How you can reduce origination costs by identifying the four common sources of fee cures

Fee cures can be a common occurrence during the loan origination process but it’s also often a preventable cost. At a time when loan volume and profitability are declining, lenders must cut costs wherever possible during the origination journey.

ICE recently conducted an analysis on nearly 90,000 loans from eight lenders over a six-month period to find out how often fee cures happen and to quantify their expense to lenders. ICE’s industry-first study found fee cures occur on more than one in three loans and that they contribute considerably to the cost of loan production — an average of $1,225 per loan. By mitigating fee cures, the study found that lenders could recover more than $1.2 million for every 1,000 loans produced.

If lenders can gain visibility into where fee cures are most commonly occurring, they can seize opportunities to help minimize them. In last month’s blog, we discussed the different types of fee tolerances and cures. Read below for more on the four most common sources of fee cures and ways lenders can mitigate these costs with advanced solutions.

Four most common sources of fee cures

1. Lender fees

Lender fees fall into the zero tolerance category, meaning that outside of specific circumstances, lenders are on the hook for the difference between the amount the borrower was quoted on the Loan Estimate and the amount the borrower was charged. According to our cost analysis, while lender fees occurred on only 5% of loans studied, they accounted for the largest volume of dollars in fee cures at 37%. Fee cures associated with discount points were the costliest type of lender fee, accounting for 28% of dollars spent on fee cures and impacted 3.6% of loans.

2. Recording fees and transfer taxes

Recording fees and transfer taxes are government-imposed fees that lenders cannot establish, negotiate or control. These fees accounted for 20% of labor-adjusted fee cures and occurred on 28% of loans studied. Typically, recording fees have a 10% tolerance and transfer taxes have a zero tolerance.

3. Title and settlement fees

Title and settlement fees are established by vendors, and they accounted for 7% of labor-adjusted fee cure dollars and occurred on 5% of loans studied. These fees may fall into the 10% tolerance or zero tolerance category based on a borrower’s ability to shop. As the numbers show, title and settlement fee cures occur with low frequency and can result from incorrectly quoted closing, document preparation and notary fees.

4. Appraisal fees

Appraisal fees accounted for 13% of labor-adjusted fee cure dollars and occurred on 11% of loans studied. Appraisal fees fall into the zero tolerance category. High cure instances of appraisal fees indicate either a vendor relationship challenge or that staff is not giving appraisers the property and loan information necessary for them to furnish accurate quotes. Drilling down into loans with appraisal fee cures may be able to help lenders pinpoint the source of problems. For instance, a lender may find that appraisal fee cures are more frequent in a specific state, like Alaska, or with a specific loan type, like VA loans.

How you can minimize costly fee cures, save time and create greater efficiencies

Adopting a fee management tool that provides fee accuracy and capabilities to monitor fee changes is one way lenders can help protect themselves against fee cures. Amidst today’s declining origination profits and the high frequency of fee cures, which are largely preventable, lenders have an opportunity to protect their profitability by implementing fee solutions.

ICE provides a powerful, first line of defense to help protect lenders from costly fee cures. Schedule a demo to learn more about how ICE Fee Solutions can help you reduce TRID fee cure losses and help you meet TRID-compliance to meet the three-day disclosure requirement.

The information provided herein is for general informational purposes only, and does not, nor is it intended to, constitute legal advice.