February 24, 2005 • ISSUE 4 / VOLUME 1

Paradigm shift: the flat fee

Home buyers need more options

Kathryn Kam, Esq., chief compliance officer for Meridian Mortgage, provides information on flat fee options for cash-strapped borrowers.

It doesn't take a rocket scientist to notice that current real estate prices in Hawaii are at a historical high. Low interest rates and low inventories of homes for sale have fueled the buying fever, resulting in homes priced so high that many residents cannot afford to buy and must remain renters.

The inability to qualify for the purchase of a home has left renters at the mercy of their landlords, many who have raised rents to take advantage of the simple rules of supply and demand. On January 1, 2005, Fannie Mae and Freddie Mac, two federally-chartered corporations that provide lenders with funds for new homebuyers, increased their maximum conforming loan limit in Hawaii to $539,475 – the highest in the nation, along with Alaska. The increase will help some prospective homebuyers, but only those who qualify with the necessary income, adequate credit scores and required down payments.

However, many other prospective buyers have been left with few or no options. Lenders have come to the rescue with programs such as the Option ARM, 100% loan-to-value and interest only loans. Subprime, VA and Alternative Lending loan products also provide valuable options when purchasing a home.

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Throughout the nation, some lenders have been taking pro-active roles and are currently providing various flat fee options to cash strapped borrowers. Generally, flat fee programs can provide two distinct advantages: savings in closing costs, and full disclosure of closing costs at the GFE (Good Faith Estimate) stage so the borrower will have a better idea of what to expect in escrow.

Some real estate companies have recently entered into joint ventures with mortgage giant lenders like Countrywide Home Loans and Wells Fargo. Although these combinations of real estate and lending may provide better bundled services, they might not provide consumers with any low flat fee options.

Therefore, bundled services alone may not help qualified borrowers with little or no cash, those who want to conserve cash for emergencies, or for those who simply want a better deal. Flat fee programs may eventually become the new paradigm shift in the marketplace. HUD wants it. Many homebuyers need it. It is up to the industry to provide it.

For more information, call Kathryn Kam at Meridian Mortgage, (808) 942-2224, or email her at kat@mortgage2u.com.

Meridian Financial Group is not engaged in the practice of law and does not provide legal services to any persons. The materials herein are provided for informational purposes only and do not constitute legal advice. A description or indication of limitation of practice by a lawyer does not mean that any agency or board has certified such lawyer as a specialist or expert in any indicated field of law practice, nor does it mean that such lawyer is necessarily any more expert or competent than any other lawyer.