When most individuals purchase a home, they do not have enough money to pay for the entire property up front. Instead, they will be required to obtain a loan which will help them finance the property through smaller payments which are spread out over time, usually monthly for thirty years.
In general, a mortgage is a legal document that an individual signs when they are purchasing a home. It provides the lender with the right to take possession of a property if the buyer fails to repay the loan according to the promised terms.
A mortgage is also referred to as a deed of trust. Mortgages assist individuals with purchasing property and homes, as well as providing refinancing options for a current property owner. When a purchase transaction occurs, a mortgage is typically filed in the country records where the property is located.
What is a Mortgage Lender?
A mortgage lender is a company or an individual, such as a bank or other type of institution, which loans money in exchange for an interest in residential or commercial real estate. A lender may provide more than just real estate loans to homeowners or potential buyers. A mortgage lender may also offer other types of products which are related to loans.
A mortgage banker is also sometimes referred to as a mortgage lender. These mortgage bankers typically originate their mortgage loans and sell them in bundles to secondary markets as well as to public and private investors.
What is Loan Origination?
Loan origination is a term which is used to describe the process in which a borrower applies for a loan, such as a mortgage loan. Loan origination also includes a response for a lender who reviews, processes, and approves the loan application.
Loan origination refers to applications for many types of loans, including:
- Mortgage loans;
- Home loans;
- Car loans;
- Business loans;
- Student loans; and
- Other types of loans.
The steps that follow a loan approval fall under the loan servicing process. The steps of the loan origination process are different from each type of loan application and each different type of loan.
The loan origination process typically includes the following steps:
- Seeking different loan options, in other words, loan shopping for the borrower;
- Filling out forms;
- Submitting requested documents;
- Undergoing background checks and credit checks;
- Reviewing an application;
- Negotiating loan terms if allowed;
- Finalizing the loan application process; and
- Approval of the loan application.
There may, of course, be other steps or requirements, depending on the type of loan and the company. Loan origination often involves opening a new account for a first time loan with the company.
What is a Mortgage Loan Originator?
A mortgage loan originator (MLO) is an individual or an organization which cooperates with borrowers in order to finalize a mortgage loan transaction. An MLO may be a:
- Mortgage broker;
- Mortgage banker; or
- Another type of professional.
A mortgage loan originator typically works on new mortgages. Accordingly, they are called originators.
However, in some cases, an original mortgage is sold into a secondary mortgage market. These transactions often involve different professionals. The majority of the time, mortgage loan origination deals with a first time mortgage transaction between a lender and a borrower.
What Does a Loan Originator Do?
A mortgage loan originator performs a variety of tasks with their clients. Generally, their main duty is to finalize a mortgage transaction with a borrower in preparation for a home sales transaction.
At their most basic function, a mortgage loan originator is a sales person. Their task is to promote their mortgage products to clients and interested buyers.
A mortgage loan originator may perform tasks including:
- Presenting different mortgage options to clients;
- Negotiating mortgage terms;
- Presenting standardized or customized mortgage contract agreements;
- Researching a client’s financial background and home purchasing history;
- Giving advice to clients if needed; and
- Finalizing the mortgage loan transaction and approval.
A mortgage loan originator may also engage in other activities, such as light advertising or doing special presentations. These activities depend on the individual professional’s practice as well as the policies of the company they work for.
What is a Mortgage Origination Fee?
A mortgage loan origination fee is a fee which is charged by a lender for helping to process a new mortgage loan application. This fee covers the initiation of the loan process, whether it is by a phone call, a referral from an agent, or from a quote.
An origination fee is typically paid up front. The borrower is generally charged anywhere from .5% to 1% of the total mortgage loan amount.
A mortgage origination loan is usually attributed to a mortgage loan originator, who works on behalf of a mortgage broker or other similar type of mortgage agency. The originator’s job is to generate leads and potential borrowers for the agency. Because of the nature of their job, there may be legal disputes which arise regarding origination fees.
Are Mortgage Origination Fees Illegal?
In general, mortgage origination fees are acceptable under most state laws, provided that the borrower has full disclosure regarding the terms and agrees to those terms. Mortgage loan origination fees, however, may become illegal if certain factors are present, including:
- Charging too much for the fee;
- Hidden fees;
- The use of one of the following in order to secure an origination fee:
- misrepresentation; or
- threats; and
- Various other types of legal violations.
What are the Consequences of Origination Fee Disputes?
Often, origination fee disputes lead to legal claims. These can typically be resolved through a legal remedy, such as a damages award. For example, the lender or the party who is charging the origination fee may be required to reimburse or compensate the borrower for losses which were caused by the violation.
In a serious case, however, a loan originator or lender who was responsible for the origination fee violation may face other consequences, which may include suspension from practice or a loss of their operating license. In addition, criminal charges may be brought, or a class action lawsuit may be filed if multiple customers were affected.
Can I Hold a Mortgage Loan Originator Liable for Losses?
A mortgage loan originator may sometimes be held liable for losses that are experienced by a mortgage borrower. This may occur if:
- A loan originator engages in coercion or in order to open or finalize an agreement;
- The loan originator violates ethical or professional conduct standards;
- There was a breach of contract; or
- The originator misrepresents information or details that are crucial to the agreement.
In these cases, a private lawsuit against the mortgage loan originator may be necessary. This may result in a damages award in order to resolve the dispute. In certain cases, criminal charges may also be filed.
Should I Seek Legal Help for Mortgage Loan Originator Laws?
Yes, it is essential to have the assistance of a mortgage lawyer for any mortgage loan originator issues you may be facing. The laws that govern mortgages and mortgage professionals vary by state.
Your lawyer can provide guidance through the loan approval process, advise you on your rights and options, and file a lawsuit on your behalf, if necessary. Your lawyer will also represent you any time you are required to appear in court.