my partner and i are using for the first time a local hard money lender in the los angeles area. We are borrowing 250k over 3 months
We just received their estimated settlement statement which seems to carry a significant amount of junk fees:
Amount requested 250,000.00
type 2nd trust deed
terms: no pre payment penalties after 3 months
Points 1,75 4,375.00
lender Underwriting 795.00
lender Admin 700.00
lawyer fee 1,000.00
Escrow Fees 450.00
title co Property Inspection Fee 75.00
Notary Fee 175.00
Electronic Recording Fees to title co 20.00
Lender Refinance Policy to Title co 1,032.00
Endorsement - estimate to Title co 125.00
Recording Fees to Title co 75.00
Deed of Trust Recording to title co 150.00
total junk fees $4597
It is the first time we use a hard money lender, but to me 50% of these fees are avoidable and should be negociated
Could you guys give me your opinion about these terms and what are the fees you'd pay and wouldn't?
@Account Closed Are they allowing you to shop for your title company? For a $250,000 loan amount, on what appears to be a refinance (Lender Refinance Policy to Title co), those title/escrow fees are on the high side.
Recent quote from First American for a refi around the same loan amount:
Escrow fee $595.00 - includes recording fees
Title fee $450.00 (short form policy)
Notary fee $150.00
I like them because they don't change a dozen different fees!
I don't know what a title company property inspection fee is for? Who is inspecting the property from the title company?
Other than that, lender fees and points are generally higher on hard money loans, so I wouldn't necessarily say they are out of line. I don't know how typical the lawyer fee is for hard money, but I haven't seen that before.
you can shop with another lender, and see if the totals come out the same. It seems like a great rate/points, but that's probably how they get you in the door.
You've identified the lender's title policy as a junk "fee".
You consider the lender's underwriting as well as the preparation of loan docs/security instrument by the lender's attorney to be "junk".
There may be a few dollars to argue about in that list but not these.
I'm not sure how many are "junk", but I think the Lender "underwriting" and "admin" fees are kind of like the same fee. They're just breaking it up so as not to charge $1495 for underwriting. Lawyer fee is relatively standard, unless a lawyer owns, or works for the HML. Maybe they do that in house, but in all honesty, most of it comes out the same in the end. They could reduce all title aspects, and then you'd pay a title company those fees.
Do the math, ask other lenders. 2nd trust deed? we don't do that. it's not that common.
I think that "standard" hard money rates would be 12% and 4 points, a great deal would be 10% and 3 points. These guys are advertising less points but then in the end their points are truly right around 3. 10% and 3 points is actually not bad for hard money. They also make sure they get their interest for the first three months. I would just think of these fees as points. If you don't have any other option, use them. If you can find a private money lender at 10% at no points, that would be much better!
in so cal it would be RARE to have a lawyer involved in this transaction @David Weintraub we are a title and escrow state
so take out the 1k and the two addition doc review fee's 750 and 795 those are straight to the lender for his profit side.
other than that fee's are fairly standard.. I always use my own notary so I never pay notary fee.. I make them send the docs go my title co.. that will sign me off as a courtesy.. however your correct for a second mortgage the points and fee's are quite good.
@Jay Hinrichs Who prepares the Note, Deed of Trust, Assignment of Rents, etc. in title and escrow states?
Most of those are pretty standard .. you may save a few hundred elsewhere but you will gain the headache of going through the process again.
Good luck brother
@Tom Gimer Bank will prepare note... Escrow officer prepares DT or mortgage..
when I had my Hard money shop my doc prep folks prepared the note .. title and escrow the DT or mortgage.
and Escrow can prep note as well.. assignment of rents is buried in the DT or Mortgage.. these are standard docs out our way and not custom made.. Notes can be bought at office depo along with mortgages and or DT's.. and they work fine.
only way an attorney would prepare these is if they are really custom or specialized large commercial transactions or when I would do some equity share notes.. I would have my attorney do one template then my office would do all the rest of them.
Senior escrow officer is quite capable of handling any and all closings needs for REsi re and they do it as a matter of course.
the Lawyer is usually in the main office and handles disputes or title claims not day to day closings.
@Jay Hinrichs Out here with either HML or private money you will definitely be paying for legal -- title exam, preparation of loan docs, possibly more. And whether it is labeled as an Attorney Fee or Doc Prep or something else on the Settlement Statement, the borrower is paying several hundred dollars or more for it.
@Tom Gimer , out here, where the OP is from, there is absolutely no reason to pay legal. Docs are drawn by lender or a paid doc prep company($1,495 = $795 underwriting + $700 admin), and title is not only examined but also insured by title ($1,032) ... and that is all way more than normal. $1,000 (a nice round number) is totally junk.
There you have it, folks. No legal required! Lender can just make a claim against itself or with the "doc prep company's" E&O when the instruments don't properly secure an interest in real property or otherwise fail to protect the lender when things go sideways.
You're right! Lenders are responsible for their actions, title company's are responsible for their actions, escrow company's are responsible for their actions and doc prep company's are responsible for their actions. You act as though attorney's are somehow infallible, or, I"m not sure what your point is. YES, absolutely no legal required.
Out here, the only person not responsible for their actions are consumers...it is CA after all.
People like to have somebody they can blame things on... and collect from. That's typically an attorney with an E&O policy. Infallible, no. Insured, yes.
And I'd say that's not unique to this area. Or perhaps OP found the only HML in CA that has attorneys involved with their loans.
Thank you all for the the inputs;
I've shopped around and this lender actually came up with the most competitive and flexible terms. They also seem legit and have good reviews
I will use my escrow company; they quoted me a lower fee for the same policy, and will negociate to have the legal and doc fees waived
I've never seen a lender in 2nd position with 10% rate and less than 2 pts. That's pretty amazing. Is it really 2nd position? Can you send me the name of this company?
Everything below the lawyer fee comes from the title/escrow company, not the lender. Not sure why they're charging an attorney fee, but looks like there has been some discussion on it.