A mortgage loan origination fee is a fee that is charged by a lender for helping to process a new mortgage loan application. The fee basically covers the initiation of the loan process, whether it be by phone call, referral from an agent, or from a quote. The origination fee is typically paid up front, and the borrower is usually charged anywhere from .5% to 1% of the total mortgage loan amount.

Mortgage loan origination are usually attributed to loan originators, who work on behalf of a mortgage broker or other similar mortgage agency. They are basically similar to sales persons whose job it is to generate leads and potential borrowers for the agency. Due to the nature of their job, there can sometimes be legal disputes regarding origination fees.

Are Mortgage Origination Fees Illegal?

Mortgage origination fees are generally acceptable under most state laws, provided that the borrower has full disclosure and agrees to the terms. However, mortgage loan origination fees can become illegal if certain factors are present, such as:

  • Charging too much for the fee
  • Hidden fees
  • Use of fraud, deceit, misrepresentation, or threats to secure an origination fee
  • Various other types of legal violations

What are Some Consequences of Origination Fee Disputes?

Origination fee disputes can often lead to legal claims. These may typically be resolved through a legal remedy such as a damages award. For instance, the lender or the party charging the origination fee may be required to reimburse or compensate the borrower for losses caused by a violation.

In serious cases, loan originators or lenders who were responsible for the origination fee violation may face other consequences, such as a suspension from practice or a loss of operating license. In serious cases, criminal charges may be pressed, or a class action lawsuit can be filed if multiple people were affected.

Should I Hire a Lawyer for Help Resolving an Origination Fee Legal Dispute?

Origination fees can sometimes involve relatively large amounts of money, and may be complex in nature. Additionally, each state has different laws when it comes to the legality of origination fees. You may need to hire a real estate lawyer in your area if you need assistance with any type of origination fee dispute. Your attorney can provide you with legal representation during court meetings, and can research the laws in your state to determine your options.