> Advice For Borrowers
Mortgage Fees Latest Consumer Reports Target
by Broderick Perkins
Financial fees bite. Individually, they may appear to be small and annoying additions to the cost of your transaction. Add them up, however, and they can take a good sized chunk out of your wallet -- a total of about $216 billion a year paid by consumers for all financial services, according to Consumer Reports. In "Financial Services: Don't Get Taken By Hidden Fees" Consumer Reports recounts a litany of fees -- sometimes "no-see-ums" -- for a host of financial services from credit cards to variable annuities. Consumer Reports rates goods and services and earlier this year examined new home defects and online mortgages. "For individual consumers, fees can be needlessly onerous: They can drive you deeper into debt, drag down an otherwise profitable investment, and lock you into an insurance policy or mortgage that ultimately makes no sense," the consumer rater of goods and services wrote in the report. Perhaps no financial transaction is as heavily laden with financial fees as are mortgages. The sheer number of them makes it nearly impossible to actually compare them from one lender to another. What's worse, some of them don't show up until a day or so before closing. However, beginning with the idea that everything in a real estate transaction is negotiable, Consumer Reports says you can find ways to save on mortgage fees. Consumer Reports says a big cost that drives up closing fees are yield spread premiums (YSPs). Simply put, they are fees lenders pay brokers for selling more expensive loans and by law they don't show up until its time for you to see the final settlement sheet, typically the day of or the day before you must sign the paperwork. "Such payments are not clearly disclosed to borrowers, and several lawsuits and congressional testimony have maintained that many such rebates are payments from banks to mortgage brokers to induce the buyer to take out a mortgage with a higher interest rate," Consumer Reports says. Consumer reports also said lenders pass on legitimate costs from third parties including credit report fees, property appraisals and title and escrow costs, but they could also add a markup to those costs. The magazine also said lenders tack on "nuisance fees" that should be included in the overhead. The magazine also said the legally required Good-Faith Estimate of costs, which the lender must submit soon after you apply for a mortgage, doesn't give you a clear financial picture. Add in YSPs the day before closing and other costs that may honestly not be levied until later and your actual loan costs could grow by thousands of dollars by closing day. So how do you get around those fees? In many cases you can't but you can ask for some sort of proof or explanation for each fee on your settlement sheet. You can also negotiate to have inexplicable fees removed. Be assertive. Ask to see all the final costs as many days as possible before the actually closing date when you have to sit down and sign the loan papers. If you can't decipher the fees get help from a trusted professional or other person who's recently experienced a mortgage closing. Be prepared not to complete the loan signing if you are satisfied with an explanation for all the fees or can't negotiate away a fee you think is exorbitant. Consumer Reports also advises: Shop around at several local banks, your credit union, online lenders and brokers in your area. Ask for the loan's contract interest rate, but also the annual percentage rate (APR), which expresses closing costs and the contract interest rate as part of an overall rate. Also ask for a detailed good-faith estimate of closing costs. Some lenders are also offering guaranteed good faith estimates or guaranteed-fee mortgages. Scrutinize them nevertheless. When possible, pay closing costs up front instead of wrapping them into the mortgage or you'll pay interest on a few thousand dollars for the loan's full term. Think twice about lowering the interest rate by paying discount points up front, especially if you believe you'll live in the house for six years or less -- the average stay before homeowners move on. | 
