Posted on: 11th Jun, 2009 11:23 am
what is the meaning of origination fee & various factors affecting it?
robertsmith2005
Orgination or activation fee is the amoutn asscoated with the establishment of yoru account with a ban or another compnay providing services handlding the processing asscoaied with taking the loan
This fee varies from 0.5% to 2% of the loan amount depending on whether the loan was orginated in the prime or subprime market
In simple words this is the fee paid to the bank or the person handling your loan appliaction
Good luck and feel free to ask
Orgination or activation fee is the amoutn asscoated with the establishment of yoru account with a ban or another compnay providing services handlding the processing asscoaied with taking the loan
This fee varies from 0.5% to 2% of the loan amount depending on whether the loan was orginated in the prime or subprime market
In simple words this is the fee paid to the bank or the person handling your loan appliaction
Good luck and feel free to ask
An origination fee is charged by the lender for processing a loan application. The fee is expressed as a percentage of the total mortgage amount. It is an up-front fee charged by a lender for processing any new loan application. It is used as a compensation for putting the loan in place. This is very similar to the commission-based payment.
Its a bank fee just the same as discount points or application fee or commitment fee, its a way for the bank to make money. The only difference from all these is a "bona fide discount point", this is paid to reduce the rate on your loan. Alot of brokers/bankers try to sell that the origination fee is a necessity on a loan it is most certainly not.
it's a necessity for us to charge it in virtually every case, though, brian. not to charge it to the customer means we have to absorb the cost ourselves. it's a company charge, and i'm not about to pay a point for someone to obtain a loan from me. i need to eat, after all.
George I don't agree with you at all, you can make your money off of the YSP on the loan. We are all trying to eat and make money in the industry but I have done many loans where the only profit I made was on yield spread premium. I am not sure what you mean its a company charge but if you bank/broker is forcing you to charge origination fee or it comes out of your pocket I would look for a new place to work.
Brian
In George's defense, the market has changed significantly over the past year. To stay competitive, you often need to quote rates at a level where there is virtually no YSP and the only way to earn anything is via origination. Why? Because borrowers are getting competitive rate quotes from other lenders at or near par. In many instances the borrower does not realize that the other lender will also make up the difference in fees at some point.
In George's defense, the market has changed significantly over the past year. To stay competitive, you often need to quote rates at a level where there is virtually no YSP and the only way to earn anything is via origination. Why? Because borrowers are getting competitive rate quotes from other lenders at or near par. In many instances the borrower does not realize that the other lender will also make up the difference in fees at some point.
Eric I could not agree with you more and for those clients I explain to them exactly how that works. You can have a more attractive rate by paying the points or you can save your money and have a less attractive rate but less fees! But to say that its a necessity on a loan is nowhere near accurate.
that last post was from me, apparently i was not logged in
well....if you are a direct lender and ysp is not applicable to the loans, it becomes a necessity. maybe i ought to be working at a broker's shop so i could make a bit more...