Underwriting Fees

Question: Freddie and Fannie both charge a fee for underwriting loans through their automated underwriting system. I have always stated this fee should be listed separately on the HUD indicating who the fee went to. However, other lenders in our market are telling me that they do not list this fee. Instead, they only quote one underwriting fee that goes to the bank and that is it. I think it very clearly states in the FDIC FIL 45-2000 that we should separate out all fees to third parties, but I am being told that this is putting them at a competitive disadvantage in their markets. What do you think?

Answer: Mortgage loan officers seem to be convinced that any itemized disclosures (that require a little more work) will put them at a competitive disadvantage. If the total amount for underwriting is the same - which it should be - then it is difficult to understand what the competitive disadvantage is. As you have observed in your research, the RESPA rule is quite clear on itemizing disclosures and naming the correct service providers and payees. The idea of this rule is that consumers have a right to know who is being paid with their money. So stick to your guns and make sure the services are properly itemized and disclosed.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 16, 1/05