ST Alpha - "It's an origination fee that pays out the largest amount for loans between $2M and $10M" (Reading a Post)

SlickerTalk
Search Archives
The Leaderboard
The FAQ

Down to Post

Backboards:

Posts: 158

In response to "If a big bank processed $10m in loans they should get the same fees regardless of # applicants but they'd sure save man hours processing biggest first -- nm" by Max

It's an origination fee that pays out the largest amount for loans between $2M and $10M

Posted by decline (aka Decline) Apr 21 '20, 09:14

Participation Incentives

The structure of the federally backed loan program pays financial institutions an origination fee on a sliding scale for their participation, ranging from 5% on smaller loans to 1% on the largest loans.

The structure incentivized banks to front-load larger loans, the suits claim, by offering up to $100,000 in fees for processing loans between $2 million and $10 million.

By contrast, smaller-dollar loans would earn a far smaller origination fee per loan, up to just $17,500 for processing loans up to $350,000.

Had the banks informed applicants they they were allegedly prioritizing some loans over others, the plaintiffs would’ve gone to a community bank or elsewhere with their application, the complaint said.

Responses:

But that's backwards. If the percentage fee was higher for smaller loans they would be incentivized to do more smaller loans. -- nm - pmb Apr 21, 09:15 3
- I think the assumption in the lawsuit is that the banks figured out it was a finite amount of money that would run out and that their SBA groups -- (edited) - decline Apr 21, 09:23 2
  - And I'm saying, that based on my experience with the banks it wasn't that they planned to maximize their fees by doing it that way. It just worked - pmb Apr 21, 09:48 1
    - banks are evil pmb - decline Apr 21, 10:02

Post a message top

It's an origination fee that pays out the largest amount for loans between $2M and $10M

Replies are disabled on threads older than 7 days.