Lenders and Their "Junk Fees"

By
Real Estate Agent with Hawaii Military Realty, Inc.

I write this blog and hope to get some input from lenders that can talk about "junk fees".  While I do not claim to be an expert in lending (or anywhere close to an expert), I have done a fair amount of research and have asked many questions so that I am well versed about lending.

This is where I would like to get some input.  What are REALLY "Junk Fees" and what are not?  Some say that the "document preparation fee", "administrative fee" and "processing fee" are "JUNK" while others say that those charges should be part of the interest rate.

I know some of you out there are working for extremely professional companies and you wont hesitate to share some insight on this topic.  I will GREATLY appreciate it.

Just for the record......I dont plan on getting into lending.  I have taken a GRI class that talked about "Financing" but not in the sort of detail that I want to get into. 

Do any other REALTORS out there get involved in their clients mortgage business or do you just let them do it on their own?  Do you check to see if your clients are getting a fair deal on their mortgage?

MILITARY BASES, POSTS AND FORTS ON OAHU, HAWAII AND POHAKALOA TRAINING AREA BIG ISLAND OF HAWAII

Schofield Barracks: Mililani, Wahiawa, Kapolei, Waipahu, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii Schofield Barracks and adjoining Wheeler Army Airfield are the 2nd Brigade, 3rd Brigade, Aviation Brigade, 45th Sustainment Brigade and the 8th Military Police Brigade.  In addition, the 8th Theatre Sustainment Command, 65th Engineer Battalion, 25th Special Troops Battalion and the 556 Personell Service Battalion are also part of the Division team and play an integral role in the success of the Division.

There are also two Brigades that are stationed in other locations.  The 1st Brigade is stationed at Ft. Lewis, Washington and the 4th Brigade is stationed at Ft. Richardson, Alaska.

The 25th Infantry Divison has proudly served in numerous wars and conflicts around the globe.  The Soldiers that make up the division are currently deployed to several locations to include Iraq.

Pearl Harbor: Pearl City, Pearlridge, Aiea, Salt Lake, Honolulu, Waipahu, Oahu, Hawaii

Hickam Air Force Base: Pearl City, Pearlridge, Aiea, Salt Lake, Honolulu, Waipahu, Oahu, Hawaii

Marine Corps Base Kaneohe: Kaneohe, Kailua, Oahu, Hawaii

Camp H. M. Smith: Salt Lake, Moanalua, Honolulu, Aiea, Pearl City, Pearlridge, Oahu, Hawaii

Tripler Army Medical Center: Salt Lake, Moanalua, Honolulu, Aiea, Pearl City, Pearlridge, Oahu, Hawaii

Fort Shafter: Salt Lake, Moanalua, Honolulu, Aiea, Pearl City, Pearlridge, Oahu, Hawaii

Wheeler Army Airfield: Mililani, Wahiawa, Kapolei, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii

Helemano Military Reservation: Wailaua, Wahiawa, Mililani, Haleiwa, Oahu, Hawaii

Kahuku Training Area: Kahuku, Oahu, Hawaii

Kilauea Military Reservation: Hilo, Kona, Hawaii

Pohakuloa Training Area: Hilo, Kona, Hawaii

Makua Military Reservation: Waianae, Nanakuli, Makaha, Oahu, Hawaii

 

 

TEMPORARY LODGING FACILITIES FOR THE ARMY, NAVY, AIR FORCE, MARINE CORPS, COAST GUARD, RESERVISTS, NATIONAL GUARD, DOD CIVILIANS AND RETIREES ON OAHU, HAWAII

The Hale Koa Hotel on Waikiki Beach: Honolulu, H

The Inn at Schofield Barracks: Mililani, Wahiawa, Kapolei, Waipahu, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii

The Royal Alaka'i at Hickam Air Force Base

The Lodge at Kaneohe Bay and the Cottages at Kaneohe Bay

Navy Lodge Hawaii at Pearl HarborThe Beach Cottages at Kalaeloa (formerly Barbers Point NAS): Mililani, Wahiawa, Kapolei, Waipahu, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii

Tripler Army Medical Center Guest House

Bellows Air Force Station Beach Cabins

 

GOLF COURSES ON OAHU, HAWAII FOR ARMY, NAVY, AIR FORCE, MARINE CORPS, COAST GUARD, RESERVISTS, NATIONAL GUARD, DOD CIVILIANS AND RETIREES

