In a recent case Midwest Centre Bank was not allowed to charge
borrowers the $125 preparation fee in real estate closings.
- The Missouri Supreme Court ruled that Midwest Centre Bank had charged
borrowers an average of $125 for a document preparation fee.
- The documents were filled in by bank clerical employees, and were
never seen by a lawyer.
- Since document preparation is legal work, the fee was considered
illegal.
What law regulates mortgage fees?
- The Real Estate Settlement Procedures Act was signed in 1974.
- There is a federal law that forbids kickbacks and mark-ups.
- Fees are also regulated by the Department of Housing and Urban Development.
- In fact, if you suspect a lender is charging you illegal fees, you
should report them to HUD.
What about price mark-ups on third party services?
- If the credit report costs the lender $25, they can charge you $25
and no more.
-
Mark-ups on third-party services are illegal. This includes:
- Pest
inspectors
- Title searches
- Appraisals
- Surveys
Are lenders required to refund application fees if you decide
to go with a different mortgage company?
No, they are legally allowed to keep application fees even if you go
with another lender.
Compared to a five or six-figure mortgage, a few hundred dollars
in bogus fees might not seem like much, but with a little diligence
you could save enough money for a new appliance or family vacation
simply by avoiding illegal fees.
