In a recent article, I examined Bank of America's new no-fee program for house purchasers, under which lender and third-party fees are absorbed by the bank. On a fixed-rate mortgage, the borrower pays the interest rate and points, and that's it. Price shopping would be so much easier, I mused, if all lenders did the same. A spokesman for another large lender responded to that article by claiming that other lenders do offer the same product, but they give it a different name; they call it a "no-cost mortgage." I will explain what he means with an oversimplified example. A lender who absorbs all costs in its rate and points must mark up the price accordingly. For example, if BofA is prepared to absorb $3,000 of costs including third-party charges to acquire a $300,000 loan at 6 percent, it will price a no-fee loan at 6 percent and zero points. Now consider Lender X offering the same loan, and faced with the same $3,000 in costs except that the costs are billed to the borrower....
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