Consumer Agency Unveils Mortgage Disclosure Forms

The new Consumer Financial Protection Bureau (CFPB) has posted two versions of a mortgage disclosure form on its website, seeking input from consumers.

The forms are aimed at helping prospective borrowers better understand the terms of the loan and shop around for the best mortgage.

“The task is pretty simple: Consumers would receive a form similar to one of these versions within a few days of applying for a loan,” the agency said on its website. “Take a look, and tell us which one would do a better job of disclosing the necessary information.”

Two forms

Right now, anyone who applies for a mortgage gets two disclosures that contain basic information about the mortgage: the Truth in Lending form and the Good Faith Estimate.

The feedback process is one of the first steps in combining the Truth in Lending form and the Good Faith Estimate into a single, simpler disclosure form,” the agency said. It asks consumers to consider these questions:

• Would this form help consumers understand the true costs and risks of a mortgage?
• Could lenders and brokers clearly and easily explain the form to their customers?
• What would you like to see improved on the form? Is there some way to make things a little bit clearer?

Making the market more consumer-friendly

“At the heart of our work is the idea that the consumer financial product and services market should work for you,” the agency said. “We think we should learn from you what you want to see.

This isn't the first time that government agencies have tried to streamline disclosure forms and remove a lot of legalese. But these attempts always draw opposition from the banking industry, which says the legalese is there for a very good reason – to keep them from getting sued.

Congress' recent financial regulatory legislation created the CFPB, and the new agency has set streamlining the mortgage process as one of its first goals.

“Buying a home is one of the biggest financial decisions most Americans will ever make. The Know Before You Owe project is about giving consumers upfront, easy-to-understand information that helps them compare different mortgage offers and find the one that’s best for them,” said Elizabeth Warren, Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB. “The current forms can be complicated and difficult for consumers to use. They are also redundant and can be costly for lenders to fill out. With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage and can I get a better deal somewhere else?”