Despite the Bush administration's retreat on mortgage settlement reforms, any home buyer who wants a guaranteed, fixed-cost loan can easily find one.

That's because all the major lenders who currently offer "packaged" mortgage deals say they don't intend to pull back their fixed-fee programs for home buyers, no matter what the federal government does.

The Bush administration's move March 22 -- under heavy congressional pressure -- essentially delayed or killed proposed federal standards for lender-guaranteed mortgage settlement costs. The proposals would have set national standards for guaranteed mortgage packages (GMPs). With a GMP, a lender quotes not only an interest rate, but a fixed-cost bottom-line number for all origination and settlement-related charges for the mortgage.

That is in stark contrast to today's predominant practice of quoting rates but giving only "good faith estimates" of origination and settlement fees. Frequently, home buyers find the estimates to be far off the mark when they get to the settlement stage. Lenders and title companies are free to tack on whatever additional fees they care to at settlement, with no legal recourse for consumers stuck with hundreds or thousands of dollars of unexpected, last-minute closing expenses.

Under the GMP approach, by contrast, home buyers could shop and compare rates and guaranteed closing expenses from lender to lender. Lender A, for instance, might quote a 5 1/2 percent rate on the mortgage and $2,800 in guaranteed closing fees. Lender B might quote the identical rate, but cut the guaranteed closing costs to $2,300. With the federal standards defining the rules of the game, consumers would know precisely what services were covered by the guaranteed prices, and could therefore shop and compare competing loan deals intelligently and with confidence.

The Bush proposal may be revived later this year, but home buyers -- and their professional advisers -- need not wait for the federal standards. Fixed-fee packages are a fast-growing concept in the marketplace, even without government intervention. Consider these facts:

• GMAC Mortgage Group, the home lending subsidiary of General Motors, says it has closed over $60 billion in guaranteed fee packages, much of it through its Ditech.com unit that advertises heavily on cable TV. Ditech offers a $395 "flat fee" mortgage package, plus a zero-cost "rolldown" package and other fixed-fee options. Some of the package plans include slightly higher interest rates, allowing the home buyer to finance a fixed-cost package of settlement expenses over the term of the loan. The company says the Bush administration's pullback of its GMP reform proposal will have no effect on its packaged offerings.

• ABN-Amro Mortgage, another of the country's highest-volume loan originators, says it has closed over 175,000 ($25 billion) in its "OneFee" packaged home mortgages during the past 18 months alone. Senior vice president Garth Graham says that although his firm "welcomed" the Bush proposals for setting national standards, their absence in the marketplace does not affect consumer demand for fixed-fee mortgages.

• Mid-sized, regional mortgage banking firms nationwide increasingly are offering fixed-fee home loan options. Among them are Minneapolis-based Bell Mortgage, plus America's Mortgage Cooperative, whose 30 member firms operate across the country.

• E-Trade Financial, E-Loan and Greenlight Loans, among others, all offer packaged mortgage deals.

• Local title and settlement agencies are joining with local mortgage companies to offer customized fixed-fee loan packages. Example: A McLean, Va.-based title agency, Monarch Title, has joined with First Savings Mortgage to offer a guaranteed-price home buyer package it calls "the Edge." The program even provides credits averaging $1,200 back to buyers who sign up for the loan, title and settlement features.

The bottom line here? Fixed-fee mortgage packages are out there for home buyers already. There's no need to wait for the feds -- and certainly not Congress -- to bestow their blessings.

Published: April 5, 2004

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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, consmer 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.