Top federal housing officials are promising a “consumer-friendly” overhaul by this summer of the current rules on disclosures of mortgage-related fees and closing costs. In an interview, HUD Secretary Mel R. Martinez said the reforms will touch virtually every new loan transaction in the U.S., and will bring “far greater clarity and transparency than ever before” to home purchases and mortgage refinancings.

“I want people to be able to know early on just what costs to expect,” he said. “These (fees) shouldn’t be last-minute surprises on the day of settlement.” In advance of Martinez’s proposals, however, some innovative mortgage banking and brokerage firms are initiating new, voluntary consumer disclosures on their own. They are beginning to spell out in greater detail than ever before just what sorts of fees an applicant can expect to pay, and how much other settlement costs should total. A handful of firms are even promising applicants that if closing costs exceed initial “good faith” estimates by some threshold amount--say, 10 percent--the company will issue a revised disclosure well in advance of settlement.

Though the voluntary disclosures differ in some respects firm by firm, one that has attracted widespread attention was created by Fidelity Home Mortgage Corp., a mortgage banker based in Timonium, Md. The lender now requires all brokers to use the disclosure form with every applicant.

Key elements include:

Published: April 8, 2002

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.