I'm bumfuzzled and need some help in sorting this out. I'd like to have all my eggs in the basket before calling the loan officer. Here's what happened.

Consumers (husband and wife) applied for a loan to refinance their principal residence. GFE was given, the loan was approved and papers were drawn and sent to the title company. Communication then broke down between the holder of the loan and my bank....refusal to quote payoff without the borrowers' written consent, among other things. It took a number of phone calls and jumping through various other hoops to finally get the payoff quote. During this time, the borrowers made another payment. The officer decided to charge an origination fee on the loan and the borrowers agreed. The origination fee "just happened" to be the difference between my bank's loan amount and the new payoff from holder of the note thus eliminating the need for new papers to be drawn up. It appears, as a result, that the origination is financed i.e. it's part of the principal of the loan. Since an origination fee is a prepaid finance charge already, is it legal to finance it and charge interest on it.

Give me your thoughts about this mess.....please.

Shirley,

The origination fee can be financed in, but you'll have to do the docs over anyway (at least the HUD-1 and the TIL) because you have to disclose that origination fee as such, and as a prepaid finance charge. That changes the APR.

Don't you just love these situations loan officers can come up with?!?

I agree. Fees are often financed in. This is one way there are so many "$1 Move In" specials. It looks odd when the settlement statement shows $500 earnest money paid and the buyer gets $499 back at closing. You get a house, a month without a payment and money back! What a country.