Packaging incentives: cost averaging

To reduce the record-keeping burden for settlement services providers, HUD would allow average cost pricing for services like credit reports and courier services.

&L Gates attorneys Phillip Schulman and Holly Spencer see average cost pricing as a positive, "particularly for those fees that are difficult to determine at closing. Using recording fees as an example, while consumers may get the benefit of uncertainty in some cases and pay less than the actual recording fees, in other cases consumers pay more than the actual fees, which has led to class action litigation. The use of average cost pricing, however, should go a long way in alleviating the class action litigation risk that often arises with settlement service fee overcharges."

Attorney Howard Lax calls cost averaging "packaging dressed up in sheep's clothing" because it would, in his view, allow some lenders to demand a certain number of free transactions from settlement services providers before the provider could charge for its services. The discount could be used to offset higher lender loan fees, Lax matinains -- enabling large orginators to grow market share at the expense of smaller companies. Creating "a device that only one class of settlement service provider may effectively exploit is going to destroy the playing field," he argues.

What's your take? Who wins and who loses with cost averaging? Would it be good for consumers, or ultimately bad for competition?