bobbyw24
10-08-2009, 11:37 AM
Despite Housing Slump, Mortgage Lenders Making Record Profits From Fees
Never ones to let an opportunity go unexploited, mortgage lenders are taking advantage of a market fueled by low interest rates and massive government subsidies to turn record profits. Their secret: The return of "junk fees."
The Mortgage Bankers Association recently announced that independent mortgage lenders made an average profit of about $1,100 per loan originated in the first quarter of the year, an astonishing 635 percent increase from the previous quarter.
Nine big mortgage lenders, representing about two-thirds of the market, made about $9.1 billion in the first six months of the year off loan originations, according to Inside Mortgage Finance, a leading trade publication that collects data from lenders. In 2008, those lenders made about $3.3 billion for the whole year.
Meanwhile, real estate agents, consumer advocates and mortgage researchers say consumers are paying more than ever in fees, typically tacked on at the end of the transaction. Though rarely more than a few thousand dollars, the fees, multiplied by every homeowner trying to refinance an existing mortgage and every prospective home buyer taking on a new one, can add up to billions in undeserved profits, experts say.
"There's been a return of fees -- originating fees, underwriting fees, processing fees -- fees you haven't seen in years," says Guy Cecala, publisher of Inside Mortgage Finance. "There are roughly 12 to 20 fees you wouldn't have seen as recently as two to three years ago. But lenders can charge them, so they're charging them.
"This is the greatest period in recent memory for generating income," he adds. The rate of profits per loan has nearly doubled from last year, according to Inside Mortgage Profitability, an Inside Mortgage Finance publication.
"You do wonder what's going on here," says House Financial Services Committee member Brad Miller (D-N.C.). "Is this a case of the mortgage industry making great profits, at a time when consumers are suffering, yelling the sky is falling when in fact they're doing quite well? I'm more concerned that the banks are misrepresenting the true picture."
Realtor Rose L. Harris, owner of Re/Max Elite Properties in Coral Gables, Fla., says she sees fees on every loan. "I see a lot of junk fees," she says. "Even for people who have really good credit and qualified down payments... they are being charged a lot of extra fees."
Story continues below
http://www.huffingtonpost.com/2009/10/08/mortgage-lenders-making-r_n_312973.html
Never ones to let an opportunity go unexploited, mortgage lenders are taking advantage of a market fueled by low interest rates and massive government subsidies to turn record profits. Their secret: The return of "junk fees."
The Mortgage Bankers Association recently announced that independent mortgage lenders made an average profit of about $1,100 per loan originated in the first quarter of the year, an astonishing 635 percent increase from the previous quarter.
Nine big mortgage lenders, representing about two-thirds of the market, made about $9.1 billion in the first six months of the year off loan originations, according to Inside Mortgage Finance, a leading trade publication that collects data from lenders. In 2008, those lenders made about $3.3 billion for the whole year.
Meanwhile, real estate agents, consumer advocates and mortgage researchers say consumers are paying more than ever in fees, typically tacked on at the end of the transaction. Though rarely more than a few thousand dollars, the fees, multiplied by every homeowner trying to refinance an existing mortgage and every prospective home buyer taking on a new one, can add up to billions in undeserved profits, experts say.
"There's been a return of fees -- originating fees, underwriting fees, processing fees -- fees you haven't seen in years," says Guy Cecala, publisher of Inside Mortgage Finance. "There are roughly 12 to 20 fees you wouldn't have seen as recently as two to three years ago. But lenders can charge them, so they're charging them.
"This is the greatest period in recent memory for generating income," he adds. The rate of profits per loan has nearly doubled from last year, according to Inside Mortgage Profitability, an Inside Mortgage Finance publication.
"You do wonder what's going on here," says House Financial Services Committee member Brad Miller (D-N.C.). "Is this a case of the mortgage industry making great profits, at a time when consumers are suffering, yelling the sky is falling when in fact they're doing quite well? I'm more concerned that the banks are misrepresenting the true picture."
Realtor Rose L. Harris, owner of Re/Max Elite Properties in Coral Gables, Fla., says she sees fees on every loan. "I see a lot of junk fees," she says. "Even for people who have really good credit and qualified down payments... they are being charged a lot of extra fees."
Story continues below
http://www.huffingtonpost.com/2009/10/08/mortgage-lenders-making-r_n_312973.html