At the core of the home real estate settlement reforms proposed last week by the Bush administration is an idea that could literally transform the way millions of home buyers and refinancers shop for mortgages: Guaranteed-price closing cost packages.

As outlined by Housing secretary Mel R. Martinez, mortgage shoppers would get the option of comparing not just interest quotes from competing lenders, but guaranteed bottom-line "bundles" of settlement fees as well. A shopper might call one mortgage company and be quoted 7 1/4 percent with a guaranteed settlement fee package of $4,500. A second lender might quote 7 percent with $3,900 in fees. And a third might offer 7 percent with $4,200.

With that information up front--and guaranteed at closing--a borrower could shop among competing lenders for the best deal with full confidence that there would be no last-minute surprise fees on the closing statement.

The guaranteed-fee idea is part of a series of regulatory proposals that include detailed disclosures of mortgage broker fees and and improvements to the "Good Faith Estimates" disclosure that home loan borrowers receive from lenders three days after application. Martinez described the proposals broadly at a National Press Club briefing last Wednesday.

But Federal Housing commissioner John C. Weicher provided much more detail about the guaranteed-fee plan in a separate interview with me last week. According to Weicher, the new system will be:

Published: July 1, 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.