Special offer

Consumers Beware of Rising Fees

Mortgage and Lending with Mortgage Solutions Financial

Borrowers need to be aware that many mortgage brokers are choosing to raise fees to maintain their income on each loan transaction.  Following is advice from one major wholesaler to their broker customers:



 See the original GFE given to the Customer - Line 1. Contains the following:

Origination fee + Processing Fee + Lenders Admin. Fee + YSP

(plus any other compensation / fee that the broker charges). Once you give the GFE to the Customer your line 1 will not change higher (except if the loan amount changes your origination will be adjusted up or down if a percentage was used).

 Line 2 shows the credit that the Customerwill receive (YSP).


 So Line A is going to be what is earned on this loan (Original GFE).


Many brokers still think that by increasing the YSP they earn more income on a loan.

Is this TRUE?   Answer is NO

If you add in the YSP in Line 1, then subtract it in Line 2 (the credit that goes to the customer). What are you making from YSP?

 $2,085- $2,085= $ 0

 Now see the New HUD at Closing

 Line 801 is from the Original GFE - Line 802 the YSP = Line 803 Total Broker Compensation


Suggestion on How Brokers can make money in this new environment.

Since higher YSP do not increase your earning, it only increases the Credit to the Customer to reduce their costs, you may want to look at charging more Origination Fee (On Conventional & FHA loans, VA limit is still 1%) and as little as possible YSP.

 Line 1 - Origination 2% + Processing $450 + Lender Admin $775 + No YSP = $8425

Line 2 -  Zero YSP

Line A (income to broker) $8,425


This will made a big difference in the Broker compensation. Plus the Customer benefits by receiving a lower interest rate.


Conclusion- in this new environment the only time to charge a YSP is to lower the closing costs for the Customer (as in a  low or no cost refinance).

My Conclusion is that Mortgage Brokers are and will continue to raise fees to cover their operating expenses and profits.  Banks and Mortgage Banks continue to have the flexibility to price their profit into rate.  Is this fair?  Probably not to mortgage brokers...but it does save the consumer from the game playing that many abusive brokers used to play with fees.  The question we really need to ask; Did abusive brokers kill the golden goose?

Art Marine

Branch Manager

Academy Mortgage

10220 SW Greenburg Road, Suite 250

Portland, OR 97223

503-764-4005 direct

503-799-7085 cell

1-866-510-4716 fax






Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

Do you feel this is why more and more people are shopping the market. I've seen in the last six months people contract 4 or 5 mortgage people before deciding on who to go with, rather than just the referral they got from a friend.

Feb 18, 2010 09:10 AM
Art Marine
Mortgage Solutions Financial - Lake Oswego, OR
Loans that Fit your Life

The "shopping the market" phenomenon has been going on for the last couple years.  However, I do think that the information shoppers get now will be more accurate.

Feb 19, 2010 06:25 AM