Mortgage Junk Fees - Part 2

Last week I said that junk fees were to pay for assuring that all of the loan documentation met the standards of the Secondary Market where you loan is likely to be sold. Let's talk about specifics. The numbers listed below are typical but can range higher:

• Appraisals - $250 to $350. Used to be done by the loan officers or other employees of the lender.  Now appraisals must be done by licensed appraisers and the rules governing them must meet the Uniform Standards of Professional Appraisal Practice published by The Appraisal Foundation. You can learn more at http://www.appraisalfoundation.org
• Underwriting - $250 to $400. The cost of assuring that all the documentation in the file meets the standards of the lender's underwriting manual and those of the Secondary Market source to which they will be selling the loan.
• Document Fee - $100 to $200. The cost of preparing the more or less 80 pieces of paper that you will sign. 
• Funding Fee - $25 to $50. The cost of the person who actually checks in the signed documents and sends the money to the settlement agent, title company, or escrow company.  Sometimes, but not always, this includes the cost of the bank's wire transfer.
• Flood Certification - $20 to $30. The cost of federally mandated report that says you either are or are not in a FEMA flood zone.
• Administrative Fee - $400 to $900 - Usually a single fee that would include the above services.

So if the lenders are incurring these costs, how can they find the income to cover them?  The first option would be just to have it be part of overhead.  I think a better way is to have each of these fees be a variable cost and have each borrower pay the fees associated with his own loan.

Again, as distasteful as these may be, no lender is going to negotiate them.

More next week! Share your questions and feedback in the comments section below

- Randy Johnson