Jack Guttentag isn't waiting for the Bush Administration to come to the rescue with Real Estate Settlement Procedures Act (RESPA) reform for consumers in the dark about mortgage costs.

After certifying dozens of independent mortgage brokers as "Upfront Mortgage Brokers" (UMB), he's signed on his first "Upfront Mortgage Lender" (UML), all promising to supply consumers with loan pricing information consumers often must otherwise pry from lenders and brokers.

Some Non-UML and Non-UMB lenders and brokers have similar guarantees, but the "Upfront" certification is the first umbrella system of voluntary certification serving a group of lenders and brokers.

Dublin, CA-based online lender E-LOAN is the first lender to join 43 mortgage brokers in Guttentag's effort to not only reveal the true cost of loans to consumers, but to allow consumers to more accurately compare costs and better shop for loans.

Wayne, PA-based Guttentag, a professor emeritus of finance at the Wharton School of the University of Pennsylvania, is known as the "Mortgage Professor," and operates a Web site that advises consumers on how to effectively navigate the home loan process.

He also co-founded GHR Systems, Inc. which has developed an electronic network lenders use to deliver complex mortgage information quickly to loan-officer employees, to mortgage brokers, and to consumers using the Internet. Clients include Washington Mutual, Charter One Mortgage, Homecomings Financial, Radian Guaranty and Cendant Mortgage.

Alarmed by growing consumer frustration over being unable to easily compare all mortgage costs, Guttentag in 2000 started a network of UMBs that provide an alternative way to shop for mortgages.

"It has been a slow process. Most brokers don't want to relinquish their capacity to deceive borrowers. The key is going to be what happens regarding the HUD proposals," said Guttentag.

The U.S. Department of Housing and Urban Development (HUD) has been wrangling with Congress and special interest groups from the mortgage and related industries since late last year over a similar "guaranteed settlement" mortgage package that would reform RESPA.

In the past,l consumers have been unable to efficiently compare loans because they don't always know the full costs until after an application has been submitted. The HUD proposal says home mortgage shoppers would get a fixed package of all settlement costs -- before the borrower signs -- to make the package truly comparable among competing lenders. The deal would be guaranteed and legally enforceable at settlement.

Right now, no federal or state law requires the lender to deliver settlement costs in the amounts stated in the estimates, and thousands of American home buyers routinely get hit with unexpected fees at closing -- often thousands of dollars more than expected.

Some mortgage banks and brokers already offer in-house, proprietary versions of the guaranteed-fee concept, but Guttentag's "Upfront" certification provides an existing system for any lender or broker to join.

UML and UMB customers are not exposed to future increases in costs after initial disclosures that reveal fixed-dollar fees, including credit and appraisal charges, that are guaranteed through closing.

Customers also get clear explanation of rate-lock requirements, adjustable rate mortgages' (ARMs) potential performance disclosures, and disclosures about how brokers or officers are compensated.

"If HUD follows through on its proposal that lenders credit rebates to borrowers, 85 percent of the profit from deception will disappear, making it less costly to become a UMB. If HUD also requires brokers to state their compensation upfront, all brokers will be obliged to be UMBs," in practice if not in name, said Guttentag.

Published: July 17, 2003

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.