At what point can a lender collect a loan origination fee?

A lender can collect a loan origination fee at the time the loan closes because this aligns with the regulatory framework that governs mortgage transactions. The loan origination fee is considered a fee for the service of processing and underwriting the loan, which occurs up until the loan is finalized. Closure of the loan is the point at which all conditions are met, and the loan is officially completed, allowing the lender to receive the fee for their services.

While some steps in the loan process may involve collecting other types of fees, such as application fees, the origination fee is specifically tied to the completion of the loan process. Collecting it at closure ensures that the lender has fulfilled their responsibilities and that the borrower has received the loan for which the fee is being charged. This practice also helps protect borrowers from being charged prematurely, which could lead to confusion or financial issues if the loan does not close successfully.