Mortgage loan processing is a confusing aspect of refinancing for many homeowners. Many mortgage brokers charge a fee as high as $500 or more; however, isn’t this just a junk fee?
Many mortgages brokers justify their fee by saying they use a “professional loan processor” to process their files. First of all, what the heck is a “professional loan processor” and if this person gets paid $500 an hour for their work, where can I sign up? Nonetheless, here and the pros and cons of the broker’s “professional loan processor” argument to help you decide if “processing fees” are legitimate expenses when refinancing your mortgage.
Mortgage Loan Processing
What happens when a mortgage broker “processes” your loan application? Once your mortgage broker has sold you on a loan offer they’ll set up a file in whatever origination software that broker is using. After they’ve priced out the loan including the potential markup of your interest rate they’ll turn the file over electronically to the “loan processor.”
The “mortgage processor” checks the file for errors (electronically of course…computers do most of the work). If everything checks out the processor prints the application documents and disclosures. The necessary documents for closing your new mortgage include:
Documents Prepared by Your Loan Processor
Good Faith Estimate (GFE)
Truth in Lending Statement
Borrower’s Signature Authorization
Borrower’s Certification and Authorization
Federal Disclosure Notice
Mortgage Origination Agreement
Equal Credit Opportunity Notice
Servicing Disclosure Statement
Tax Transcript Requests
Patriot Act Disclosure
Once the application and mortgage documents have been sent to you for signature, the loan processor begins checking the title and proof of insurance and verifies your income using w-2s or bank statements. After your file is complete the processor assembles the necessary documents for the lender you’ve chosen and transfers the file to the loan underwriter. These documents are typically sent via FedEx or other courier. Your mortgage application has not yet been approved.
At this point the loan processor’s job is done and your file is in the hands of the underwriter. How much time is spent preparing your documents? One hour…maybe two? Is printing out documents prepared by a computer worth a $500 processing fee? Shouldn’t your mortgage broker print out their own paperwork?
If a mortgage broker’s time is that valuable they could easily find cheerful college students at temp agency to do this work for $15 an hour…how can you possible justify a $500 processing fee by someone that has nothing to do with underwriting the loan? I’m sure loan processors are real people with kids to feed; however, for the work necessary to get your file to the underwriter there is no justification for a $500 processing fee.
What do you think? Is the application processing fee a valid expense?
Leave your thoughts and comments below…
As for me, I think not…tell your mortgage broker to take out the trash and refuse to pay junk fees when refinancing your home.
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