Regulators propose New Mortgage Disclosure Forms - What do you think? (Inform the Consumer Financial Protection Bureau -- Click on Link Below)
After a year and a half of research and review, the Consumer Financial Protection Bureau released simplified mortgage disclosure forms Monday that it hopes will make it easier for borrowers to understand the terms and costs of their loans and therefore be a step toward "restoring trust in the mortgage market" after the housing bubble.
As part of the bureau's "Know Before You Owe" mortgage project, the bureau received tens of thousands of comments and conducted 10 rounds of testing with consumers and industry participants over the course of 18 months to come up with the proposed forms.
The public has until Nov. 6, 2012 to comment on most of the proposal. The bureau will review the comments before issuing the final rule, the CFPB said.
Consumers currently get two disclosure forms whenever they apply for a mortgage, and two more at the closing ta
Loan applicants get one loan disclosure form aimed at satisfying Truth in Lending Act requirements (the "TILA" form), detailing loan terms like annual percentage rate (APR).
Another form -- the good faith estimate, or GFE -- is required by the Real Estate Settlement Procedures Act (RESPA), and is intended to help borrowers evaluate their complete loan package, including closing costs like title insurance.
At closing, consumers get another TILA disclosure detailing the terms of their mortgage, and a HUD-1 Settlement Statement itemizing additional closing costs.
Lenders and groups representing consumers and the real estate industry have complained that having two sets of loan disclosures is confusing to borrowers.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act tasked the bureau with creating a single, unified form for loan applicants -- a Loan Estimate -- and a single, unified form for homebuyers closing a deal -- a Closing Disclosure -- that satisfy both TILA and RESPA requirements.
"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray in a statement.
"Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."
"The public will have 60 days, until Sept. 7, 2012, to comment on most of the proposed rule. The bureau will issue the final rule in January 2013.
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