Why are the number of fees for a loan growing?

Question

Looking for a loan and am curious if all lenders have resorted to creating a laundry list of fees. Some of what I am seeing are:

- Legal Fees

- Underwriting Fees

- Corelogix and other data fees

What's next - Fees for if you are an American living in America? First Born Fees, The Fee Fee, etc.

All of the fees are increasing the amount of money a flipper has to bring to the closing table and aren't helpful.

Jay Hinrichs · Answer

we call those junk fee's the issue is simply marketing.

there is a race to the bottom on APR and points..  so junk fee's are not included in your apr.

and you dont advertise your junk fees  you advertise your points.. and when ALL of your competition is at 1 to 3 points with no up front disclosure of junk fee's in their advertisements then thats how you get the phone to ring.. U see i every day when borrowers get to the closing table and are shocked at their add on junk fees.. And its too late to back out.. and these loans are not government regulated these lenders do NOT have to divulge this up front and are not penalized if they add things..

My self I have Zero fees but my points are higher LOL.. so I get many who just pass on us because of this not knowing that the total cost for the loan is actually less than these brokers with  all the junk fees.. of course I REAL private money so I make the rules.

Erik Estrada · Answer

No one is going to hand you a list. You will need to network in the area, go to events, and meet ups. Or just work with a mortgage broker in the area

Mike Klarman · Answer

So, of course greed, but also inflation, and labor rates, and all new costs associated with the COGS for any product is passed down to the consumer/borrower.

Most of these loans are securitized so the payment streams are actually not theirs but the capital partners of the lenders that buy the packaged notes.  So the only money a lender makes is the fees and origination.

Civic should you what happens when lenders try to sit on their own notes - when the market slipped and their loans started defaulting they went under.

Now, sometimes a broker has a corresponding lender agreement with a lender which means that all the broker fees are white labeled into the HUD and grouped with the lenders and now you can't tell what fees are the lenders and which are the brokers.

Devin Peterson · Answer

Yes, 100% agree - it’s reality we all face with private lending.

Chris Seveney · Answer

@Devin Peterson

As someone who does some private lending I have an attorney create the documents and closing package which we pass on. We also charge an underwriting fee which includes reviewing the entire file, cost for appraisals and credit checks etc

You also can thank your state or federal government for creating additional layers such as licensing for business loans which to me is stupid.

Devin Peterson · Answer

James,Fees are accurately disclosed up front by the lender or broker you are working with. There’a something you have to understand that @Erik Estrada made great point on. There’s on cost involved with underwriting a loan. Legal, underwriting, servicing, credit reports, etc. Where you can SAVE money - is by teaming up with one broker or lender and establish a mutually beneficial partnership of return business and maybe earn your self a return client discount. Volume consistency matters. That should make sense, yes?

James McGovern · Answer

Would love to find a list of 65% LTV max mom and pop hard money lender in my area. Got suggestions?

Erik Estrada · Answer

It depends on the hard money loan type. If it's a high LTV loan, they are most likely using institutionalized money. These types of loans go under a lot more scrutiny than your run of the mill 65% LTV max mom and pop hard money lender.

But to your point, the extra fees might be because the loan is small. These loans are the same work as a bigger loan for less profit. Hence, why there is an up charge to make up for the difference.

If I were in your shoes I would just shop it around. Work with lenders that are reputable though. There are a lot of bait and switch type lenders in this space since it's unregulated.

Why are the number of fees for a loan growing?

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