I got a question today from a client that was unhappy with her origination fee, so I thought it might be well to repeat my opening of the kimono on the subject.
Just wanted to make something clear about how the origination fee stuff works. Obviously, all mortgage people get paid. Some get paid more than others. Some are even worth it. I get paid pretty well for the industry, and I think I earn it. I also pay most of it out to all the people I have helping me, so very little of it ends up in my pocket, but that’s another story, and a personal choice. Not relevant to our discussion.
Mortgage people get paid in two ways – one, they charge origination fees, and two, they get paid to re-sell the mortgages on the secondary market. The first fee is transparent. It’s stated clearly on the Good Faith Estimate. The second is not. It is supposed to be disclosed per federal law, but it often isn’t (it’s a fairly new law). In essence, mortgage people are able to hide how much they are really making on a deal by raising the interest rate and “lowering” their fees. Most people only look at the transparent fees and don’t think that .125% on the interest rate is that big a deal.
Well, it is.
I worked on a deal this morning where I’m competing with a lender that does not charge origination. Lots of people like that. I’m going to win, though, because I know the borrower and I know that the additional .25% in interest the other lender is charging (in order to make the money she wants) is going to end up costing the borrowers more than $10,000 in additional interest over the life of the loan, and several times that if they are really trying to get rid of their debt.
This is a business. We’re not a charity. We get paid to do this. Well, okay, not THIS, exactly, because blogging is kind of a freebie, but we get paid to find people the best loans there are. And we do that. From 5:30am to 8pm every weekday.
Also wanted to mention that I’m going to be on the Geoff Beckstrom show on grapevineradio.com from 3pm to 4pm today, right after I get out of my Rotary District Conference. Busy day. And fun.