Closing Costs and Banks are Disgraceful

[elgerber]

A couple more comments...
20% down requirement on condos is not out of the ordinary these days, especially on new construction condos. Often condos have requirements where a certain amount of the project must be sold and owner occupied, among other things, that make them unwarrantable if those requirements are not met. Often they are not held to the same standards if you put 20% down.
And the appraisal, they are always required. Just because you pay a certain price, doesn't mean the value is there. I have files on my desk every month, both existing and new construction, where the value does not come in as high as the purchase price. And the loans are often sold to different investors who also need to verify the value of the home is supported. The cost of the appraisal does not come from the lender itself, but the independent appraiser who appraises the property.

 

[tvguy]

The HUD is the HUD-1 Settlement statement, that itemizes all costs to buyer and seller, and is signed by both parties at closing. It is done on every file closed, no matter what type of loan or financing you have.

Thanks. I looked through my packet from selling my parents home last year and didn't have one. God bless Google. HUD-1 Settlement statements are only used if a Federally insured mortgage is being used. So it wouldn't be used on every file
http://homebuying.about.com/cs/titleescrow/a/hud1_settlement.htm

 

[firegurl]

Thanks. I looked through my packet from selling my parents home last year and didn't have one. God bless Google. HUD-1 Settlement statements are only used if a Federally insured mortgage is being used. So it wouldn't be used on every file
http://homebuying.about.com/cs/titleescrow/a/hud1_settlement.htm

I have been a mortgage processor for many years. HUDs are used on ALL mortgage loans. It has nothing to do with having a conventional mortgage, FHA mortgage or VA loan.
As far as the fees that are charged, as a pp mentioned that the fees cannot be inflated. We have to provide an invoice for each service we charge for. Credit adds up. There is a cost for the initial pull, a cost to run it through the automated loan software, a cost to update accounts. It adds up.
You can't supply an appraisal that you had done on your own. Its useless. Appraisals have to be ordered through Appraisal Management Companies that make sure a completely legit third party is handling the home valuation.
In my state, title searches for new purchases go back 60 years. I've seen them go to 100. Those are to protect you and the lender. It makes sure that all changes in title were done correctly and no one can lay claim to your property at a later point. Title insurance also protects you and the lender. It makes sure you are covered in the event there is an issue, an unreleased lien that appears later against the previous owner.
Now, the part that really gets me. I work hard. Darn hard. Why shouldnt we be able to charge an origination fee or a processing fee so I can earn a paycheck? At my company there are no less than 6 people that will work on your loan. Primarily the loan officer and processor but then you have an assistant that creates your in initial application, the compliance manager, the funding manager and the loan production manager. That 1% origination fee (as an example) doesn't go very far when you split it between 6 people plus trying to make the company profitable so I have a job to come to every day.

 

[DebbieB]

Thanks. I looked through my packet from selling my parents home last year and didn't have one. God bless Google. HUD-1 Settlement statements are only used if a Federally insured mortgage is being used. So it wouldn't be used on every file
http://homebuying.about.com/cs/titleescrow/a/hud1_settlement.htm

I have a HUD-1 from the purchase of my new home and also one for the sale of the old one. Neither were FHA. The old house sale was cash.

At the top left, there are 5 boxes:

1. FHA
2. RHS
3. Conv Unins
4. VA
5. Conv Ins

On my new home, #3 was marked. I don't have the old home one handy.

 

[indygirl99]

Can you pay off your mortgage at any time with no penalty? When we refinanced to a 15 year mortgage a few years ago, that was a requirement for us in who got our business.

Yes no prepayment penalty. That is why I pay an extra amount to principle each month.

I could not qualify for a 20 year loan when I bought but by paying the small amount extra each month I will pay it off in just under 20 years.

I just love when lenders lump everyone into the same bucket with their refinancing push.