 

Leilehua Golf Course (Army, Schofield Barracks) Mililani, Wahiawa, Kapolei, Waipahu, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii

Walter Nagorski Golf Course (Army, Ft. Shafter)

Mamala Bay Golf Course and Kealohi Golf Course (Air Force, Hickam AFB)

Kaneohe Klipper Golf Course (Marine Corps, Kaneohe Bay)

Barbers Point Golf Course (Navy, Barbers Point): Mililani, Wahiawa, Kapolei, Waipahu, Ewa Beach, Waipahu, Makakilo, Oahu, Hawaii

Navy Marine Golf Course (Obvious Right?)

 

COMMISSARIES ON OAHU, HAWAII FOR ARMY, NAVY, AIR FORCE, MARINE CORPS, COAST GUARD, RESERVISTS, NATIONAL GUARD, DOD CIVILIANS AND RETIREES

Schofield Barracks Commissary near Wahiawa, Waipahu and Mililani, Hawaii  Kaneohe Marine Corps Base Commissary near Kaneohe and Kailua, Hawaii             Barbers Point Commissary near Kapolei, Ewa Beach and Makakilo, Hawaii            Pearl Harbor Commissary and Hickam Air Force Base Commissary which are both near the cities of Pearl City, Pearlridge, Aiea and Honolulu.

Mahalo ahead of time!

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Location:
Hawaii
Tags:
mortgage
lenders
costs
junk fees
hawaii real estate

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
658,918
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645
That is one of the advantages of the VA loans.  They do not let the lender charge certain fees to the buyer.  I look forward to seeing the responses to your question form the lending experts.
Feb 20, 2007 04:39 PM #1
Rainer
118,729
Bob Sloop, Consultant, Indianapolis, IN
RS Mortgage Consulting - Indianapolis, IN
When reviewing the fees on the GFE, take note to see if an origination fee is charged, and if a discount point is also being charged.  I had a client come to me because their lender was charging both fees, which is OK to do, if your getting the services for the fees charged.  This case, nope, the discount fee was not used to lower the interest rate as it should have, and I was able to quote a lower rate, without the discount point, and without an origination fee.  This is what I look for as a competing lender.  Hope that helps you.  I could go on and on but you get the gist I hope.
Feb 20, 2007 11:57 PM #2
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Randy-This is a VA loan!  I know about the non allowables but plain as day there are still other fees noted on the GFE.

Bob-I am looking at the GFE (30 year fixed VA by the way with a rate of 6.125%)  There is an origination fee of 1% and a loan discount fee of .5%.  Other charges that I see are Processing Fee $200, Underwriting Fee $150 and Document Preparation Fee of $100.  What do you make of those charges?  Thanks ahead of time for any input you may have!

Feb 21, 2007 09:07 AM #3
Rainer
54,515
Dave Cheatham
INC Financial - Bartlett, IL

Ok. you aksed about Junk fees.  I will tell you.  I was at places that charged for everything.  They would have a fedex charge, a marketing charge, a who knows charge.  Bottom line is this. 

I need to charge my costs of doing a loan.  That might be to a lender, it might be to for many things.  I eat a lot of those charges too.  I charge a processing fee charge.  I do not see this as a junk fee.  It is a fee I need to pay for my compnay to do the loan.  It is a fraud prevention tool.  I need to charge for a Title, and other things.  In total my fees for a refi is low for the area. 

  Some people say the LO will eat a lot of the fess and charge points.  this way it is all a tax write off.  Well they can do some of these, biut not all fees can be put in there.

If a Realtor can get paid 2.5% of the total price, can a LO make 2.5 for the loan that is lower than the price?  I think it is fair to get the same as a realtor would.  I many times do not do that.  I want the loan to happen and make it happen.  I sometimes have made $200. and needed to split that with people on a loan that took me a long time to do.

Find an LO that will give you what the need to charge on <oans.  They will tell you if they want your business.  then ask what do they make on loans.  Understanding they don't make all of the money either.

I work with my realtors and tell them upfront what I do.  They know and we all work as a team to help the client get the home they want.

Soor, thsi was very long. I hope it helped.  If not tell me and I will get rid of it.

