Boston.com ran a post on their real estate blog on Jan. 8 that had a user comment that I wanted to respond to here. The commenter’s handle was “Regretful House Buyer,” so obviously there are some feelings of remorse there. However, the post raises a few issues that are important to discuss (and rebut) in a little more detail.
Regretful House Buyer’s post reads as follows:
“There is a significant caveat to refinancing. Closing costs. Yes, closing costs, the way certain lawyers and assorted other mercenary swindlers pick your pocket in a very big way. One of my favorites: Freight Fee. You have to make sure the 18 wheeler it requires to carry all those tons of paper required to buy your your house all over again is paid for. Real estate transactions are a racket, where people you never heard of show up with their hands out. How about this: Overnight Mail Payoff. Yes, I’m quite serious - it is right in the settlement charges. And this: Obtain/Process Discharge. Say what? Someone gets paid, you don’t know who, or for what, but you pay them. But I would not feel so alone…” Posted by Regretful House Buyer
Okay, so I’m breaking down this post to respond more fully:
“There is a significant caveat to refinancing. Closing costs. Yes, closing costs, the way certain lawyers and assorted other mercenary swindlers pick your pocket in a very big way.”
That’s up for debate, obviously. Closing costs are not fun. Keep in mind that there are no-points, no-closing-cost loans available at this time. However, there are rational, legitimate reasons for each cost that is listed in line-item fashion on the HUD-1 Settlement Statement. At every closing, purchase or refinance, I go over these charges line by line and explain each one.
“One of my favorites: Freight Fee. You have to make sure the 18 wheeler it requires to carry all those tons of paper required to buy your your house all over again is paid for.”
I’ve never seen this charge. Ever. Processing fees, application fees, underwriting fees, yes. “Freight fee,” no. I don’t doubt this commenter’s claim, but I’d need more information (especially who the “payee” was on his HUD) to determine what exactly the freight fee was. But there are certainly many lenders who don’t charge a freight fee. And the beauty of a refinance is you can shop around, and all charges are listed on the Good Faith Estimate that you receive from the lender early on in the refi process. You should read the GFE carefully and ask your loan officer about any fees you have questions about.
“Real estate transactions are a racket, where people you never heard of show up with their hands out.”
This statement is, in a word, inane. Every transaction in this economy, whether for real estate transactions, meals ordered in restaurants, or the purchase of a car, benefits many people. The difference is that in a real estate transaction, you see every entity that “benefits,” because all are listed on the HUD-1 Settlement Statement.
“Overnight Mail Payoff. Yes, I’m quite serious - it is right in the settlement charges.”
Wow, this one is easy. And very necessary. When you refinance, the bank attorney typically pays off your current mortgage(s). In order to make a timely payment after the new mortgage goes on record, the bank attorney will send, via overnight mail, a check to your old lender to pay off your mortgage in full. Since interest on your mortgage typically accrues daily (and often can be hundreds of dollars a day, depending on the size of your loan), it is most definitely to your benefit to pay the small (typically less than $25 or $30) overnight mail charge to pay the mortgage off as quickly as possible and stop the interest from accruing. And the check to your lender can be tracked, to ensure that your mortgage actually is paid off.
“And this: Obtain/Process Discharge. Say what?”
This fee is usually found in purchases, not refinances, and is charged to the seller. The bank attorney’s obligation at closing is to clear title. Part of that obligation obviously involves paying off the seller’s mortgages with the proceeds from the real estate transaction. Many lenders are notorious for not promptly sending the discharge to the appropriate Registry of Deeds or the bank attorney’s office. Sometimes the lender will send it to the Registry, but it’s incorrect. The “Obtain/Process Discharge” fee is probably the fee the bank attorney is charging to make sure the correct discharge is recorded at the Registry of Deeds. The fee is typically no more than $100, and usually less. Without knowing more, I’d be surprised if this fee were charged for the refinance of the commenter.
“Someone gets paid, you don’t know who, or for what, but you pay them. But I would not feel so alone…”
I think I’ve made it clear that HUD-1 Settlement Statement clearly lists every charge and who is the entity getting paid. That being said, if you have any questions about the HUD, you should ask the attorney doing your refinance, or your mortgage lender. Both should be able to tell you what the fees are specifically for, and you should leave your refinance (or purchase or sale) understanding why you’ve been charged what you’re paying.