 

[tvguy]

I have been a mortgage processor for many years. HUDs are used on ALL mortgage loans. It has nothing to do with having a conventional mortgage, FHA mortgage or VA loan.
As far as the fees that are charged, as a pp mentioned that the fees cannot be inflated. We have to provide an invoice for each service we charge for. Credit adds up. There is a cost for the initial pull, a cost to run it through the automated loan software, a cost to update accounts. It adds up.
You can't supply an appraisal that you had done on your own. Its useless. Appraisals have to be ordered through Appraisal Management Companies that make sure a completely legit third party is handling the home valuation.
In my state, title searches for new purchases go back 60 years. I've seen them go to 100. Those are to protect you and the lender. It makes sure that all changes in title were done correctly and no one can lay claim to your property at a later point. Title insurance also protects you and the lender. It makes sure you are covered in the event there is an issue, an unreleased lien that appears later against the previous owner.
Now, the part that really gets me. I work hard. Darn hard. Why shouldnt we be able to charge an origination fee or a processing fee so I can earn a paycheck? At my company there are no less than 6 people that will work on your loan. Primarily the loan officer and processor but then you have an assistant that creates your in initial application, the compliance manager, the funding manager and the loan production manager. That 1% origination fee (as an example) doesn't go very far when you split it between 6 people plus trying to make the company profitable so I have a job to come to every day.

I'm not disputing that you use them. Just pointing out they are only required with Federally insured loans. Please read the previous link or the one below.
I just double checked in my packet from last year, I don't have one.
http://www.inman.com/2011/11/08/when-a-hud-1-form-required/

 

[firegurl]

I'm not disputing that you use them. Just pointing out they are only required with Federally insured loans. Please read the previous link or the one below.
I just double checked in my packet from last year, I don't have one.
http://www.inman.com/2011/11/08/when-a-hud-1-form-required/

It's not that I use them. Everyone uses them. Trust me, you have some version of it. Even cash purchases without mortgages will have a HUD.
Its not about the lender requiring them, its how the title company settles all the information and lists seller costs, buyer costs and balances them out.

 

[DebbieB]

As I mentioned, I have a HUD-1 from the sale of my old home, which was a cash deal, no bank involved. The HUD shows exactly who owes what and what the final amount owed to close the deal. Because of commission, in both my purchase & sale, the seller paid more in closing costs.

 

[elgerber]

I'm not disputing that you use them. Just pointing out they are only required with Federally insured loans. Please read the previous link or the one below. I just double checked in my packet from last year, I don't have one. http://www.inman.com/2011/11/08/when-a-hud-1-form-required/

It's says federally regulated loan, that is pretty much any loan by a bank of any kind. Mortgage loans are all regulated these days, no matter if it's government, conventional, insured or not.

 

[Lynne M]

I bought my condo from the previous owner, not the builder, but I clearly remember getting a HUD with closing estimates when the contract was generated - when I made my offer to the seller. In other words, right at the start of the process. So it's very surprising to me that you're getting your estimates this late in the game.

Not only that, but all through the mortgage approval process, the bank kept stressing that I needed to have X amount of dollars in the bank set aside for closing. In fact, that was some of the documentation I needed to submit with my mortgage application - a bank statement showing that I had enough money to cover the estimated closing costs.

Of course, the HUD got revised a couple of times along the way, but it was still very close to the original estimates.

 

[barkley]

My escrow for insurance, taxes, CDD fee was only around $1,500. They waived the HOA fee of $155/month for a whole year. It's the bank fees like title insurance, loan origination fee, appraisal (really?? it's new), processing and underwriting, courier, capital contribution, builder's fee, flood determination (really?? think they know that)....It is what it is....I'm just venting...

title insurance is worth every penny if something comes up after you take ownership.

we had an issue come up within about 6 months of taking ownership that resulted in an issue with our title-title insurance paid for all the legal expenses (our choice of attorney w/direct pay/not reimbursement after the fact) to research and deal with the issue. given that the issue ended up involving 4 parties and each had a different law firm that had to be dealt with over the course of several months our representation alone was very costly.

