On one day, for example, deals were signed that would cost one borrower $357 in overages, another $4,680 and a third borrower nothing at all.

-- At other times, overages were waived for a "good customer" borrowing $173,000 and for a John L. Scott real-estate employee requesting $111,600.

-- Some loan officers are whizzes at collecting the charges - and earning their one-fourth share of overages in commissions. Quarterly reports at Puget Sound, for example, show one officer collecting overages from 20 of 20 borrowers and another from only two of 16.

When an employee threatened to reveal Puget Sound's practices earlier this year, the bank directed its staff to stop charging overages. The practice, however, might be renewed, said president James Maxwell.

"The income, although it's not a substantial portion of our profits, is still important to us," he said, adding that he hadn't considered whether the bank would tell customers if the practice is renewed.

Maxwell said the practice is legal, appropriate and common in the industry.

Some customers are charged more because they have bad credit histories, or have cost the bank time and money by filing previous applications then backing out, said Patricia Thompson, senior vice president in charge of residential lending.

Thompson said her philosophy is, "Get the highest price you can for the money. That's what keeps us in business. The borrower has the option of saying, `I don't want that rate.' "

Critics contend that borrowers are unable to shop around for mortgages as freely as they do cars or other merchandise; they must meet financing deadlines and pay hundreds of dollars for appraisals and credit reports each time they apply for a loan. For that reason, they say, lenders should have to clearly define all fees and make them uniform.

The fee that usually includes overages is the "discount fee," also called "points" because the fee is a certain percentage point of the loan amount. The fee is described as something the borrower pays to hold down the interest rate and make the loan more marketable to investors, who buy loans in what's called the secondary market.

Diana Goodwin Shavey, a regional housing director for the Department of Housing and Urban Development, said discount points should be charged evenly to all borrowers - in part to guard against discrimination.

Puget Sound Bank has acknowledged that it didn't charge borrowers evenly.

What borrowers face

Gary Zelamsky shopped around and thought he'd gotten a good deal.

He borrowed from Puget Sound Bank because it was the only lender taking mortgage applications for condominiums in an unfinished building. Because Puget Sound held the construction loan on the building, it was willing to finance the mortgages when other lenders weren't.

Zelamsky compared interest rates offered by several lenders, then threatened to back out of his purchase if Puget Sound Bank didn't match the most favorable rate.

In the end, Zelamsky, who has an accounting background, was satisfied with the 9.625 percent interest rate on his $143,600 mortgage.

But he didn't scrutinize his fees, part of which were being paid by the person selling him his home.

Without Zelamsky or the seller knowing it, the seller was charged $718 in extra fees that were included on the loan papers as part of a $2,154 discount fee. Zelamsky and the seller had been hit with a hidden overage.

Stephen Hammil, an analyst with Boeing computer services, also paid an extra fee: $350 included in his $1,410 discount fee for a $70,500 mortgage.

J. Michael Burry, whose business is real-estate investment, fared even worse than the other two on his personal mortgage. His loan officer charged him an extra quarter of a percentage point on his interest rate. If Burry pays the full 15 years on his $173,600 loan, the overage will cost him $4,680.

Burry was disturbed but pragmatic when he learned of the charge, saying the bank honored its original quote to him: "If I wasn't misled, it doesn't bother me because I got what I bargained for."

How lenders profit

Much of the debate in the industry about overages centers on whether banks are making too much profit on home loans.

Maxwell said the bank made an overall 1.24 percent return on assets last year - a typical profit, industry experts say.

The percentage translates into $16.6 million in profit for Puget Sound last year, including about $500,000 in overages. That helped the bank's parent company, Puget Sound Bancorp, set a profit record of $46.2 million for the year.

Lenders - banks and specialized mortgage brokers - make money on loans three ways:

-- Charging "loan origination" fees for processing loans. These range from 1 percent to 2 percent of the loan amount.

-- Selling loans to investors in the secondary mortgage market. By selling a loan, the lender gets cash to make more loans. The investor who bought the loan - a pension fund or insurance company, for example - will profit from the interest payments.

-- Servicing loans. The lender keeps three-eighths of a percentage point of the total monthly interest payment as compensation for billing the borrower, collecting the mortgage payment and administering the loan. On Hammil's $70,500 loan, that totals about $20 a month, or $7,200 over 30 years.

Many customers are infuriated by the fact that banks profit by selling and servicing loans and still charge fees for everything down to a $70 credit report.

"I don't know why they're charging me a fee to give me a loan . . . since I'm giving them $200,000 in interest over 30 years anyway," Hammil said. He said he never knew what any of the fees were for, "except a charge the bank had for the pleasure of doing your business."