Boston.com ran a post on their real estate blog on Jan. 8 that had a user comment that I wanted to respond to here. The commenter’s handle was “Regretful House Buyer,” so obviously there are some feelings of remorse there. However, the post raises a few issues that are important to discuss (and rebut) in a little more detail.
Regretful House Buyer’s post reads as follows:
“There is a significant caveat to refinancing. Closing costs. Yes, closing costs, the way certain lawyers and assorted other mercenary swindlers pick your pocket in a very big way. One of my favorites: Freight Fee. You have to make sure the 18 wheeler it requires to carry all those tons of paper required to buy your your house all over again is paid for. Real estate transactions are a racket, where people you never heard of show up with their hands out. How about this: Overnight Mail Payoff. Yes, I’m quite serious - it is right in the settlement charges. And this: Obtain/Process Discharge. Say what? Someone gets paid, you don’t know who, or for what, but you pay them. But I would not feel so alone…” Posted by Regretful House Buyer January 8, 09 09:51 PM
Okay, so I’m breaking down this post to respond more fully:
“There is a significant caveat to refinancing. Closing costs. Yes, closing costs, the way certain lawyers and assorted other mercenary swindlers pick your pocket in a very big way.”
That’s up for debate, obviously. Closing costs are not fun. Keep in mind that there are no-points, no-closing-cost loans available at this time. However, there are rational, legitimate reasons for each cost that is listed in line-item fashion on the HUD-1 Settlement Statement. At every closing, purchase or refinance, I go over these charges line by line and explain each one.
“One of my favorites: Freight Fee. You have to make sure the 18 wheeler it requires to carry all those tons of paper required to buy your your house all over again is paid for.”
I’ve never seen this charge. Ever. Processing fees, application fees, underwriting fees, yes. “Freight fee,” no. I don’t doubt this commenter’s claim, but I’d need more information (especially who the “payee” was on his HUD) to determine what exactly the freight fee was. But there are certainly many lenders who don’t charge a freight fee. And the beauty of a refinance is you can shop around, and all charges are listed on the Good Faith Estimate that you receive from the lender early on in the refi process. You should read the GFE carefully and ask your loan officer about any fees you have questions about.
“Real estate transactions are a racket, where people you never heard of show up with their hands out.”
This statement is, in a word, inane. Every transaction in this economy, whether for real estate transactions, meals ordered in restaurants, or the purchase of a car, benefits many people. The difference is that in a real estate transaction, you see every entity that “benefits,” because all are listed on the HUD-1 Settlement Statement.
“Overnight Mail Payoff. Yes, I’m quite serious - it is right in the settlement charges.”
Wow, this one is easy. And very necessary. When you refinance, the bank attorney typically pays off your current mortgage(s). In order to make a timely payment after the new mortgage goes on record, the bank attorney will send, via overnight mail, a check to your old lender to pay off your mortgage in full. Since interest on your mortgage typically accrues daily (and often can be hundreds of dollars a day, depending on the size of your loan), it is most definitely to your benefit to pay the small (typically less than $25 or $30) overnight mail charge to pay the mortgage off as quickly as possible and stop the interest from accruing. And the check to your lender can be tracked, to ensure that your mortgage actually is paid off.
“And this: Obtain/Process Discharge. Say what?”
This fee is usually found in purchases, not refinances, and is charged to the seller. The bank attorney’s obligation at closing is to clear title. Part of that obligation obviously involves paying off the seller’s mortgages with the proceeds from the real estate transaction. Many lenders are notorious for not promptly sending the discharge to the appropriate Registry of Deeds or the bank attorney’s office. Sometimes the lender will send it to the Registry, but it’s incorrect. The “Obtain/Process Discharge” fee is probably the fee the bank attorney is charging to make sure the correct discharge is recorded at the Registry of Deeds. The fee is typically no more than $100, and usually less. Without knowing more, I’d be surprised if this fee were charged for the refinance of the commenter.
“Someone gets paid, you don’t know who, or for what, but you pay them. But I would not feel so alone…”
I think I’ve made it clear that HUD-1 Settlement Statement clearly lists every charge and who is the entity getting paid. That being said, if you have any questions about the HUD, you should ask the attorney doing your refinance, or your mortgage lender. Both should be able to tell you what the fees are specifically for, and you should leave your refinance (or purchase or sale) understanding why you’ve been charged what you’re paying.