If you are in the process of refinancing your mortgage loan there are a number of garbage fees you need to know about. Unknowingly paying these fees will result in paying thousands of dollars unnecessarily for your new mortgage loan. The garbage fees I am referring to pertain to the “Computerized Loan Origination Fee” charged by many mortgage websites like Lending Tree, and the Yield Spread Premium charged by nearly every mortgage company in America.
Computerized Loan Origination Fees
This is a garbage fee charged by lead generation websites that have absolutely nothing to do with mortgage loans. They put up a flashy website, advertise on television with a catchy phrase about “lenders competing” and then sell your personal information to every mortgage lender willing to pay them. If you visit the Lending Tree website for example, look carefully at the Licenses and Disclosure link found at the bottom of the page. This disclosure statement explains that if you fill out the contact form on their site you will have a fee on your Good Faith Estimate for their part in “arranging” your loan. Guess how much this fee is? This Computerized Loan Origination Fee will set you back as much as $1,300, and all you did was fill out a form on their website! There are hundreds if not thousands of these lead generation websites littering the Internet. You can protect yourself by reading the find print before giving up your personal information.
Yield Spread Premium (YSP)
YSP is the markup of your mortgage interest rate by the loan originator for a commission. This commission is in addition to any fees you pay (or overpay) for arranging your mortgage loan. Mortgage companies and brokers do this because the wholesale lender pays them a bonus of one percent of your mortgage amount for every quarter percent you pay over the interest rate you qualified. Not exactly an incentive to keep mortgage brokers honest is it? Fortunately there are ways to avoid paying retail markup of your mortgage interest rate; homeowners who negotiate with their mortgage broker to avoid paying this markup will save themselves thousands of dollars. You can learn more about avoiding Yield Spread Premium, Computerized Loan Origination fees, and other costly mistakes with our free mortgage refinancing video tutorial.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
