FHA 1% Origination Fee Cap Removed

By admin • January 4th, 2010

As part of our government’s continuing crusade to over regulate and over complicate the mortgage process for consumers and mortgage industry professionals alike so that they can continue to blame mortgage brokers for the current crisis instead of government, the new RESPA guidelines took effect on January 1, 2010. More on this later.

One requirement of the new guidelines is that the single origination charge on the GFE and HUD-1 must include all administrative and processing fees related to the origination of the loan.This must include all the compensation for both the mortgage lender and mortgage broker. This is one of the few real simplifications involved in the new regulations.

For years this origination fee has been capped at 1% of the loan amount. Obviously, if the 1% cap remained in effect then there would be no incentive whatsoever for anyone in the mortgage industry to help any potential borrower get an FHA loan.

Therefore, on December 30, 2009 HUD issued Mortgagee Letter 2009-53 which removes the 1% origination fee limit effective January 1, 2010.

It is a safe bet to assume that a new limit, or some sort of fee guidance, will be forthcoming from HUD.

Consumers should not panic over the change. It does not mean that fees are increasing. It simply means that all fees will be included in one figure to make them easier to compare between lenders.

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