Everyone knows that interest rates fluctuate. But don't lose sight of the fact that regulations fluctuate as well.
With or without changes to RESPA, the Real Estate Settlement Procedures Act (see page 11), customers are seeking clarity at the closing table. That's the promise of Guaranteed Mortgage Packages, or GMPs, which provide customers with a firm price for closing a mortgage deal on a home. "Whether it becomes legislated or not, this is what the consumer seems to want," says James Gladden, executive vice president of ATM Corporation of America (Pittsburgh, Pa.) "A number of companies are saying, 'I need to be able to compete and I need to be able to offer these kind of services in a bundled package'."
This has sparked the creation of settlement service providers, which manage a network of providers and bundle the providers' services into packages. Those pre-priced bundles are then sold to mortgage originators, who can resell them at a markup.
Indeed, ATM recently won a contract to create a national settlement services company as a Pittsburgh-based subsidiary of E*TRADE Mortgage. Upon starting operations in the second quarter of 2004, the company will employ approximately 70 people. In return for its consulting and technology infrastructure, ATM will receive a share of the profits over an initial period of the venture. ATM is also helping CitiFinancial to develop a settlement services company, Gladden adds.