SunTrust Mortgage Inc. has joined the handful of lenders that are not waiting for regulatory reforms before they simplify closing costs for consumers.
About 18 months ago the Richmond, Va., unit of Atlanta's SunTrust Banks Inc. began to offer guaranteed-price bundles of lender- and third-party closing costs in its consumer-direct retail channel. This year it is taking bundling to another level.
"And we didn't need a law to make us do it," said Sterling Edmunds Jr., the lender's president and chief executive, in an interview Tuesday.
SunTrust is pilot-testing the use of the bundles in its brick-and-mortar retail channel in central Virginia and expects to roll out them out to all its home-loan branches by yearend, Mr. Edmunds said.
It also plans to start offering a guarantee on good-faith estimates in the fourth quarter.
That guarantee would be basically equivalent to bundling, with similar results: Each gives consumers a way to shop loan deals with a firm sense that what they see is what they will get.
Offering up-front packages of closing costs is an exception to the rule - which is one reason the Department of Housing and Urban Development is once again looking at ways to lessen consumer confusion through reforms. But the practice appears to be slowly growing more widespread.
ABN Amro Holding NV's U.S. mortgage unit has long been the leader in bundles; it now offers them throughout its various lending channels, including wholesale. General Motors Acceptance Corp.'s Ditech.com also has long offered flat closing costs, while E-Loan Inc. guarantees such costs up front.
This spring Bank of America Corp. began offering packages for bank customers that include everything but title costs. Other lenders, including Washington Mutual Inc. and Citigroup Inc., have introduced bundling on a smaller scale, such as in particular regions, or only in call centers or on certain products.
Mr. Edmunds acknowledged that HUD's plan to reform enforcement of the Real Estate Settlement Procedures Act - on hiatus until recently - was what initially pushed SunTrust into bundling. Nevertheless, he noted, seeing a competitive advantage and benefits for consumers, it decided to move ahead even after the agency indefinitely pulled a reform proposal last year.
"That's why I don't think there's any need for Respa reform," Mr. Edmunds said.
SunTrust was the 21st-largest lender in 2004, according to National Mortgage News. Mr. Edmunds said it wrote about 4,000 mortgages with the bundles (which include everything needed for a loan to close but prepaid interest and tax escrows) and that the tally has already reached about 3,500 this year.
SunTrust will probably also exclude per-diem interest and escrows from its guaranteed good-faith estimates, Mr. Edmunds said. On the other costs he does not expect to incur much expense in covering too-low estimates.
"To the extent that you have to pay if you're wrong, it forces you to get really good at it," he said.
New debate among the various parties with an interest in the outcome of Respa reform will begin in earnest this week when HUD starts a series of roundtables meant to lead to a better understanding of what should change.
The first of three summer forums in Washington is scheduled for Thursday. Representatives of several lenders are expected to participate, including ABN Amro, BB&T Corp., H&R Block Inc.'s Option One Mortgage, and JPMorgan Chase & Co.'s Chase Home Finance.
Trade groups in attendance should include America's Community Bankers, the American Land Title Association, Mortgage Bankers Association, Mortgage Insurance Companies of America, National Association of Mortgage Brokers, and National Association of Realtors.
Consumers groups, title companies, state regulators, and state-level trade groups will also attend. HUD, in conjunction with the Small Business Administration, will hold additional discussions in Los Angeles, Chicago, and Dallas-Fort Worth.
