Chart of the Week: Lender-Paid Loan Expense and Borrower-Paid Charges and Fees
Sources: MBA and STRATMOR Peer Group Roundtable Program; MBA analysis of Home Mortgage Disclosure Act (HMDA) data
In recent years as volume has subsided, mortgage lenders have been focused on rising origination expenses, including credit costs. In competitive markets like that for mortgage originations, lender profit margins can absorb some of these cost increases in the short run, but escalating fulfillment costs are ultimately borne by consumers. This week’s Chart of the Week shows that both lender-paid and borrower-paid costs have increased over the past four years, adding pressure to lenders’ already tight margins, and further stretching affordability for some borrowers.
Loan expense represents the lender’s cost (net of the fees received from the borrower) for appraisals, credit reports, flood certifications, homeowners’ association transfer fees, tax services, termite and other inspections, and other typical “pass-through” expenses. Based on data collected through the MBA and STRATMOR Peer Group Roundtables Program, loan expenses were fairly steady from 2019 to 2021, averaging $281 per loan in the retail channel and $288 per loan in the consumer direct channel. However, between 2021 to 2025, loan expenses increased by over 50% in the retail channel and close to 100% in the consumer direct channel on a per-loan basis.
The rising lender-paid loan expense may be attributed to several factors. A lower pull-through could result in lenders paying for third-party costs on behalf of prospective borrowers who never close on a loan. Higher loan expense may also result from the rise in out-of-tolerance cures, or refunds paid by the lender to the borrower when the actual costs exceed the estimated disclosed costs by a certain threshold. Finally, in an effort to stay competitive, some mortgage lenders may not be seeking reimbursement from borrowers for the full amount of pass-through costs, even as third-party service charges increase.
Borrower-paid origination charges and fees (excluding discount points used to buy down the mortgage rate) have also increased over this time period for loans originated through the retail and consumer direct channels, according to MBA’s analysis of HMDA data. These costs include borrower-paid charges for appraisals, credit reports, inspections, title, and other typical “pass-through” expenses. In addition, origination charges including processing, underwriting, and other administrative fees are included. Between 2021 and 2024, borrower-paid fees rose by 30%. These rising borrower-borne charges may reflect escalating third-party service charges as well as higher lender fee income charged to compensate for escalating overall costs to originate loans.
Lenders will continue to seek ways to control costs in the year ahead, as borrowers continue to struggle with lack of affordability in many markets.
– Marina B. Walsh, CMB (mwalsh@mba.org); Jon Penniman (jpenniman@mba.org)
