Junk fees on a home loan. What a misused term. So many fees are mistakenly classified as home loan junk fees including fees that are bona fide. Mortgage loan fees nationwide amount to roughly 110 billion annually. You may wonder why that figure is so high to do a home loan.
With each loan that funds there are multiple people working to complete the loan transaction whether the loan is from a bank or a broker. Here is a list of the titles of people who are always involved in each and every home loan:
* a loan processor
* loan officer assistant
* escrow officer
* escrow officer assistant
* title insurance company
* appraiser
* appraisal management company
* underwriter
* underwriting assistant
* lenders account executive
* funder
* doc drawer
* county recorder
* courier
* bank - wiring funds
It amazes me how many banks play games and provide good faith estimates without listing all of the fees associated with a home loan. Little does the consumer know that they make money to cover these fees by giving out higher interest rates. They simply omit the fees to make it look less expensive. However, that higher interest rate can and usually will amount to more money spent on a loan than if the borrower would have paid the fees themselves.
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Junk in the trunk does not always refer to a caboose.
Fair, regulated, fair, regulated, fair ... oh, the echoes in my mind.
While I loved the speech from the movie "Wallstreet", I don't firmly believe that greed is good. That written, it stifles my mind that in a Capitalistic Society we still pick and choose which entities are to be paid and which are not deserving, those who are nothing more than 'junk' or unnecessary fees. If you want the job done right, it may not be the most expensive in the land that fits the bill. But I'm not going to go shopping at Walmart for my DVD collection either.
Nevin - AMEN!!! THANK YOU, THANK YOU, THANK YOU! While many of my borrowers understand this fee when I go over the GFE and accompanying fee worksheet, there are a few (usually my borrowers parents) who will question these fees.
Mind you, while I do have 60+ lending sources available to me, I typically use a small group of about 5-10 lending sources for almost all of my loan files. With the exception of one of these lenders, the GFE/IFW for my lending sources consists of all of the four fees: a) underwriting, b) processing, c) origination and d) appraisal - THAT'S IT!
Recently, I was meeting with one of my young first time buyers to go over the est. HUD1 statement with him and his father came along. This bozo (the father) had the audacity to question my four fees and referred to them as junk but never once questioned the other nearly 20 fees on the sheet (most of them the bank sellers title & escrow fees). When I asked if he felt that these other fees were junk, his response, "oh those are actual valid fees to do buy a house" - AND LOAN FEES AREN'T.
To this jerk, it was ok for everyone else in the transaction to get get paid but it wasn't ok for me and my lender to get paid - SERIOUSLY!!! After awhile, I just chose to ignore the idiot father (who had no financial and/or legal interest in the loan or the sale) and before my client left, he thanked me profusely for taking care of him and everything else that happened during the transaction (that's a whole other post) and always being there to explain things to him.
In the end Nevin, that's what it's all about - that the client is happy with the loan he got as well as my service. I couldn't give a rats @$$ what others think - I don't work for them and they're not my clients.
Andrew - Interesting comment
Jason - Well said from an intelligent mind! Good to hear from you Jason
Donne - This was a great opportunity for future business! I have several ways to deal with this type of situation so that it is tactful and educational. I have found whenever a person questions my integrity It's because they don't trust people in our industry. Maybe they've had a bad experience in the past.
Talk about a great opportunity to get a client for life! This is a perfect chance to educate them, professionally without getting offended or offending them. First I tell them I understand that they may have reservations regarding loan people and acknowledge their feelings. Then with an honest and valid explanation I get them to understand how I came up with my numbers and I show them how much we will be compensated.
Often, after a constructive explanation that father will want to do business with you because of how you treated them and your transparency. These are the best customers because they won't trust anyone else when they know they can trust you. Even if they don't it sends a message to the son that you will respect their father even when the father questions your integrity.
Nevin - For the most part, I get along great with my young clients parents. More times than not, the parents and I are the same age group and have a lot in common. I am currently doing a refi for the grandfather of a client I had last year after my client referred him to me.
However, every now and then there is that ONE that is just an absolute jerk. In this particular case, there was no educating this man and he became rather rude, arrogant and obnoxious while his son and I were talking. It got so bad at one point, that his son apologized. That's when I began to just smile whenever he interrupted us and after he finished, his son and I would continue on with our discussion of his transaction.
Anyway, while it is important to educate parents (especially ones that haven't purchased a home in 20+yrs) just as much as it is to educate our own clients, there is absolutely no reason to allow them to be rude and disrespectful to us. I don't deserve that and will not allow it. I am of the philosophy that respect starts with me, when I respect myself and my business then others will too. If they don't, then they can find someone else to abuse.
Donne - Point well made. If this person was this bad I too would have either ignored him or asked him politely to please step out of the room. I completely agree with you that we don't need to tolerate rude people. Good job defending yourself! Sorry Donne, I didn't realize that he was that bad.
Nevin - I can most certainly understand that some people have a hard time getting past all the crap that the media has made us (MLO's) out to be. I know that many parents just want to make sure that their kids "don't get ripped off" (I've actually had parents say that to me). However, referring to everyone in my profession as "a bunch of crooks out to rip poor people off" is just unacceptable. That's actually where my client got embarrased and apologized.
Most of the parents I work with are great people and as I mentioned before, have typically not purchased a home in awhile and they KNOW that the things have changed. Many times, the parents have actually been a great help and ally (to me) in helping their kids get through the process and helping them understand the things that they need to know. I usually like working with parents, especially when they understand the value of a great MLO (me!). LOL
You forgot about agents who pass on their "Transaction Fees"
:)
Renee - Hi there! The agent transaction fee I think is an agent fee not a loan fee. At leat I haven't run into it on my end.