Junk Fees

Charges levied by a lender at closing in the hope that the borrower will neither question them nor abort the transaction. Such fees often are of a questionable nature, but are small relative to other legitimate closing costs.


Example: When the Stevenses went to close on their new home, they discovered several expenses on the list of closing costs that were connected with financing. They understood the charge for discount points and origination fee, as well as the costs of title insurance.
However, they wondered if the charges for loan processing ($200), document handling ($150), and fund maintenance ($350) were just junk fees that the lender was trying to slip by them. There had been no mention of these costs on the lender’s good faith estimate they received when the applied for the loan.

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Nebulous charges assessed at the closing of a mortgage that go to the originator or lender. These fees are hidden in the mortgage documents and are usually assessed as raw dollars rather than "points" or a percentage of the loan. Junk fees may or may not pay for an actual service to the borrower, but they typically are not known to the borrower prior to signing. Some common fees that may be considered junk fees include settlement fees, sign-up fees, underwriting fees, funding fees, translation fees and messenger fees.

Also known as "padding fees" or "garbage fees".

Investopedia Says:
The idea behind junk fees is that at the end of the mortgage signing process, the borrower is already committed to signing the loan and will not walk away from the table. Junk fees, however, may not necessarily be noted in the good faith estimate the borrower receives a few days prior to closing.

Most junk fees are nominal compared to mortgage points and other major closing costs.

Related Links:
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Learn how to pay less for your home in the long run, or save in the short run. Mortgage Points - What's The Point?
If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer. Avoid Capital Gains Tax On Your Home Sale