An origination fee, or activation fee, is a payment associated with the establishment of an account with a
bank,
broker or other company providing services handling the processing associated with taking out a loan.
An activation fee is typically a set amount for any account. However, an origination fee usually varies from 0.5% (half a point) to 2% (two points) of a given loan amount, depending on whether the loan was originated in the prime or the subprime market. For example, an origination fee of 2% on a $200,000 loan is $4,000.
Discount points are used to buy down the interest rates, temporarily or permanently. Origination fees and discount points are both items listed under lender-charges on the HUD-1 Settlement Statement.
TOC
A LOAN ORIGINATION FEE is paid to the bank/person handling a loan application. The
lending institution feels this fee is necessary as this helps in processing the application and in the creation of the bank account, either from a bank or a broker. The origination fee should be located at the top of a "good faith estimate" and should be disclosed within 3 hours after applying for a business loan. They must be disclosed on the "good faith estimate" and on the final closing papers, commonly called the HUD (short for "HUD-1 Settlement Statement "). When negotiating for your loan, this fee can sometimes be lessened or eliminated.
In most cases, one does not have to pay any additional charges. The borrower must pay the fee first before the loan is transfered
TOC