Mortgage companies charge a number of fees when payments are late and when there is a default.
Late Fees: Most mortgages give homeowners a "grace period" before charging a late fee. The mortgage dictates the amount of the late fee, usually 4-5% of the overdue payment.
Be certain to watch out for fee pyramiding, which was described in Late Fees, Fee Pyramiding and Unreasonable Fees.
Property Inspection Fees: These fees cover the cost of inspecting the property -- usually a drive-by -- to make certain the property is occupied and adequately maintained. The fees for these inspections are low, generally around $10 to $15.
Broker's Price Opinions: Broker's price opinions are estimates of the value of your property and are made by real estate professionals, such as real estate brokers.
Property Preservation Costs: The mortgage company has the right to preserve the value of the property. You will be charged a fee if the expense was actually incurred and necessary to preserve the value of the property. Here are some examples of property preservation services:
mowing the lawn and/or removing snow;
removing trash and abandoned items such as furniture;
taking pictures of the property; and
repairing damage to the property.
As you can imagine, mortgage companies can rack up the amount of these property preservation fees.
Foreclosure Fees and Costs: Now that the Consumer Financial Protection Bureau has begun regulating mortgage companies, there are a new wrinkles you should know: the mortgage company cannot start a foreclosure until you are behind 120 days and loss mitigation is not feasible.
Foreclosure expenses that a court may require you to pay, include the cost of searching the title; court filing fees; the cost of serving the complaint and summons on you; sheriff's fees; and the costs of mailing and publishing notices.
The biggest fee is attorneys fees. Most mortgages include a clause requiring you to pay the mortgage company's attorney if you default. The attorney's fee must be reasonable and must be actually incurred (in other words, the lawyer actually performed the work for which he is charging).
Corporate Advances and Other Fees: Corporate advances are expenses paid by the mortgage company for which you are responsible, usually property taxes and hazard insurance. Insurance that the mortgage company buys for you is known as force-placed insurance, and can be extremely expensive. You do not have to pay for force-placed insurance if you already have insurance coverage.
Review corporate fees and advances carefully. Mortgage companies sometimes charge expenses that you are not responsible for.
Miscellaneous Expenses: Check them to make certain they are legitimate. I told you about an outrageous example of the misuse of "miscellaneous fees" that happened to Beth and Michael. The mortgage company demanded that they pay around $14,000. The mortgage company allocated approximately $9,000 to principal and interest. $5,000 went to "miscellaneous expenses."
When the loan modification process is drawn out, the mortgage company has more time to charge you these fees. A seriously important fact that you should be aware of is that mortgage companies often refuse to add these fees to your principal balance. That means that you have to pay them if you want a loan modification. Sometimes, the amount of these fees is so high, the homeowners cannot get the modification they otherwise qualify for.