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.