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Rainer
138,080
Ken Jones
Toms River, NJ

Christian Frech Mortgage loan origination fees (a/k/a"points") are part of the lender's yield (profit) on the loan. They are also used to "buy down" (reduce the interest rate) because they provide the lender part of their profit now rather than waiting over the life of the loan

Jun 09, 2021 04:18 PM
Rainmaker
875,734
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

Simple! Origination fees are for the purpose of making money for the originator.

Jun 09, 2021 05:55 PM
Rainmaker
2,619,319
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

A loan officer has to make a living...

Jun 10, 2021 05:58 AM
Ambassador
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Origination fees are commission to the lender.  Points are what buys a mortgage down.  They are different in Virginia.

Jun 09, 2021 05:53 PM
Ambassador
2,551,930
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Several things, including buy down the interest rate, and commission to the lender.

Jun 09, 2021 04:36 PM
Rainer
307,612
Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

There are a number of different fees when a borrower closes a loan. Loan origination fees used to be one percentage point of the start loan amount. Today a borrower can choose to pay up to five percentage points to buy down the interest rate for the life of the loan.  For example a $200000 loan in Salt Lake with perfect FICO can get 3% rate 30 year monthly payment $843 with no origination fee but if they want to pay 1% origination they can pay $2000 to get a rate of 2.75 payment $813. Payment sample is principle and interest only. In my opinion origination or points doesn't pay off unless you own the mortgage MANY years

BUT HOWEVER there is currently an exception to this example. 

Fannie Mae and Freddie Mac are not currently buying non owner or investment loans right now. Some lenders are not offering them. We are but like others there's a loophole in using "origination costs." To get a non owner occupied loan today there is a pricing add of 2.75 percentage points which borrowers cannot be exempt or buy up. In this case the origination points are acting like a prepayment penalty to the borrower to pay for a more risk intense loan to lender. This second answer is not on your test, It's just information for you to dig further in your studies. Best of success!!!!!

Jun 09, 2021 04:29 PM
Rainmaker
6,424,114
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Mortgage lenders prefer to be profitable.

Jun 10, 2021 10:56 AM
Rainmaker
4,064,068
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Ken Jones, ASA | Broker & Appraiser nailed it. You can pay me now or pay me later. Yield i the goal.

Jun 10, 2021 04:31 AM
Rainmaker
809,467
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

It's a way for the lender to increase its yield on the transaction. Don't fall for it, usually not worth it, even if it brings down the interest rate somewhat.

Jun 10, 2021 10:41 AM
Rainmaker
2,016,830
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

To increase the lenders yield

Jun 10, 2021 10:25 AM
Ambassador
3,009,770
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

You have some great responses here.  It all boils down to money in one form or another. 

Jun 09, 2021 07:43 PM
Rainmaker
504,916
Susie Kay
Ultra Real Estate Dallas Fort Worth - Plano, TX
North Dallas Specialist

You have many great answers.  

Jun 11, 2021 07:36 PM
Ambassador
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

To pay your lender! ;-) 

Jun 11, 2021 03:52 PM
Rainer
258,104
Don Baker
Lane Realty - Eatonton, GA
Lake Sinclair Specialist

for the bank to make money for processing the loan

Jun 10, 2021 12:38 PM
Ambassador
954,622
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

"Origination Fees" cover various lender fees - these fees generally cover lender overhead (you'll often see within 'origination fees' itemization for 'underwriting fee', 'processing fee', 'admin fee', or something similar.  

Some 3rd party required vendors lenders must pay for and pass on to the consumer can also be included - 'tax service' fee is one example.

Any 'points' used to buy down an interest rate are not origination fees, but discount points (sometimes when discussing total costs, discount points are lumped into origination fees, but discount points ALWAYS buy down the rate)

 

Contrary to some answers here, origination fees do NOT include originator pay - since the Dodd-Frank act of 2015, loan originators are paid a set % or fee for every loan regardless of lender proceeds, points, fees, etc.  So an originator charging extra would not actually make the originator any more money (in the past, this was different).

 

While no one WANTS to pay fees, origination fees are necessary for staffing, overhead, and the techonology we use to provide great service and competitive rates - any lender NOT charging origination fees will pad their fees into higher rates.

Jun 12, 2021 11:27 AM