The following is the transcript from CNNfn's segment about charges associated with mortgage closing costs in which
Amerisave's director of consumer affairs, David Herpers was interviewed by Ali Velshi of CNNfn.
ALI VELSHI, CNNfn ANCHOR, YOUR MONEY: You've completed the house hunting, received approval for a mortgage. Now it's time for the final
step, the closing. But before you sign on that dotted line, or, as I recall, several dotted lines, you have to deal with several charges
associated with sealing the deal on the house.
How do consumers make the process easier on themselves? Knowing what to look for is one way.
David Herpers is the director of consumer affairs at Amerisave, an online mortgage company. He joins us from Atlanta.
David, good to see you.
DAVID HERPERS, DIRECTOR OF CONSUMER AFFAIRS, AMERISAVE: Good to be here.
VELSHI: Let's talk about these closing costs. It is unbelievable the lineup of things that you have to pay for when you close on a mortgage.
And I suppose you could just pay it as a lump sum, and it wouldn't seem as unbelievable if it were just one line. But it really does seem to
be a whole lot of various charges. What are the main ones?
HERPERS: Well, you can group closing fees into three main categories: lender fees, third-party fees, and prepaid or escrows.
The lender fees sometimes can be the largest portion of the fees, these are fees the lender can control. Lender fees would include fees
such as the origination fee or application fee, if your lender's charges one.
The third-party fees, which typically the lender has less control over, would include items such as the: appraisal fee, title insurance
and credit reporting fees. Some of these may vary depending on which county or which state you live in.
Lastly, you have your prepaid and your escrows. Prepaid fees would include your prepaid interest. Escrows would include things like your
property taxes, or your homeowner's insurance.
When comparing one lender against another, it's recommended not to include the prepaid and escrows, because those are going to be the same
across lenders.
VELSHI: All right. How do you make -- where do you first get this information? There are a couple of documents that might give you some
sense of what you're going to end up paying. I mean, your mortgage broker or lender might tell you up front. But what are the documents
that you're entitled to?
HERPERS: The first document is the good faith estimate, or GFE. This document by law has to be delivered to you within three days of
application. One thing to keep in mind is, this document is only an estimate. Your lender is going to estimate what your total fees are
going to be at the time of closing and display that to you on the GFE.
At the closing, you're going to receive what's called the HUD-I. The HUD-I is the detailed breakdown of all those fees. And most states
are going to require that the HUD-1 be delivered to you a few days before closing.
Regardless of which state you reside in I would always ask your lender to deliver that document to you at least a couple days before
closing so you can compare that document against the GFE.
VELSHI: Of the costs on the GFE, you said really the only ones you might have any role in being able to negotiate are the lender-controlled
costs. How much leverage do you have?
HERPERS: Well, it depends. I mean, everything is negotiable. What we're finding is a lot of the online companies, like amerisave.com,
are setting those fees. And they're really not willing to negotiate those fees with the consumer, mainly because they're setting those
fees as low as they possibly can to increase the competitiveness of their product.
Some offline or your brick-and-mortar lenders may have padded those fees allowing them to reduce those fees slightly.
VELSHI: In this day and age, where we see mortgage originations and refinancing down, does the consumer have a little more leeway?
HERPERS: Perhaps. One of the emerging trends we see in the industry is what's called fee bundling, or guaranteed closing costs. This
isn't very widely used today, but we -- think it is going to emerge as the trend of the future.
In this scenario, you're going to receive one fee, and this fee will include all the fees you're going to potentially incur during the
process, and that fee is guaranteed not to change from the time of application to the time of closing.
VELSHI: And, you guys are going to start doing this in 2004, your own company is going to be doing this?
HERPERS: That's right, we're piloting it right now, and we look to roll it out in early 2004.
VELSHI: Why would that be difficult? Why would that be much of a risk on the part of the lender? What could change, how much do these
things change?
HERPERS: Well, it's been difficult in the past, primarily for estimating the third-party fees, such as the title insurance. It's very
difficult to predict the title insurance if you're not the title insurance company, because those fees vary by state, by county, the
appraised value of the property.
VELSHI: OK. The title, the title insurance might vary. What are the other things that are likely to vary?
HERPERS: The appraisal fee, recordation taxes. Depending on which county or state you live in, you might be charged taxes by the state
in which you're closing that loan. And that's going to vary depending on the county, state and appraised value. And again, lenders
have had a difficult time...
VELSHI: Yes.
HERPERS: ... getting a hold of that information.
VELSHI: David, good to talk to you. Thank you for being with us.
HERPERS: Yes, thank you.
VELSHI: Dave Herpers is the director of consumer affairs at Amerisave, joining me from Atlanta.
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