what do you think of these HML junk fees?

Question

Hello guys,

my partner and i are using for the first time a local hard money lender in the los angeles area. We are borrowing 250k over 3 months

We just received their estimated settlement statement which seems to carry a significant amount of junk fees:

Amount requested                                   250,000.00

type                                                             2nd trust deed

terms:                                                         no pre payment penalties after 3 months

rate                                                             10%

Points 1,75                                                4,375.00

lender Underwriting                                795.00

lender Admin                                            700.00

lawyer fee                                                   1,000.00

Escrow Fees                                                450.00

title co Property Inspection Fee              75.00

Notary Fee                                                  175.00

Electronic Recording Fees to title co       20.00

Lender Refinance Policy to Title co         1,032.00

Endorsement - estimate to Title co         125.00

Recording Fees to Title co                         75.00

Deed of Trust Recording to title co         150.00

total junk fees                                             $4597

It is the first time we use a hard money lender, but to me 50% of these fees are avoidable and should be negociated

Could you guys give me your opinion about these terms and what are the fees you'd pay and wouldn't?

thanks

Tom Gimer · Answer

You've identified the lender's title policy as a junk "fee".

You consider the lender's underwriting as well as the preparation of loan docs/security instrument by the lender's attorney to be "junk".

There may be a few dollars to argue about in that list but not these.

Tom Gimer · Answer

Account Closed

There you have it, folks. No legal required! Lender can just make a claim against itself or with the "doc prep company's" E&O when the instruments don't properly secure an interest in real property or otherwise fail to protect the lender when things go sideways.

Jay Hinrichs · Answer

in so cal it would be RARE to have a lawyer involved in this transaction @David Weintraub  we are a title and escrow state

so take out the 1k  and the two addition doc review fee's 750 and 795  those are straight to the lender for his profit side.

other than that fee's are fairly standard.. I always use my own notary so I never pay notary fee.. I make them send the docs go my title co.. that will sign me off as a courtesy..   however your correct for a second mortgage the points and fee's are quite good.

David Weintraub · Answer

you can shop with another lender, and see if the totals come out the same.  It seems like a great rate/points, but that's probably how they get you in the door.

Tom Gimer · Answer

Account Closed

People like to have somebody they can blame things on... and collect from. That's typically an attorney with an E&O policy.  Infallible, no.  Insured, yes.

And I'd say that's not unique to this area. Or perhaps OP found the only HML in CA that has attorneys involved with their loans.

Account Closed · Answer

@Tom Gimer

You're right!  Lenders are responsible for their actions, title company's are responsible for their actions, escrow company's are responsible for their actions and doc prep company's are responsible for their actions.  You act as though attorney's are somehow infallible, or, I"m not sure what your point is.  YES, absolutely no legal required.

Out here, the only person not responsible for their actions are consumers...it is CA after all.

Account Closed · Answer

@Tom Gimer, out here, where the OP is from, there is absolutely no reason to pay legal.  Docs are drawn by lender or a paid doc prep company($1,495 = $795 underwriting + $700 admin), and title is not only examined but also insured by title ($1,032) ... and that is all way more than normal.  $1,000 (a nice round number) is totally junk.

Account Closed · Answer

Thank you all for the the inputs;

I've shopped around and this lender actually came up with the most competitive and flexible terms. They also seem legit and have good reviews

I will use my escrow company; they quoted me a lower fee for the same policy, and will negociate to have the legal and doc fees waived

Nghi Le · Answer

I've never seen a lender in 2nd position with 10% rate and less than 2 pts.  That's pretty amazing.  Is it really 2nd position?  Can you send me the name of this company?

Everything below the lawyer fee comes from the title/escrow company, not the lender.  Not sure why they're charging an attorney fee, but looks like there has been some discussion on it.

Jay Hinrichs · Answer

@Tom Gimer  Bank will prepare note... Escrow officer prepares DT or mortgage..

when I had my Hard money shop my doc prep folks prepared the note .. title and escrow the DT or mortgage.

and Escrow  can prep note as well.. assignment of rents is buried in the DT or Mortgage.. these are standard docs out our way and not custom made..   Notes can be bought at office depo along with mortgages and or DT's.. and they work fine.

only way an attorney would prepare these is if they are really custom or specialized large commercial transactions or when I would do some equity share notes.. I would have my attorney do one template then my office would do all the rest of them.

Senior escrow officer is quite capable of handling any and all closings needs for REsi re and they do it as a matter of course.

the Lawyer is usually in the main office and handles disputes or title claims not day to day closings.

what do you think of these HML junk fees?

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