Feb 21, 2007 10:52 AM #4
Rainer
118,729
Bob Sloop, Consultant, Indianapolis, IN
RS Mortgage Consulting - Indianapolis, IN
David, I think so far so good.  I would ask the lender if the discount of .50 is actually buying the rate down, but everything else is pretty standard for a V.A. Loan, the reason the origination is one percent, is due to the lender not being able to charge other fees, so the lender has to collect for the fees through an origination fee.  I think you ok so far.  Keep me posted, and if at closing there is a drastic change I would then be concerned.  Good luck, Bob
Feb 21, 2007 11:38 AM #5
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Dave-No need to get rid of it because it did help out.  I agree that everyone needs to get paid and I have no issues with that.  What I want to avoid is when one of my buyer clients is being taken advantage of and getting charged fees that are not necessary.  By all means charge for services rendered but dont inflate in order to pad your pocket at the expense of my buyer.  I want referrals and repeat business because I took care of my clients.  I am sure that most lenders want the same thing if they plan on being around for a while.  As far as the lender making the same percentage as the REALTOR.....I dont even want to open that can of worms!

Bob-Thanks and I appreciate your honest feedback just like Dave gave me.  I cannot confirm that the .5 point is buying down the rate though as I was unable to locate that on the GFE.  I was only able to find the words "loan discount .5%"  Where can I go to check 30 year VA rates?  I dont have any problems finding all of the conventional info but have been unable to locate VA rates.

Semper Fi back to you.

Aloha, Dave

 

Feb 21, 2007 01:01 PM #6
Rainmaker
658,918
Randy Prothero
eXp Realty - Mililani, HI
Hawaii REALTOR, (808) 384-5645
Dave's post was helpful.
Feb 22, 2007 07:18 PM #7
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Randy-I agree.  I read back over it several times and took notes from the points that he made and also from what Bob had said.  There are still a lot of questions that I have because there are so many other charges on the GFE that I wonder about.

What they should do is to charge one single fee with everything rolled up into one big ball which would make it easier for me to compare one company with another.  Did I just say I was not smart enough to do that on my own?

P.S.  Saw you at LRG.....Looking good brah!

Feb 23, 2007 03:26 AM #8
Rainer
52,786
Dan Allred
Allred Realty - Thousand Oaks, CA
DRE#01761967
I personally am a partner in both a real estate company and a mortgage company and do see a lot of fees come through on different transactions. There are several fees that I may not agree with however we can control some of those fees. If you ask for fees to be reduced by title or escrow they can sometimes reduce fees like sub-escrow or wire fee. What we must first understand is who is charging the fees the lender, escrow, title or the mortgage company. Having a strong relationship and loyalty often will help in the help you can get for your client.
Mar 03, 2007 03:53 PM #9
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Thanks Dan.  You mention some of those fees that I am talking about.  It is so confusing sometimes but I just want to insure that my client is not paying for un necessary charges.  As you suggested, having a food relationship with a lender (or two) as well as a few escrow companies should alleviate any problems with those charges in the future.

Aloha!

Mar 03, 2007 05:08 PM #10
Ambassador
532,575
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Hey David & Tonya,

    Relevant question indeed.  First off, my experience is that discount points should and are always used to buy down the rate.  Junk fees, in of themself, are fees tacked on for sometimes intangible reasons.  I've seen some HUDS where the mortgage company nickle and dimes the borrower to death.  Essentially, there may be a set fee that a firm charges for their services.  In addition, the mortgage company/lender is paid in whatever origination fee they may charge and/or in yield spread they get paid from the lender in charging a higher rate.  The best way to ensure proper understanding is to simply ask how they make their money and what they charge.  The how's, what's, and why's so to speak.  Then, you can assess if it is reasonable.  A mortgage company's fees aren't set in stone, so negotiation is important.  Then again, if the client has a recent bankruptcy, no money, beat up scores, and a rollercoaster job history...they'll probably pay for the priviledge. 

Mar 03, 2007 08:42 PM #11
Ambassador
532,575
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

One more thing....I wrote a blog that awhile back that may shed some light on this very issue.  Let me know what you think...

http://activerain.com/blogsview/36769/A-Little-Fuzzy-Math

 

 

Mar 03, 2007 08:49 PM #12
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Aloha Jason-I went to the blog and I read through the blog and all of the comments.  From everything that is there I will cut and paste something that is very near and dear to my heart and is all that really matters to me......"The real question is about the competence, hard work, diligence, genuine caring & understanding to get the job done in the client's best interest."