 

[clutter]

DIng...Ding...Ding....that is exactly what is happening. I could go with Wells Fargo who I have banked with for many years, but I would lose the closing costs and other Lennar perks. Believe me, I have contacted other lenders and most are not writing condominium loans anyway. I was forced to go with their recommended bank and was told when purchasing that depending on my credit score (which is 821) I could negotiate interest rates too! Not true. They are doing portfolio loans and the interest rate is 5%.. Nice to know that I worked so hard to pay off all credit cards and get my score so high to not have it even matter. Salesman told me the most I would pay towards any closing costs would be around $500....so far it looks to be around $2,800 because of the stupid builder's fee.....what a headache!

That's what I said. I can understand saying "you must use our lender to get $7K off", but I would think it would be illegal to say "you must use our lender or can't buy.".

This is the problem. You said that no other bank would touch a condo loan. So yeah, you have to use this lender or pay cash. Believe me, coming from the other side, there is no way the condos would have been built unless this lender agreed to make the loans before construction began. Lennar would not have gotten construction loan financing unless their lender was sure that the condo owners had a place to get financing.

Its a portfolio loan. That means that the lender is taking more risk on by offering the financing because they are not insured by Fannie Mae. If you take on more risk, you earn more rewards. If you want to get a market rate loan is to purchase something other than a condo. (And yes, something that people don't think about is that it does affect the ability to re-sell.)

The builder's fee is probably standard, and if you search was probably disclosed somewhere. However, it is pretty shady that it didn't show up in the GFE.

Loan origination fees are industry standard. If you look at rates at a bank like Wells Fargo, they quote rates that have "no points". The fine print then says that it means no points above the 1% loan origination fee. (Good news, it's prepaid interest, so you can deduct the full amount on your tax return when you purchase a new home.)

My escrow for insurance, taxes, CDD fee was only around $1,500. They waived the HOA fee of $155/month for a whole year. It's the bank fees like title insurance, loan origination fee, appraisal (really?? it's new), processing and underwriting, courier, capital contribution, builder's fee, flood determination (really?? think they know that)....It is what it is....I'm just venting...

All of these fees would have been charged by Wells Fargo or any other bank. The appraisal, which usually runs between $300 - $500 is rarely waived, usually if the bank has an appraisal under a year old and/or the loan to estimated value ratio is really low. The capital contribution probably doesn't go to the bank, but to the condo association. Again, it should have been disclosed in the GFE. Flood determination is also not optional. Again, should have been in the GFE. Builder's fee doesn't go to the bank. Title insurance goes to the title insurance company.

I get your frustration, but it should be with the preparer of the GFE. But the reality is that the bank is providing financing that no one else wants to. So they do kind of get to charge more than the norm because you are kind of stuck.

 

[barkley]

it doesn't matter how new a property is-appraisals look to the value of a home at the time the purchaser is asking for a loan to purchase. the value is only as high as what the comparable properties are selling for currently/to some extent historically. with new construction if some type of building cost has decreased OR something is going on with the identical units (foreclosures, short sales, downward trends in the real estate market, a neighborhood issue that's impacting resale costs/insurance rates) it can greatly change the appraised value of a home.

we had our home appraised twice in an 17 month period-despite the appraiser documenting the improvements we made to the property (which we had bought new) and how much they "should" have increased the value-b/c of the state of foreclosures and slow sales in the comps our appraised value DECREASED by $18,000. we had new construction near our previous home (also new construction but a different builder w/ no restrictions on who one could use as a lender)-the new construction w/ a fixed lender had been much more creative in loan approval, and as a result there were a glut of those homes on the brink of foreclosure/listed WELL below what the builder was selling off the final units for. the appraised values on these units were tens of thousands below what people had purchased them for a year earlier (and this was during the peak of the sellers market).

