Consumer Financial Protection Bureau simplifies mortgages forms

The CFPB, in a bid for greater transparency in the mortgage industry, plans to require a simpler, less confusing mortgage buying sheet. The bureau is being led by Obama administration adviser Elizabeth Warren. Two prototype version of the new mortgage disclosure form were released to the public Wednesday on the bureau’s site. Consumer and industry groups have both had mixed reactions to the new forms.
Consumers mixed up about existing forms
The CFPB claims that hidden charges and unreasonable terms are often concealed within the confusing language of the forms currently being used by lenders. Right now both the federal Truth in Lending Act (TILA) mortgage disclosure and the Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate are required. Rather than getting five pages, consumers will only get one now, front and back. This is because the two have been combined. It is being done by the CFPB. It is the “know before you owe” project being done.
Two different prototypes offered
Both versions of the new form contain the same information, but it is presented in different ways. Both forms have taxes and closing costs on them. The monthly loan payment and interest rate is also on it. Monthly payments, and just how the loan will change the payments, can be seen. Penalties and other charges that might be added on will even be put on the form.
Confusion can be costly
Warren commented on Wed. “Getting stuck with the wrong home loan can cost tens of thousands of dollars over the life of the loan,” he said. “(This) is a clear, simple form so consumers can get better answers to two basic questions: Can I afford this mortgage, and can I get a better deal somewhere else?”
The reactions that came
The reactions have not all been the same. They have been mixed. Industry groups say the changes may limit innovation and variety in lending, while consumer groups are concerned that the changes may limit the ability to stop a foreclosure with court action.
Every little thing is currently the same
The new forms won’t soon be accessible by any bank, however. Part of the Dodd-Frank Act was the Consumer Financial Protection Bureau. It will get started on July 21. Before a form is introduced in September, the CFPB will test the forms in six cities in five rounds. The bureau will then have until July 2012 to propose rules associated with the form’s implementation.
Information from
CNN
money.cnn.com/2011/05/18/pf/mortgage_disclosure_form/index.htm?iid=HP_LN
Bloomberg
bloomberg.com/news/2011-05-18/banks-say-simpler-mortgage-form-could-stifle-new-products.html
LA Times
articles.latimes.com/2010/feb/28/business/la-fi-harney28-2010feb28