One of the country's largest retail mortgage lenders is rolling out a concept that home buyers, refinancers realty agents -- and even federal housing regulators -- have been demanding for years: Totally-guaranteed, locked-in loan closing costs that are identical to borrowers' upfront "good faith estimates."

SunTrust Mortgage, Inc., a subsidiary of Atlanta-based SunTrust Banks and one of the top 20 mortgage originators in the U.S., has begun offering what it calls "good faith guarantees" along with the federally-mandated good faith estimates all lenders must provide borrowers within three business days of their application.

Good faith estimate (GFE) disclosures have been widely criticized by consumers for being notoriously inaccurate. In thousands of complaints to HUD during the past six years, borrowers have charged that lenders' and brokers' upfront cost estimates too often turn out to be inaccurate or low-balled by settlement day. Title insurance costs estimated in GFEs at $1,800 balloon into $2,800 fees at final closing with no warning. Loan origination and "processing" fees estimated at $250 mysteriously turn out be $500 on the HUD-1 settlement sheet. GFEs can be hundreds of dollars or thousands of dollars off the mark -- pushing consumers beyond their anticipated budgets for their real estate transactions.

HUD has regulatory oversight of the Real Estate Settlement Procedures Act (RESPA), which governs GFEs. But Congress never gave HUD enforcement authority -- the ability to punish lenders whose GFEs are seriously inaccurate. As a consequence, HUD can urge lenders to do better jobs on their estimates -- and many lenders and brokers make a serious effort to comply with the law -- but the problem continues.

Three years ago, HUD outlined reforms creating federal support for what it called "guaranteed packages" of mortgage origination and settlement costs, plus "hardened" GFEs permitting no more than 10 percent variations between upfront estimates and final costs at closing. HUD withdrew its packaging proposal last year under congressional and realty industry pressure, but is expected to announce new approaches to address consumers' complaints within the next few months. One of those proposals is expected to involve guaranteeing GFEs.

But a handful of lenders are jumping out ahead of any HUD reforms.

"Our customers told us they wanted certainty" on loan costs, said SunTrust Mortgage CEO Sterling Edmunds in an interview last week. "So that is what we are giving them. We don't need legislation" or new HUD rules to guarantee loan origination and most closing costs, he added.

SunTrust operates in 50 states and the District of Columbia, and is rolling out its guaranteed GFE concept this week in its retail branch network. SunTrust already offers "guaranteed packages" of fees -- everything from credit and appraisal through title insurance and settlement charges -- as an option for applicants who want to shop the competition. Its packages include every HUD-1 settlement sheet item except "prepaids" -- per diem interest charges that depend upon the customer's preferred day of settlement during the month, and escrows for local property taxes and hazard insurance.

Neither its guaranteed GFEs nor its packages allow for even minimal variations, unlike HUD's earlier proposals. Martha Simmons, SunTrust's national retail manager, said, "We've been talking about doing this for a long time. There is no reason why we can't get the numbers right."

SunTrust is not alone among major mortgage companies in responding to loan applicants' demands for certainty on costs. Abn-Amro Mortgage, Ditech, E-Loan, E-Trade and GMAC Mortgage, among others, offer guarantees or "single fee" commitments to borrowers with no variations permitted. Still more lenders reportedly are working on guaranteed fee programs and are expected to roll them out later this year, especially if HUD calls for them in its forthcoming reform proposals.

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