 

[Mickeyluver37]

I have been a mortgage processor for many years. HUDs are used on ALL mortgage loans. It has nothing to do with having a conventional mortgage, FHA mortgage or VA loan.
As far as the fees that are charged, as a pp mentioned that the fees cannot be inflated. We have to provide an invoice for each service we charge for. Credit adds up. There is a cost for the initial pull, a cost to run it through the automated loan software, a cost to update accounts. It adds up.
You can't supply an appraisal that you had done on your own. Its useless. Appraisals have to be ordered through Appraisal Management Companies that make sure a completely legit third party is handling the home valuation.
In my state, title searches for new purchases go back 60 years. I've seen them go to 100. Those are to protect you and the lender. It makes sure that all changes in title were done correctly and no one can lay claim to your property at a later point. Title insurance also protects you and the lender. It makes sure you are covered in the event there is an issue, an unreleased lien that appears later against the previous owner.
Now, the part that really gets me. I work hard. Darn hard. Why shouldnt we be able to charge an origination fee or a processing fee so I can earn a paycheck? At my company there are no less than 6 people that will work on your loan. Primarily the loan officer and processor but then you have an assistant that creates your in initial application, the compliance manager, the funding manager and the loan production manager. That 1% origination fee (as an example) doesn't go very far when you split it between 6 people plus trying to make the company profitable so I have a job to come to every day.

As someone who also works in a professional services industry, I don't have a problem with you charging a fee for your services. However, a contingent fee doesn't make sense. The same 6 people are going to touch the loan whether the loan is $50k or $500K. It should be a flat fee or a standard per hour billable rate for your services. As I mentioned before, what gets me is passing on things like shipping. I don't know of any other professional service that does that or wouldn't consider it tacky. It's assumed to be built into the overhead and the billable rate, sure. But not itemized. I understand some things are regulatory. Shipping and credit reporting are not. You are allowed to pass these charges on but not REQUIRED to.

Our title company did nearly nothing for us and yet commanded a $2,000+ fee- again based on a contingent percent, which doesn't make sense. I'd say the lender/broker (I say this because it was sold before the first payment was even due) did a lot more work than the title company. I would love to know the statistics in a situation like mine where the original owners are family and a mysterious lien comes up years down the road. I would bet it's less than 5%. It seems like this fee is just to pay the title company to stay in business. And when I say nearly nothing, I'm not kidding. I had to provide them with everything they needed (no realtor involved) and then they didn't even file the sale correctly with the state- our last name was spelled wrong.

 

[barkley]

I have been a mortgage processor for many years. HUDs are used on ALL mortgage loans. It has nothing to do with having a conventional mortgage, FHA mortgage or VA loan.
As far as the fees that are charged, as a pp mentioned that the fees cannot be inflated. We have to provide an invoice for each service we charge for. Credit adds up. There is a cost for the initial pull, a cost to run it through the automated loan software, a cost to update accounts. It adds up.
You can't supply an appraisal that you had done on your own. Its useless. Appraisals have to be ordered through Appraisal Management Companies that make sure a completely legit third party is handling the home valuation.
In my state, title searches for new purchases go back 60 years. I've seen them go to 100. Those are to protect you and the lender. It makes sure that all changes in title were done correctly and no one can lay claim to your property at a later point. Title insurance also protects you and the lender. It makes sure you are covered in the event there is an issue, an unreleased lien that appears later against the previous owner.
Now, the part that really gets me. I work hard. Darn hard. Why shouldnt we be able to charge an origination fee or a processing fee so I can earn a paycheck? At my company there are no less than 6 people that will work on your loan. Primarily the loan officer and processor but then you have an assistant that creates your in initial application, the compliance manager, the funding manager and the loan production manager. That 1% origination fee (as an example) doesn't go very far when you split it between 6 people plus trying to make the company profitable so I have a job to come to every day.

