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#529959 - 04/11/06 02:03 PM Origination Fee
D2Xs Offline
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For example, say we have a loan that it for $180k but when you add additional fees it equals $200k. We want to take an origination fee of 1%. I believe the origination fee is based on the loan amt not the loan amt plus fees. However, I am not finding this in the regs.
Can someone point me in the right direction?
Thanks
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#529960 - 04/11/06 02:57 PM Re: Origination Fee
RR Joker Offline
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You won't find it. There is nothing cut and dried regarding what you can or cannot charge as a fee. Normally, it's 1% of the principal loan amount...whatever that happens to be.
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#529961 - 04/11/06 03:21 PM Re: Origination Fee
D2Xs Offline
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Thanks for the reply but what should we base the fee on, 1% of the initial loan amount or 1% of the initial loan amount plus costs?
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#529962 - 04/11/06 03:39 PM Re: Origination Fee
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Whatever amount you are giving to the borrower is what you calculate it on. In your example, if the borrower wants to finance the costs, the loan amount is $200,000. If not, the loan amount is $180,000.
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#529963 - 04/11/06 04:19 PM Re: Origination Fee
Sooner Fan Offline
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Our banking procedures are to charge the origination fee based on the credit request, which sounds like your $180,000.

To take that amount and add other fees and then charge your customer for an add'l fee seems like a complete rip off to your customer. Charging fees on top of fees, geez.

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#529964 - 04/11/06 05:01 PM Re: Origination Fee
TB 12 Offline
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Foxboro
Soonerfan-when people refinance, most of them dont want to pay closing costs "out of pocket", so the loan amount is structured to include the payoff(s), closing costs, escrows, additional cash out, etc. The total of that is the credit request, and therefore the fees are based on that amount. Some choose not to include the closing costs and or escrows, so they bring that amount to the table.
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#529965 - 04/11/06 05:59 PM Re: Origination Fee
D2Xs Offline
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Sox do you have any citation showing this is not prohibited that I can give to my boss?

Is this state specific?
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#529966 - 04/11/06 06:15 PM Origination Fee
Miss Kitty Offline
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California
I'm curious.... does your FI have any policies/procedures on various types of loans and what fees (e.g. 1%) will be charged? You can look at what is standard practice in the industry- are you referring to Mortgage or another type of financing.

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#529967 - 04/11/06 07:08 PM Re: Origination Fee
D2Xs Offline
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I just got more info. Hopefully this is clear.

If we have customer who applies for a 200k loan and it turns out they don't need the whole 200k so they tell the bank to take the fees out of the 200K and give him the remainder. If one of the fees was 1 point then does the bank get 1 point on the 200K or the money left over after the fees are taken out?
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#529968 - 04/11/06 07:18 PM Re: Origination Fee
Dan Persfull Offline
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We charge a % of the loan amount. If they applied for 195,000 plus 5,000 in fees for a total loan amount of 200,000 we'd charge a % of the 200,000. However, you may want to check any applicable state law. State law may not allow you to charge points on fees financed.
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#529969 - 04/11/06 09:32 PM Re: Origination Fee
Sooner Fan Offline
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Where the wind blows swiftly d...
I understand that fees are either financed or paid in cash. I'm just saying that we have always charged the org. fee based on the credit that the customer is actually requesting minus any other applicable fees. It just seems like double dipping to charge the org. fee on top of all of total fees plus loan proceeds.

That's just my opinion though.

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#529970 - 04/11/06 10:28 PM Re: Origination Fee
Suwannee Offline
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FNMA and FHLMC both allow the origination fee to be based on the "total" loan amount. Generally, most lenders follow FNMA and FHLMC guidelines.
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#529971 - 04/12/06 01:10 PM Re: Origination Fee
Dan Persfull Offline
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SF, your method is definitely a benefit to your borrower. However, the fees are being financed, therefore you are carrying the fees in your loan proceeds (you're lending them to your borrower to pay you) so why would you not charge your loan origination fee based on the actual money being borrowed? IMO, there's no double dipping; the fee is based on the total monies being borrowed.
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#529972 - 04/12/06 02:56 PM Origination Fee
Miss Kitty Offline
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California
I have to agree w/Dan on this Maybe too much analization is going into this. What is the actual amount of proceeds the customer is requesting? Start from here and base your fees on this amount, with the fees financed it will be your total loan amount.

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#529973 - 04/12/06 04:45 PM Re: Origination Fee
Sooner Fan Offline
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Where the wind blows swiftly d...
If you are charging your customer an appraisal fee, title fees, filing fees, etc. and then you are charging your customer another fee on top of those fees, it seems to appear as double dipping.

I'm not saying there are any laws that are being violated, it just doesn't seem like the best thing for your customer espeically since purchase transactions can have steep fees to begin with.
Just my opinion though.

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#529974 - 04/12/06 05:31 PM Origination Fee
Miss Kitty Offline
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California
Curious.... What other fees other than fees connected with the loan are considered "on top of those fees"?. Other than that there should be no other fees other than if the customer was late with a payment (Late Charge) or are you thinking about the accrued interest the customer is paying on the outstanding balance?

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#529975 - 04/12/06 05:55 PM Re: Origination Fee
Dan Persfull Offline
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Bloomington, IN
Quote:

Maybe too much analization is going into this.




This is a true statment. The bottom line boils down to it's the FI's choice which way they charge their origination fee. Providing of course they are within any applicable state law.
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