,000 pages of new lending laws, it does not mean all the rip-offs are bygones.

The reason this home owner knew enough to contact me is because he had read Mortgage Rip-Offs and Money Savers. And while some of the content in the book is now outdated, it is still relevant and saving good folks hard-earned money today.

As always, thank you for stopping by my blog. If you think this information is important, please use social media to pass on the news.

If you need a loan in CA or WA, I am licensed (NMLS 1294134) and will serve you as a true home owner’s advocate.

Thank you.

 

 

Mortgage Junk Fee or Legitimate Cost?

Reading through some lenders’ cost estimates is like going dumpster diving. They are full of unnecessary garbage — and by that, I mean fees that are either redundant or make no sense at all.

The sad thing is that some of these over-priced lenders have high ratings on social media sites. Some even win so-called awards.

How can that be? you may ask.

How Bad Lenders Get Good Feedback and Win Awards

Charm is one way. A loan officer might be one sweet-talking sales person who is available to receive your texts and emails up past midnight. But do you really want to pay hundreds or even thousands of dollars extra for 24/7 service? I am not exaggerating.

I reviewed one lender’s cost estimate that was $3,000 more than the competing lender. This expensive lender had “great” reviews online. The reviewers had no basis from which to make a judgment. They were  not in the mortgage business. They had not done a proper job of educating themselves about home loans. They were duped.

Another way some lenders get an award is that they purchase them. For example, one shady lender down the road from me “won” a Better Business Bureau Award because they donated the most money toward a BBB fundraising effort.

What is a Junk Fee?

Junk fee is a term commonly used to describe an extra fee that has little purpose other than to pad the profits of the lender. A junk fee might be an uncommon fee or a redundant fee. Here are some examples:

  • Application fee: It should not cost you anything to make an application for a loan. In fact, it is illegal to collect an application fee up front before providing you with a Loan Estimate and receiving your intent to proceed.
  • Ancillary fee: A nonsense fee used to pad someone’s profit.
  • Automated underwriting fee: Fannie Mae no longer charges lenders to use their AU software, but some lenders are still charging customers this fee.
  • Email fee: Seriously? You should not pay for your lender to send an email. The same goes for the E-doc fee. Sending documents by email is part of the normal process and should not cost extra.
  • Funding fee: I cannot think of one good reason why a lender should charge you extra to fund and close your loan.
  • Photo review fee: What a laugh! You do not need to pay the underwriter extra to look at the photographs on the appraisal report.
  • Satisfaction fee: One lender has the gall to charge a $125 satisfaction fee. I have to ask whose satisfaction does that buy? Certainly not yours.
  • Verification of Employment fee: This is part of processing the loan. They should not charge extra to verify that you are employed.
  • Warehouse fee: Nonsense.

Every fee should have a legitimate purpose.

It is normal for a lender to charge an origination fee. I don’t care if they call it Administration fee, Processing fee,or Underwriting fee — just as long as they don’t charge all three.

Most lenders nowadays use an e-sign system for the loan disclosures. For example, a company called Doc Magic provides disclosures, rate lock confirmation, and other legal documents to lenders. They charge the lender, so a document processing fee might be charged to cover this service.

Appraisers must be paid.

Title companies must be paid.

Escrow officers or attorneys who close loans must be paid.

Flood certification is required by federal law.

There is a lot of work by a lot of different professionals that go into a mortgage loan. Everyone is be paid for work performed. You will pay for this one way or the other. Don’t be duped by a “no cost” or “no fee” mortgage loan. If you aren’t paying the fees in a manner that is transparent, then you are paying for them month after month over the life of the loan through taking a higher interest rate.

Mortgage fees are a big topic. I have an entire chapter devoted to legitimate and junk fees in my books. And, another chapter on paying fees through the interest rate (and when it makes sense to do so).

It is my intention to educate and inform, because frankly, I am fed up with the garbage and nonsense! I annoy a lot of people in the industry by taking a public stand against over-pricing and non-transparency — and that is okay by me.

If you want an advocate who looks out for the best interests of the everyday good person who wants a good deal and is not interested in making rich banks get richer, then I am your gal.