I gotta say-I LOVE all the old historical paperwork that I've always received on my homes as part of the title search. the information they provide about the current and historical aspects of an individual property let alone a neighborhood or community can be freaking fascinating.

with our last home reading through them disclosed how the portion of the city we lived in used to be part of an adjacent city in another county. we also learned that our property and the surrounding lands for miles were purchased and gifted by one of the big family names (today) in technology to what at the time was just the initial startup idea of a California University. University came to be, and while they sold off the land they still retained all the mineral and some other obscure land rights.

with our current there are stunning handwritten documents dating back to the mid 1800's that chronicle homesteading and land acquisitions by a family, distribution through wills that led to subdividing the property among heirs, land disputes and the easements that were granted to settle them.

it's taught me that if I were into genealogy it would be worth it to check property records of homes owned by key family members (esp. if they lived in them generationally).

 

[pooh6890]

I have been a mortgage processor for many years. HUDs are used on ALL mortgage loans. It has nothing to do with having a conventional mortgage, FHA mortgage or VA loan.
As far as the fees that are charged, as a pp mentioned that the fees cannot be inflated. We have to provide an invoice for each service we charge for. Credit adds up. There is a cost for the initial pull, a cost to run it through the automated loan software, a cost to update accounts. It adds up.
You can't supply an appraisal that you had done on your own. Its useless. Appraisals have to be ordered through Appraisal Management Companies that make sure a completely legit third party is handling the home valuation.
In my state, title searches for new purchases go back 60 years. I've seen them go to 100. Those are to protect you and the lender. It makes sure that all changes in title were done correctly and no one can lay claim to your property at a later point. Title insurance also protects you and the lender. It makes sure you are covered in the event there is an issue, an unreleased lien that appears later against the previous owner.

Now, the part that really gets me. I work hard. Darn hard. Why shouldnt we be able to charge an origination fee or a processing fee so I can earn a paycheck? At my company there are no less than 6 people that will work on your loan. Primarily the loan officer and processor but then you have an assistant that creates your in initial application, the compliance manager, the funding manager and the loan production manager. That 1% origination fee (as an example) doesn't go very far when you split it between 6 people plus trying to make the company profitable so I have a job to come to every day.

I am sure you work very hard and I totally understand that. My problem was they were charging me a loan origination fee that is basically charging me the fee to get a loan from them. Something sounds wrong with that. I would think they would charge the seller since they work hand in hand with them being the only bank to finance their condos, like a referral. I did speak with the bank and they lowered the fee from $1,480 to $875. They said all the pre-Hud figures were estimates and they always go higher than lower.

 

[pooh6890]

I bought my condo from the previous owner, not the builder, but I clearly remember getting a HUD with closing estimates when the contract was generated - when I made my offer to the seller. In other words, right at the start of the process. So it's very surprising to me that you're getting your estimates this late in the game.

Not only that, but all through the mortgage approval process, the bank kept stressing that I needed to have X amount of dollars in the bank set aside for closing. In fact, that was some of the documentation I needed to submit with my mortgage application - a bank statement showing that I had enough money to cover the estimated closing costs.

Of course, the HUD got revised a couple of times along the way, but it was still very close to the original estimates.

I signed the paperwork back on May 31st. Since then I have complied with every single requirement usually the same day. When the mortgage people called me, they did say they were shocked how fast I got them the info as most people take a long time to get it to them. It's only been the beginning of October that they started sending me e-mails with pre this and pre-hud that and figures as low as $1,100 for closing costs and $2,000 for escrow pre pays to a good faith estimate of $15,333 with no credits. It's so much paperwork that it's almost like they want to show you big costs and discounts later like you're getting a great deal.....I don't know....I'm better today but it's very stressful.

 

[pooh6890]

This is the problem. You said that no other bank would touch a condo loan. So yeah, you have to use this lender or pay cash. Believe me, coming from the other side, there is no way the condos would have been built unless this lender agreed to make the loans before construction began. Lennar would not have gotten construction loan financing unless their lender was sure that the condo owners had a place to get financing.

