Processing Fees Cover Real Costs

Regarding the Aug. 22 “Real Estate Q&A;” item headlined “Separating Junk Fees From Real Costs” by Robert Bruss, I would like to say that processing fees are not “junk fees.”

Processing fees are charged to compensate for the time and efforts expended:

* In ensuring that the borrower’s loan application is properly completed, which includes obtaining pertinent income, employment, residency, credit and asset ownership data, which must be supported by valid documents.

* In resolving erroneous payment and liability information contained in the borrower’s credit report that includes obtaining supplemental and substantiated explanatory literature.

Loan processing is typically contracted to independent companies organized solely for this purpose or performed internally by a full-time processor.

MIKE FINE

Certified public accountant

and real estate broker

Via e-mail

Bruss states that the underwriting fee, processing fee, document prep fee, closing review/courier fee, certificate fee and warehouse fee are “pure junk fees for the mortgage broker.”

He also states that the “$55 credit report costs the lender much less.” These statements are not true.

The fees he mentioned are most likely the lender fees and not the mortgage broker fee. The broker is simply packaging the loan for submission to the lender. It is the lender that is charging these fees, with the exception of the processing fee.

The processing fee is typically charged by the mortgage broker and is the only fee that is not a hard cost charged by the lender. We certainly can debate whether certain of these fees are excessive, but these are not junk fees charged by the mortgage broker.

Although anyone can obtain a credit report for less than $10, a lender requires more than a standard consumer report. The $55 fee was the hard cost of the required report. It is illegal to mark up the cost of the credit report.

RANDY LEVINE

Via e-mail

Bruss talks through his hat a great deal of the time when it comes to the mortgage loan industry.

All wholesale lenders charge a sum of fees per loan that are either itemized (as in this example) or are lumped together as an administration fee but that total usually within about $100 of one another.

The better mortgage brokers charge only a nominal processing fee in addition to the wholesale lender’s fees. The example given does appear to be on the high side regarding what the broker himself is charging, but you can bet he is not pocketing all the fees indicated by Bruss.

MEL ROBINSON

Citadel Mortgage Co.

Glendale