New mortgage shopping sheet attempts to simplify and clarify

Wednesday, August 6th, 2014 By

glasses resting on mortgage application

CFPB readies simplified mortgage forms / Image: TheTruthAbout/Flickr/CC BY-SA

The Consumer Financial Protection Bureau, the Obama administration’s agency being set up by adviser Elizabeth Warren, plans to bring greater transparency to the credit industry by requiring the use of a simpler, more straightforward shopping sheet for mortgage lending. On Wednesday the agency website released two possible versions of a simpler mortgage disclosure form for public scrutiny.  Reactions have been mixed from industry and consumer sources.

Current forms confuse consumers

The CFPB claims that hidden charges and unreasonable terms are often hidden within the confusing language of the forms currently being used by lenders.  Currently, two mortgage disclosures are required: the federal Truth in Lending Act (TILA) mortgage disclosure and the Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate.  The new form will combine the two, reducing the the current five pages down to a one-page (front and back) form. The CFPB is calling it the “know before you owe” project.

Two different prototypes offered

Both versions of the new form contain the same information, but it is presented in different ways. Both show the interest rate, monthly loan payment, closing costs and taxes.  At a glance, one can see monthly payments and how those payments might change during the life of the loan.  The forms will also warn of possible penalties and other non-transparent charges.

Confusion can be costly

“Getting stuck with the wrong home loan can cost tens of thousands of dollars over the life of the loan,” Warren said Wednesday.  “[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?”

Mixed reactions on both sides

Industry and consumer reactions 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.

No change at this time

The new forms will not soon be available by any bank, however.  The Consumer Financial Protection Bureau, created by the Dodd-Frank Act, will officially begin work on July 21.  The CFPB will then conduct five rounds of testing in six different cities before introducing an official form in September. The bureau will then have until July 2012 to propose rules relating to the form’s implementation.


LA Times

Previous Article

« On the border: a border fence and immigration reform debate

On the border, the controversial U.S. Border Fence Project has become a political football in the debate about immigration reform. READ MORE the U.S. border fence extending into the ocean
Next Article

Chelsea Hotel provides a home for the Doughnut Planet »

A hotel once known for being the cradle of bohemian counter-culture is now home to a doughnut shop. This could make the building a classy place. Photo of the Hotel Chelsea.

Other recent posts by Ron Ford

Tips for staying on budget when the urge gets to be too much

There are simple things you can do to stay on budget and save when cravings to spend more than you should get to be overwhelming.
Shiny penny

Renting smart in a landlord market

More people are trying to rent and available rentals are down. Landlords have the upper hand. A renter has to be savvy to get a good deal.
Landlord Tenant Law

Tips for a more successful yard sale

Spring is here; time to declutter and spend time outside. How about a yard sale? Some planning will make it more profitable and low-stress.
A yard sale