The "True Cost Calculator," Fannie Mae's much ballyhooed tool to help borrowers determine the actual cost of a particular mortgage and which product might be the best one for them, is up and running on the Internet.

The electronic estimator is part of the secondary mortgage market giant's newly redesigned consumer web site, www.homepath.com. The site is designed to help consumers locate a Fannie Mae mortgage product that fits their needs and a list of lenders who offer it.

But the company also is making the calculator available through lenders as a link from their own web sites. And several already have jumped at the opportunity.

One is Fleet Mortgage, which is in the process of building a hyperlink to the calculator. "We believe (it) will be a useful tool for our customers as they search for a mortgage," said Fleet Chairman A. William Schenck.

Most calculators available to consumers on the Internet are notoriously inaccurate. And even when they are correct, they do little more than allow would-be borrowers to determine their monthly cost for principal and interest based on the loan amount and mortgage rate.

The True Cost Calculator, on the other hand, allows borrowers to compare all of the costs of obtaining financing. Computations also will include points, mortgage insurance, appraisals, title insurance and miscellaneous settlement charges.

Furthermore, as perhaps an even more useful and realistic cost assessment tool, it will permit borrowers to compute the costs over the full term of the loan under consideration, or for the time they actually expect to hold the mortgage.

Consumer activist Stephan Brobeck, executive director of the Consumer Federation of America, applauded the new calculator. "No longer will consumers have to puzzle over the cost implications of rates versus points," he said.

The tool works incrementally, making basic assumptions at the start but becoming much more accurate as data fields are filled. "To get started, all you have to do is enter a mortgage amount and an interest rate," said David Voth, a Fannie Mae vice president said at the Mortgage Bankers Association's national secondary market conference in San Diego, where the calculator was unveiled..

It also contains what is described as "reasonable checks" to make sure that users don't insert misleading or inaccurate data. But company officials conceded that the old computer warning, garbage in, garbage out, still holds true.

Although the calculator is brand new, Fannie Mae is already thinking about future enhancements, including covering such "miscellaneous" ownership costs as hazard insurance and monthly property taxes.

In addition, future incarnations will allow borrowers to analyze various loans insured by the Federal Housing Administration. Only conventional products are included now.

Besides the calculator, consumers can use the revamped Homepath site to locate credit counselors in their areas, access information of Fannie Mae-owned properties, or look up unfamiliar terms in a comprehensive glossary.

Published: May 11, 2000

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