I am state licensed to do loans in California and Washington. If you happen to be elsewhere, one of my books might save you tens of thousands of dollars and a whole lot of stress.

Thank you for reading and God bless.

Cover.Homebuyers BewareSignature

Mortgage Fees: What are the Junk Fees?

Take out the garbage! Rotten fees are stinking up the place.

Take out the garbage! Rotten fees are stinking up the place.

Junk fees and garbage fees are the unnecessary fees that some banks and mortgage lenders charge to pad their profits. These fees are either nonsense, redundant, or padded costs. You want to avoid wasting your hard-earned cash and say NO to those fees. As promised, here is updated information on lender fees for 2015.

Current Law About Mortgage Fees

The Dodd-Frank Act (passed after the release of Mortgage Rip-Offs and Money Savers) says two things you should know:

1) Lenders cannot increase their fees from the time of the Good Faith Estimate to the closing HUD Settlement Statement.

2) All of the lender fees in the upfront Cost Estimate or Fees Worksheet must be added together and posted on one line in the Good Faith Estimate: “Our origination charge” (page 2, #1).

What This Means to You

1) You no longer have to worry about a lender adding a big junk fee at closing, as used to happen. This also means you don’t need to ask the loan officer for a written guarantee on the lender fees, because that is now built into the law.

2) Your main concern when it comes to lender fees is the total cost of those fees. Are they fair? Are they reasonable? Are they too high? To help you answer those questions, you can dig deeper into what those fees are.

Common Lender Fees

Lenders might call their fee an administration fee, commitment fee, processing fee, underwriting fee, or simply, origination fee. As long as it is a fair and competitive amount for your region of the country, it doesn’t matter which of those fee names they use. (East and West Coast states are higher priced than the South and Midwest.)

Another common fee–one that I do not like–is the application fee. Some lenders used to charge an upfront app. fee of $150 to $400 for taking the loan application. Thankfully, it is now illegal to collect that money before your loan has been pre-approved. However, I still do not like the idea of lenders taking an application fee before closing, because if the loan does not go through for some reason, the application fee is the one they do not have to refund to you. One of the biggest national banks charges an application fee for this very reason. Sneaky, right?

Pure Junk!

In my professional opinion, a lender should not charge the following fees: (To my way of thinking, these services should already be covered by the administrative, processing, or underwriting fees.)

* Ancillary Fee
* Courier
* Document Preparation Fee
* Doc Fulfillment Fee
* Document Review Fee
* Email or e-doc Fee
* Funding Fee
* Misc. Fee
* Photo Review Fee
* Satisfaction Fee
* Storage Fee
* Warehouse Fee

There is a lot more to say about lender fees, which is why there is an entire chapter on this topic in Mortgage Rip-Offs and Money Savers and in Homebuyers Beware.

Next blog post, I will discuss junk fees that title companies, escrow companies, and even attorneys who provide settlement/closing services are charging nowadays. I invite you to subscribe to this blog so you don’t miss out on any important information.

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Mortgage Lender Fees

Money in hand  “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.”

True.

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.

Who Chooses the Title Company for a Mortgage?

realtor2When you buy a house or refinance your existing mortgage, title insurance is required. Title insurance protects the interested parties (you and the lender) from a whole host of possible problems:

* False liens and judgments. (This is common. Someone with a name similar to yours fails to pay a bill and next thing you know, it shows up as a lien on your property. Title insurance protects you and removes it.)

* False heirs claiming ownership. (As in, “My grandma used to live there and she willed the house to me.”)

* Mistakes and errors. (They happen.)

* Fraudulent claims. (Someone says you owe money when you don’t.)

It’s easy to see why title insurance is important: it protects your ownership in the property. But who chooses the title company?

If You Are the Buyer

For a purchase loan, your Purchase & Sale Contract states who the title company is. So, it is decided between the buyer and seller. In some states, it is seller choice. However, the buyer has the right to request a certain title company. If the seller is a private party, they will usually agree to the buyer’s request. If the seller is a bank, then the bank usually has a title company they work with for all their transactions, and they don’t want to switch.

