Acknowledges McKee, "What started the RESPA reform, is that when you go to the title company today there is a bevy of new fees, like processing fees, and a lot of them aren't disclosed on the good faith estimate, which makes the good faith estimate a joke. Mel Martinez is trying to simplify closing on the home, and wants to make the lender the provider of settlement services for a lump sum fee, but that gives the lender the right to go out and negotiate volume discounts and then take the markup for themselves."

Further, points out McKee, people who provide settlement services are not allowed to accept referral fees as the rules stand now. "If a lender has a relationship with a real estate company," he says, "they can't pay a Realtor a referral fee for bringing them a mortgage, and under this proposal they could. We don't think that is the way to do it. A one package system may be simpler for the consumer, but the one package lender is in control, and when they are in control do you think they will provide lower prices?"

Consumers won't be forced to use one package settlements, but McKee worries that the HUD may offer incentives for them to do so. "We feel like there should be others besides mortgagors to package settlements. It makes it difficult for us as brokers to get into a guaranteed mortgage, and a guaranteed lump sum for all services, but you can't guarantee the interest rate. It gives power and control to the lender and that is not in the best interest of the consumer. We propose a guaranteed outline of all the charges on the Hud-1 settlement statement, and section 800 has to do with loan origination fees, credit fees, loan docs, underwriting etc be one package, and GSP would include title search, closing fee, notary fee, etc. This would give the consumer the right to go to a lender to guarantee the loan fees, but allow them to shop the title policy and other stuff and to see what those service providers are charging."

The effects of the Single Package rule could be far-reaching, says Sue Johnson, spokesperson for RESPRO, a national association of over 250 cross-industry organizations, as it could hurt the efforts of brokers, builders and other organizations which are attempting to improve service to the consumer with one-stop shopping. She agrees with McKee that the One Package system "would put the control of the transaction in the hands of one party." A Two Package system "would reduce the incentive for lenders to try to manipulate pricing of either interest rates or Guaranteed Settlement Packages, because consumers would have additional choices of settlement service packages, including those from both lenders and non-lenders."

"We have 3/4 of the top 100 brokers and many from the top 250," says Johnson, "and we represent mortgage lenders and title underwriters and some homebuilders, and they are all trying to offer one-stop shopping. The mortgage lenders have a strategy of developing partnerships with the real estate brokers, for example. They are all getting into each others' businesses."

So how can the consumer lose? "HUD tends to look at refinancing more than at the purchase money market," says Johnson. "Homebuyers will lose because there will be less competition.

"The larger mortgage lenders," she explains, "get the ability to negotiate volume discounts with ancillary providers, so they can say 'If you mark down the cost of the title policy, I will use your policies for 1000 loans.' The title companies and closing services will be pressured to reduce fees to get that business. If there is no competition from non-lenders on the title and closing part of it, there is less incentive to pass those negotiated discounts to the consumers. It is important to have competition in title and closing services."

That's what the public comment period is for. According to HUD, the organization is looking at both sides. (More on HUD's responses Monday on Agent News.)

"HUD wasn't fully aware when it began this process of the impact on or the direct involvement of agents and homebuilders in this process," says Johnson. "They were looking at refinancings, and they weren't aware of how the homebuyer's market differs from the refinancing market. They are becoming more aware of this and RESPRO has given them data on the extent of involvement of brokers, builders, etc in closing services."

"Our membership needed to coordinate the views of our members and the one thing we came together on," says Johnson, "is if there is to be packaging, then everybody should be able to offer it. With the Two Package approach, we took all non-lender services and created a proposal to allow non-lenders like real estate companies, homebuilders and title companies to offer guaranteed packages separate from the loan package. That would allow everybody to continue to compete."

HUD's response will be featured in Monday's edition of Agent News.