DEFINITION of 'Junk Fees'

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".

BREAKING DOWN 'Junk Fees'

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 TERMS
  1. Exchange Fees

    A type of investment fee that some mutual funds charge to shareholders ...
  2. Fee

    A fee is a fixed price charged for a specific service and is ...
  3. Utilization Fee

    An annual fee assessed by a lender against a borrower. The fee ...
  4. Origination Fee

    An up-front fee charged by a lender for processing a new loan ...
  5. Clearing Fee

    A fee charged by a clearing house for its services. A clearing ...
  6. Stock Loan Fee

    A fee charged by a brokerage firm to a client for borrowing shares. ...
Related Articles
  1. Investing

    8 Investing Fees That You Should Never Pay

    In investment management and financial planning there are a plethora of fees that are unnecessary.
  2. Financial Advisor

    Are Fees Eating Up Your Nest Egg?

    You may not be able to avoid all fees associated with retirement planning, but you should know what you’re being charged for. Here's a list of common fees.
  3. Personal Finance

    Do You Know How Your Financial Advisor Is Paid?

    It is important to understand how your financial planner is compensated.
  4. Investing

    Are Fees Depleting Your Retirement Savings?  

    Each retirement account will have a fee associated with it. The key is to lower these fees as much as possible to maximize your return.
  5. Investing

    A Guide To Investor Fees

    Fees are one of the most important determinants of investment performance and something that every investor should know.
  6. Tech

    Are Financial Advisor Fees Too High?

    Fees charged by financial advisors run the gamut. Are you getting a fair deal or paying too much?
  7. Managing Wealth

    How To Optimize Your Portfolio and Reduce Fees

    Investment fees aren't avoidable altogether, but there are strategies investors can employ to keep those fees at bay and reduce the impact on returns.
  8. Personal Finance

    How To Negotiate Your Closing Costs

    Closing costs can't be avoided altogether, but you can lower them. While there are a lot of fixed costs, there are also variable ones you can save on.
  9. Investing

    3 Investment Fees That Are Negotiable

    Investment fees are a necessary evil but that doesn't mean they have to be overly costly. There are ways to negotiate some of the expenses down.
  10. Personal Finance

    Cut Your Bank Fees

    Find out how to get the bank to pay you for using their services, not the other way around.
RELATED FAQS
  1. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ... Read Answer >>
  2. What kinds of fees are involved in futures trading?

    Learn what the various costs are that are charged by brokerage firms and trading exchanges to individual futures trading ... Read Answer >>
Trading Center