If you are buying from a private party, chances are the seller (like most consumers) is not familiar with title companies; therefore, it ends up being the real estate agent who chooses.

Personally, I like to choose my own title company, because I want a company with a good reputation that doesn’t charge me a bucketful of junk fees. In recent years, some title companies and escrow companies have jumped on the junk fee bandwagon. In addition to their normal compensation, they have added on extra fees such as e-doc or email fee, doc prep. fee, wire fee, courier fee, archive fee, review fee, auxiliary fee, and whatever fee.

How annoyed would you be if you ordered a hamburger for $7.95 and then the restaurant charged you a pickle fee, ketchup fee, mayo fee, and mustard fee? You would say that is part of the hamburger and $7.95 should cover it all, right? The same goes for all the title and escrow add-on fees. It’s bogus, and this is why I like to choose my own title company.

If You are Refinancing

When you refinance, there is no seller or Realtor involved, so the title company is your choice alone. If you do not tell your loan office which title company you would like to use, the loan officer will choose one for you. The same goes for the escrow or closing agent. You need to designate who that should be.

Why It is Important to Choose

By choosing wisely, you could save yourself several hundred dollars. Why pay hundreds more when you could keep that money and use it on something for your home instead?

To see a list of required fees and bogus fees used in mortgage loans, please see Mortgage Rip-Offs and Money Savers, because unfortunately, unnecessary costs are still being tacked on to loans today.

Thank you to Jason Caldwell for writing this review 14 days ago: “The book is exactly what I am going through, loved the book I also emailed her also she responded with very in depth email. I mean she really cares. but I am a first time home buyer and well going through the loan process of first time home buyer. Everything in the book she mention of how the loan officer will react to questions is true. Some of them wouldn’t show me a Good faith Estimate.Cover.3D.Mortgage Rip-Offs
From my experience so far, Loan officers don’t depend and don’t want a return buyer. they want to sell you the loan make their high profits and be done.

The book not only tells you but show how they make their profits. how the today’s loan officers can bait and trick you at signing, yes you heard me right switch right at the signing table.

I recommend this book for anyone getting the a mortgage loan to read this book first. This should be a college text book. Ive read and i go back make my own notes. The book is that informed and that good.”

 

Bank or Credit Union? Which is Better for a Mortgage Loan?

house modestDear Carolyn,

We are getting ready to buy a house and want to get pre-approved. Do you recommend going to a bank or a credit union?

That is a good question, especially since one of my coaching clients came to me last week with Cost Estimates from a large national bank, a small community bank, and a local credit union.

Because each lender used a different format for their upfront cost estimate, it wasn’t clear to her which was the best choice; and that is precisely what my Estimate Review and Consultation Service is for. Curious about how the numbers came out?

I’ll show them to you below, but first, it is important to know that these numbers are for these particular lending institutions only. Not all of the three Big Banks (Bank of America, Chase, Wells Fargo), not all community banks, and not all credit unions are the same. Some banks and some credit unions are better or worse than others, so no “lender profiling” allowed.

For my client’s loan, a 15-year fixed rate refinance, 80% Loan-to-Value, no extra cash out, here is what she was offered:

BIG BANK

3.5% 15-yr fixed rate
$1,854 points & lender fees

COMMUNITY BANK

3.75% 15-yr fixed rate
$1,400 lender fees, no points

CREDIT UNION

4.25%  15-yr fixed rate
$2,007 lender fees, no points

The credit union showed $1,954 on one line and then hid three additional lender (junk) fees in another spot. I call them junk fees, because when you’re charging $1,954 to process and underwrite a loan, there is no reason to tack on additional fees. It is nonsense and garbage. It seems they didn’t want to put a number beginning with a 2 on the lender fee line, so they scattered $53 in three fees elsewhere on the form.

Are you surprised to see that the credit union had both the highest rate and highest fees?

Personally, I am not thrilled with any of these three offers, because all the fees are too high.

On the other hand, the interest rates that start with a 3 are excellent.

Soon — possibly my next blog post — I am going to expose a brand new scam, a bait-and-switch. You won’t want to miss it, so please consider subscribing to the blog. I post only once a week (occasionally twice) so that your email is not inundated with messages.

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