Real Estate Mailbag

Don't Get Duped by Hidden Mortgage Fees

By Robert J. Bruss
Saturday, May 26, 2007

Bruss is away. These questions are taken from previous columns.

Q: DEAR BOB: Which home mortgage fees are proper for a lender to charge borrowers? -- Stephen O.

A: DEAR STEPHEN: Some mortgage lenders are constantly working to create new names for unnecessary fees to impose on naive borrowers. Start shopping among at least a half-dozen mortgage lenders for a "no-cost, no-fee" home loan. In today's market, I recommend obtaining a fixed-rate mortgage.

However, if you are certain you won't keep your home more than five years, then an adjustable-rate mortgage fixed for five years can save you a few interest dollars. Be certain that it does not contain a prepayment penalty or negative amortization, whereby the interest rate adjusts monthly or semiannually and unpaid interest is added to your loan balance.

If you are dealing with a direct lender, such as Wells Fargo, Bank of America or Countrywide, the lender's good-faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, such as for the appraisal, credit report and lender's title insurance. That's fine. Those are not junk fees.

However, if you are dealing with a mortgage broker, his or her written good-faith estimate might be less reliable.

Watch out for previously undisclosed fees with such creative names as underwriting fee, document preparation fee, loan review fee, warehousing fee and loan origination fee.

If the lender asks you to pay a loan fee of 1 or 2 percent of the amount borrowed, usually called points, ask how much reduction you will receive in the interest rate. For each point paid, you should receive at least a one-eighth percentage-point reduction in your loan's interest rate for the life of the mortgage. Pay a loan fee only if you expect to stay in the house at least 10 years. Otherwise, take the no-cost, no-fee loan with all lender charges included in the interest rate.

DEAR BOB: Our condo homeowners association was assessed $6,000 each for replacement of roofs, which we have to pay even if we sell the condo. My roof was replaced last year, but they still want me to pay $6,000. What can I do? -- Rita S.

DEAR RITA: Your homeowners association was not assessed. Instead, the association has assessed condominium owners $6,000 each to replace the roofs. That's the way a homeowners association works. Even when your individual condo unit won't directly benefit, you are subject to special assessments, approved by the board of directors, that benefit the entire condo complex.

DEAR BOB: My widowed mother died recently, and the lawyer who prepared her trust wants to charge an outlandish fee to fill out the court papers for her small estate. Is it possible that I could file the papers myself with the court? Where do I obtain them? -- Eugene B.

DEAR EUGENE: If your mother left her major assets in a revocable living trust, no probate court proceedings are required. However, if she left a will with a testamentary or irrevocable trust, probate court proceedings are probably required. This is not a do-it-yourself project.

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