It's Like Herding Cats-Your Closing
Costs Go Many Different Directions

Through the course of your purchase or refinance transaction
there are many companies that perform services essential to
the timely and successful closing.

When you review your good faith estimate at the beginning of
the transaction, or your closing statement from the escrow
company at the conclusion of it, you will see fees being
disbursed to many different service providers. You may also
wonder who they are and what did they do to earn their fee.

Let's work our way through a typical escrow closing (or settle-
ment) statement, and describe the services that were paid for.

APPRAISAL FEE: This goes to the individual appraiser or
the appraisal company that was hired to value the home. Their
job is to ascertain the market value by comparing the home to
be appraised with recently closed escrows on homes that are
most similar.

TAX SERVICE: This fee goes to a company that provides one
of two services to the lender. If you have an impound account
where your taxes are collected monthly with your payment, the
tax service company provides copies of the tax bills each year
to the lender for payment. If you do not have an impound
account, they monitor your property's records so that they can
inform the lender is the taxes are going unpaid. The lender
wants this information because unpaid property taxes can
supersede their lien interest on the property and potentially
wipe out their loan in a tax-sale auction.

FLOOD CERTIFICATION FEE: This fee goes to a company
that reviews the latest maps issued by the Federal Government
that determine where the flood zones are. If your property falls
within a flood zone, there is a separate requirement for you to
purchase Federal flood insurance.

WIRE FEE: When your loan is funded by the lender, the most
widely accepted way to get the funds to escrow is by using
the Federal Reserve wire system. There is a cost that you
end up paying, but it is small compared to relying on the
issuance of a cashier's check. If the check were to create
even a one-day delay, your daily interest cost would be higher
than the wire fee.

PROCESSING FEE: At our mortgage brokerage, there is
a fee that we collect for the processing of your loan. It is a
standard fee that is designed to cover administrative costs in
connection with your loan request.

SETTLEMENT/CLOSING/ESCROW FEE: The escrow company
is responsible for pulling together the various components of
the transaction so that it closes successfully. These would
include the lender, title company, insurance agent, real estate
agents, notary services, homeowner's associations, and of
course the clients. This fee goes to them for their work.

TITLE INSURANCE: You provide a policy of title insurance for
the benefit of the lender to insure them that they have the first
lien on the property. (Or second lien, if that was what they
intended to provide). The lender's lien on the property will
always be behind unpaid property taxes and there may be some
exclusions that run with the property that the lender will have to
find acceptable. There may be special endorsements that are
charged separately in connection with the title insurance.

LOAN SIGNING/NOTARY FEE: In recent years, there has
developed a growing group of independent contractors who
specialize in signing up the clients with their loan documents.
Many times they will either meet the client at the escrow
company, or may travel to the homes or businesses of the
clients to administer the sign-up and notarize their signatures.

DOCUMENT DOWNLOAD: Until recently, the lender would
charge for the creation of the loan documents and they would
send them by messenger to the escrow company to coordinate
the signing. Now that electronic transmission is more readily
accepted, the escrow companies are imposing a modest
charge for paper/toner/time to create the documents.

MESSENGER SERVICES: There is usually a messenger
charge to return the signed loan documents back to the lender.
Since time is of the essence and it is important to be able to
track the documents, messenger service is the best way to
accomplish the return of the documents.

LOAN TIE-IN FEE: This fee is charged by the title company
for receiving the wired loan proceeds and to be the "deep-
pockets" company to be accountable for the funds. Since
escrow companies are not required to have substantial
financial reserves, there is a reluctance to send hundreds
of thousands or millions of dollars to them. Title companies,
on the other hand, have strong financial backing and are
insured by the state. This fee covers some administrative
costs.

LOAN ORIGINATION FEE: Many times we create the new
home loan so that it is priced as a "zero-point" transaction.
That means that the lender will pay us for our service of
originating the loan. Sometimes, the borrower would like to
receive a lower interest rate and is willing to pay the loan
origination fee and receive the benefit of the lower rate over
the life of the loan.

This covers most of the standard fees that are charged in
connection with a new loan on a property.

There has been some attempts to "bundle" the services and
fees to create some economies for the borrower. Title
companies have begun to offer a consolidated price for the
title insurance when using their escrow services. Some
lenders will collect for the appraisal fee and pay it to their
appraiser without it being delineated separately.

But, as you can see, there are a number of different companies
that have each developed their own special area of expertise.
They are necessary service providers to the successful closing
of the transaction and each earn a fee for their service.