Most of the media commentary over the past week about the regulation of mortgage early exit fees under the new National Credit Code has been simplistic. There has been a widespread assumption that lenders with high break fees and early termination fees will have to bring them down, but high does not necessarily mean unconscionable.The National Credit Code, which took effect on July 1, provides that a court can annul or reduce an early exit fee if it is unconscionable. The Australian Securities and Investments Commission will be the regulator.The term "early exit fee" refers to any fee payable on early repayment of a mortgage that is not a mortgage discharge fee. An early exit fee may include a deferred establishment fee or a break fee. Typically these fees are charged if the consumer repays the loan in the first three to five years.Under the National Credit Code a mortgage contract must include a statement of any credit fees or charges that may become payable under the contract. The amount of the fee or the method of calculation must also be disclosed.ASIC put out a consultation paper on the issue last weekend. It says that in determining whether disputed fees are unconscionable, a court must look at whether a deferred establishment fee equals the lender's reasonable establishment and administration costs for that class of contract. For early termination fees the question is whether it exceeds a reasonable estimate of the credit provider's loss.Reasonable losses on early termination can include break fees for fixed rate mortgages, administrative costs for calculating the payout figure, administrative costs for processing the early termination, third-party costs that arise because of the early termination, deferred establishment costs, legal fees and land registry costs incurred in discharging the mortgage.Reasonable costs involved in a deferred establishment fee include evaluating and processing the mortgage application, preparing the mortgage contract and other documentation, valuation and settlement costs, legal and registry costs, and a reasonable amount of overheads. Cost that would prompt ASIC to take action would have the following components: business development costs, marketing costs, loss of profits. Lenders will have to keep records of how they calculate early exit fees.Mozo data shows that the average early exit fee for all lenders in year one of a mortgage contract is $1582. The range is wide - $250 for Bendigo Bank and $11,290 for BEAT Home Loans. Others charging high fees are Opportune Home Loans, with a $6950 fee in year one; Reduce Home Loans ($5400); AMP Banking ($4350); New Loan ($4100); Rams ($3925); and Homestar ($3900).Most early exit fees reduce over time, so that in year five of the mortgage contract the average for all lenders in the Mozo database is $590.As long as lenders can demonstrate that their costs fit within the parameters set out by ASIC there is no reason they have to change. While most commentators are arguing that high fees have to come back to the mean, it could also be argued that a lender charging