What Is a Mortgage Processing Fee?

The lender's steps, as Section A lines

Lenders that itemize Section A often give each internal step its own line. Our sample Loan Estimate, a fictional $382,500 conventional purchase, does exactly that. Set the lines in the order the file moves and you can follow it through the building.

Two more lines complete the section: $956 in points and a $1,495 origination fee. All seven add to $6,180.

A different lender could run the same file and print one origination fee, with processing and underwriting folded inside it. The form caps Section A at 13 items but sets no minimum, and the choice of how many lines to show is the lender's. The one line the rule labels itself is the points line. Every other label in Section A, "Processing Fee" included, is the lender's own wording.

The processing fee on our sample

The sample's processing fee is $495, one of seven lines in Section A. When we ran the document through LoanInspection, the report explained the line and moved on. It graded the Section A total of $6,180 against conventional purchase loans of similar size in the public record and found the total $405 above the typical range. The $495 did not get its own grade, because no public dataset records processing fees as a separate figure. Whether one lender's processing fee is higher or lower than another's cannot be checked against any public record. The two Section A subtotals can.

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Processing and underwriting

The two fees travel together on many Loan Estimates, and people often ask why both exist. Processing prepares the file; underwriting judges it. The processor collects and verifies, and the underwriter decides whether the loan meets the program's rules on income, credit, assets and the property. Lenders that charge for both are describing two stages of the same pipeline. Lenders that charge for neither have usually priced those stages into an origination fee or into the rate. The form does not favor either approach, and neither does the report.

When a lender can collect it

A processing fee appears again on the Closing Disclosure, the form you review before closing. The rule bars a lender from imposing any fee connected with your application before you have received the Loan Estimate and told the lender you intend to proceed, with one exception for a bona fide and reasonable credit report fee. A processing fee is not that exception, so it cannot be collected at application. After you say you intend to proceed, a lender may collect it before closing or at closing; either way it appears in Section A of the Closing Disclosure, in the Before Closing or At Closing column.

Names for the same line

Some lenders fold processing into a line called "Administration Fee" or "Lender Fee". If your Section A has no processing line, that does not mean the stage was skipped. It means the lender labeled the section differently.