Mortgage junk fees are all lender charges (not points) paid in advance. They include charges expressed in dollars, like a processing fee, lender attorney fee, endorsement fee, origination fee (one charge expressed as a percentage of the loan), etc.
Info about junk fees is very difficult to obtain early enough to be useful when you look for loans. Therefore, junk fees are very different from points, the other type of lender charge. Points are a direct lender charge expressed as a percent of the loan amount. They are viewed as part of the cost of credit and are showed wherever the interest rate is displayed. When you are quoted a price on a loan, it includes the interest rate and points. Rarely does it include junk fees!
Origination fees are the worst of the junk fees and are deliberately deceptive. Origination fees are expressed as a percentage of the mortgage, like points, but they are not disclosed as points. Their entire purpose is to allow the mortgage lender to appear to be charging fewer points than is in fact the case!
Itemization confuses borrowers. Junk fees are itemized fees. Financial companies are not required to itemize their charges and only a few don't. These lenders charge one fee. But most of the rest itemize because lenders believe that they can extract more in total from the borrower this way.
Also junk fees are never locked! When financial companies lock the rate, they commit to a specified rate and points known to the borrower. Lenders do not commit to a specified amount of total junk fees. The Good Faith Estimate (GFE) that lenders are obliged to provide borrowers shortly after receiving a loan application, shows all junk fees but doesn't bind lenders. They can revise the GFE right up to closing!
Mortgage junk fees are good to know about in order to ignore them. In addition to the points and rate, your focus should be the total of other fees. When you are mortgage shopping, ask the lender for that total in writing, if the lender will lock it at the time he locks the rate and points. Most financing companies will lock it in if you ask for it when you are in a shopping mode.
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