Its a portfolio loan. That means that the lender is taking more risk on by offering the financing because they are not insured by Fannie Mae. If you take on more risk, you earn more rewards. If you want to get a market rate loan is to purchase something other than a condo. (And yes, something that people don't think about is that it does affect the ability to re-sell.)

The builder's fee is probably standard, and if you search was probably disclosed somewhere. However, it is pretty shady that it didn't show up in the GFE.

Loan origination fees are industry standard. If you look at rates at a bank like Wells Fargo, they quote rates that have "no points". The fine print then says that it means no points above the 1% loan origination fee. (Good news, it's prepaid interest, so you can deduct the full amount on your tax return when you purchase a new home.)



All of these fees would have been charged by Wells Fargo or any other bank. The appraisal, which usually runs between $300 - $500 is rarely waived, usually if the bank has an appraisal under a year old and/or the loan to estimated value ratio is really low. The capital contribution probably doesn't go to the bank, but to the condo association. Again, it should have been disclosed in the GFE. Flood determination is also not optional. Again, should have been in the GFE. Builder's fee doesn't go to the bank. Title insurance goes to the title insurance company.

I get your frustration, but it should be with the preparer of the GFE. But the reality is that the bank is providing financing that no one else wants to. So they do kind of get to charge more than the norm because you are kind of stuck.

Finally someone explained a portfolio loan to me. You have no idea how many people I asked and got a blank stare. Yes, builder's fee is somewhere in the 57 pages I signed (attorney told me) at $2,780 which is the real reason my closing costs are so high and not "around $500" as my salesman told me....yeah, I know I have spoken today with the Title company and the loan processor and her assistant and I feel a lot better with the fees and other amounts lower than expected. Yes, I think the preparer's of the GFE are the ones giving me the problems. They didn't have my name spelled correctly on 17 pages they sent me to "sign".

 

[Cannot_Wait_4Disney]

I was so excited to purchase a new condo from Lennar. I was so excited to get $7,000 towards closing costs and upgrades on carpet, tile, appliances and cabinets....UNTIL I saw the closing statement and costs. Why give me $7,000 towards closing costs when they knew darn well it would be eaten up in the additional costs. I have only owned one home in my life. I have been a renter for many years. Some of the fees are outrageous! What bank charges a loan origination fee of $1,480 when they are the only bank I could go to? Who charges $200 for a credit report when they are basically free? Lennar charged me a 1.75% builders fee which was around $2,700!!!!! I am supposed to close next Monday on (10/27) and don't even have a HUD statement yet. Has anyone been able to negotiate these stupid fees that they are imposing or am I just stuck??? Thanks all!

Let me go over these one by one.
1 Loan origination fee. This is negotiable along with points and interest rate. Now that you've selected your loan and close in a week, kind of late in the game to change your terms.

2. Credit reports. they are free on certain websites to people getting their own credit checked. They are not free to lenders and usually a quickie is done at initial approval and a thorough one is done at final approval. $200 is not excessive here.

3. Builder's fee. This is the one you mentioned that is dubious. Ostensibly to offset development costs on common areas, this is a fee paid directly to the builder. I've seen some so nefarious that they put a deed restriction that any time the house is sold for the next 99 years, the builder gets a fee. This isn't your bank's doing. It is your builder. I doubt you could negotiate it away now. You have already signed the contract. Here, said fee would have to be specifically disclosed at contract. Not sure of the law in your state.

 

[tvguy]

It's not that I use them. Everyone uses them. Trust me, you have some version of it. Even cash purchases without mortgages will have a HUD.
Its not about the lender requiring them, its how the title company settles all the information and lists seller costs, buyer costs and balances them out.

What I have in my packet is titled "Sellers Estimated Settlement Statement" on what appears to be letterhead from the title company. It isn't even half a page.
Pulling up a HUD-1 it's 3 pages. But again, this was a cash sale, and looking at HUD-1 at the top, there is no provision for a cash sale. What I have looks like a condensed version.