When can origination fees be collected?

The correct understanding regarding when origination fees can be collected is that they are typically the fees charged by a lender to cover the costs of processing a loan application. In the scope of mortgage lending practices, these fees can be collected at various points, but they are most commonly associated with the time leading up to closing.

In general, origination fees are usually collected before the closing of the loan as part of the initial closing costs. This ensures that both the lender and borrower are in agreement over the fees being charged prior to the transaction being finalized. Collecting such fees only after the loan has been finalized doesn’t align with standard industry practices as lenders often require these funds upfront to foster a serious commitment from the borrower.

The option indicating that origination fees can only be collected when refinancing a loan older than 24 months is too restrictive and does not reflect the broader conditions under which fees can be charged.

Therefore, recognizing the common practice that origination fees can be collected at any time during the process, particularly before the loan closing, is essential for understanding the flow of mortgage transactions and complying with regulatory expectations.