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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127684  
Subject: Re: question on terminology Date: 4/19/2001 1:53 PM
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Hi Selphiras,

That's a very interesting observation about each being double the previous. Virtually guaranteed to be a coincidence... but you never know...

Loan Origination fees, when they're straightforward enough to call them that and show them up front, are the compensation to the Loan Officer, the Office Broker (if the officer works under another's broker's license), and any administrative assistants they may have who get paid based on production.

Processing fees are typically paid directly to a person holding the position and responsibility of "processor," which is the slightly more friendly and accessible complement to what elizabeth described as "those trolls in the dark places called underwriting." Processors are number crunchers, don't get claustrophobic when buried in stacks of paper, are absolutely compulsive about following rules, and have unbelievable memories for the constantly changing nuances of the rules of different lenders. As elizabeth pointed out, in many cases the actual processor is an indentured slave paid in M&M's (usually by schmoozing title company reps) and weak coffee ("generously provided by management") while the office books the processing fees.

Underwriting fees are paid to, and typically through, the specific lender chosen. The underwriter is basically also a processor, except with the single-minded purpose of protecting the lender's investors from any and all questionable risk whatsoever. Not unlike tortured pitbulls and IRS agents, underwriters are trained from birth to have a significant contempt for most, if not all borrowers, and believe that Loan Officers and Brokers have only ONE THING IN MIND (and they're not complaining that it's sex!)

Liz added;
Origination fees are points. They go to the lender or mortgage broker. Points are also points, which also go to the lender or mortgage broker.

Which is just a bit confusing... "Points" once meant fees measured as a percentage (as in 'percentage points') of the amount of money borrowed. The term then evolved to have a connotation of just the fees that the lender will accept to lock in an interest rate lower than the even, fair market value (also known as "Discount Points," as these are still almost exclusively quoted in percentages of the loan.) Lately, it seems the general public has adopted the term "points" to mean the compensation to the loan officer, broker, assistants, etc. (what I called Origination Fees above.)

Adding further to the confusion, some competitive loan officers are willing to do deals for flat fees that have nothing to do with the amount of the loan (as in your case.) In this case, the fees aren't realted to any 'percentage' at all, but "irregardless", some people still call these 'points.'

Liz continued;
But you didn't ask about "document fees." There's a whole pile of fees lenders slip in the good faith estimate, if they can get away with it. IMHO, which isn't very humble, many lenders take advantage of buyers/borrowers who don't understand how the system works. Most of the time, their real estate agents don't understand the system, either.

Hear Hear!!! Will you 'recommend' this, or liz's, for all to read again? Can I have a witness? Amen!!!

The devil's in the details, and I can't tell you how many folks have faxed me other brokerages Good Faith Estimates for review, only for me to see all kinds of bizarre line items that have no necessity in a LOAN document at all!!! It's just another way to try to soak up some money from the borrower so it LOOKS like there's "No Points."

All the best,
Dave Donhoff
Lic. Mortgage Broker
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