We can argue all day long about what realtors make and what lenders make but as long as it is in the best interest of the client, then I sleep well at night.  I havent had a sleepless night in a long time.

 

Mar 09, 2007 01:13 PM #13
Rainer
54,559
Art Blanchet
On the Outside Lookin' In - Sebastian, FL
Stranger in a Warm Land

I've never understood junk fees as a legitimate way to generate income.  They smack of greed and slimy tactics that lenders with integrity strive to avoid.  They are sometimes the result of a broker trying to squeeze a few extra bucks out of a leveraged client, but that is not always true.

A few years ago I works for a large, top-ten, well-known retail lender.   During the refi boom - which I'd only caught the last remnants of due to personal commitments - our company would even waive all lending fees if necessary to score the loan, and especially "junk" fees.  Oddly enough, as the market began to shrink, theses fees were gradually slipped back into the paperwork.  Their misguided goal was to increase the revenues from each loan, thus making the fewer transactions more profitable. We as loan officers were forced to add the extra fees in our GFEs or face a manager's ire or possible termination.

The usual fee played with was the "processing" fee - something you see often in subprime and brokered loans but not so often with "A" paper.  It climbed from $100 to $300 in about four months and was mandated regionally, then nationally.  Naturally they now wanted this upfront, although for several years lenders had trained borrowers there were no fees at application.  It was uncomfortable indeed to collect such a fee, especially in the case of refinances where we had initiated contact.  But greed is greed and short-sightedness no different.

It wasn't long before this all backfired and borrowers found someone who played nicer with them.  Regular pipelines and relationships - the affinities that had partnered with us because of our low closing costs - caught enough flack from their associates and doors that had been wide open were shutting everywhere.  Our company had bit the hand that fed them and in a year all the offices in the state but one were closed and sitting like cubicle mausoleums.  (I had bailed prior to that event - soon after the gimmicks had started).  It was justice-of a sorts.  You just can't always blame the little guy for junk fees.

Junk fees indicate cowardice.  If you as a lender are doing extra work on a particularly difficult mortgage, be upfront with your borrower.  Tell him it will cost a little more (and if it's charged in points, at least he can deduct the interest).  And the only way he'll know of your work is if you've been in communication with him and have a relationship of trust.  It's been said countless times that borrowers almost never remember their extra eighth they've saved, but they ALL remember the experience itself.  Make it a good one and money is never the issue.

Art Blanchet

 

 

Mar 14, 2007 05:28 PM #14
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner

Art-Thanks for that information.  I read it over twice in order to completely soak it all in.  The more and more I read comments and posts about this subject, the more I understand the how's and why's of mortgage workings.  You have provided a great explanation that even a Realtor can understand.

Aloha!

Mar 14, 2007 06:30 PM #15
Anonymous
vic voss

I am a trustee for a not for profit trust set up for scholarships for the members

children and grandchildren..I am obligated to get the best price I can for a loan

 

of $360,000 for a home purchase in Maui, Hi...  How can I sort out all the variables

and properly "shop" for this?

Nov 06, 2007 04:38 PM #16
Rainmaker
161,393
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner
Aloha Vic and thanks for stopping by.  It really stinks that you have to even ask the question.  Wouldn't it be great if all of those fees were just disclosed up front as one simple figure and you could decide which one was best?  Even as a realtor, I wish that there was a better way to sort thru the "crap".  My suggestion is that you go through a proven professional from Hawaii.  Dont just shop the internet and find one that "claims" to have no junk fees, no origination fees etc....because they are going to make money somehow off or your loan.  Nobody is in this business to be nice and give you things for free.  If you would like, send an email to my personal email address at david@davidkucic.com and I can refer you to several lenders that can take care of your needs.  THERE IS NOTHING IN IT FOR ME!  I dont get a referral fee or any kind of kick-back.  What I get most importantly is the satisfaction of knowing that I helped Vic Voss get a quality product and I possibly saved him from getting raked over the coals by someone who cared more about money than taking care of people.  Looking forward to hearing from you Vic.
Nov 06, 2007 04:51 PM #17
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
161,393

1SG (Ret.) David Kucic

President and Owner
Ask me a question
*
*
*
*
Spam prevention

Additional Information