It's a distressingly familiar scenario for homebuyers and refinancers, and was one of the major mortgage-related consumer complaints to federal agencies in 2005: "Good faith estimates" of settlement costs that turn out to be hundreds, even thousands, of dollars off the mark.
Previously undisclosed charges for "processing," "administration" and other vague services mysteriously appear out of nowhere on the HUD-1 settlement form. What was estimated up front as $2,200 in total fees turns out instead to be $3,400 at the actual close of the transaction.
That, in turn, forces consumers into a Hobson's choice: Do I pay the extra charges, even though they were never included in the good-faith estimates? Or do I blow up the whole deal - potentially losing the house I want to buy or the mortgage I need - over a lowball estimate?
Federal housing officials are working on possible remedies to these problems, but here's some unexpected good news: So are mortgage lenders themselves.
Growing numbers of them have gotten the message from their customers - we demand certainty about fees at the bottom line - and they are presenting new ways to turn their estimates into binding promises.
For example, this month SunTrust Mortgage Inc., which is ranked among the top 20 highest-volume home lenders in the country, began rolling out what it calls "good-faith guarantees."
When retail loan applicants receive their good-faith estimate disclosures, SunTrust now adds language that commits the company to deliver those prices at settlement. SunTrust is a subsidiary of SunTrust Banks of Atlanta and operates in 50 states and the District of Columbia.
Another large mortgage industry player, LendingTree LLC, has begun offering lenders on its network what it calls settlement services "bundles."
The pre-packaged bundles include everything needed to close the mortgage from title search and insurance to credit reports and appraisals. They often carry lower total costs to lenders than they'd pay assembling the same services on their own.
Participating lenders are thereby better positioned to offer more accurate estimates of total closing charges, and even pass on the lower, wholesale market costs to borrowers. LendingTree, of Charlotte, N.C., is a national mortgage and realty services aggregator that connects loan applicants with 260 independent lenders who participate in its network.
It typically promises mortgage applicants competitive quotes from up to four lenders.
