First Round of Revamped Mortgage Disclosure Forms Released by CFPB

As planned, the Consumer Financial Protection Bureau today posted two prototypes of new disclosure forms that will be used by all mortgage lenders, and is seeking comments through May 27. The bureau offers two options, to be voted on, requesting that both the lending industry and consumers respond to the sample documents.

The CFPB asks for lenders to select the disclosure that could most easily be used to inform a consumer about the loan they’ve requested.

The aim of the new disclosure form is to combine the Truth in Lending form and the Good Faith Estimate into one form. Through its “Know Before You Owe” program, which will include several rounds of revisions to the new form based on feedback from lenders, brokers and consumers, the CFPB will address the question: What information should lenders and brokers share with consumers when they apply for a mortgage?

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Further, the CFPB is seeking feedback with regard to whether the form will help consumers understand the true costs and risks of a mortgage; whether lenders and brokers can clearly explain the form to their customers; and what the industry would like to see improved on the form, with the aim of making things clearer.

Elizabeth Warren, the White House special advisor who is charged with setting up the CFPB, spoke in support of the disclosure changes this week during a House Financial Services Committee hearing. Bloomberg reported this week that simpler mortgage forms could stifle the development of innovative products, and could be very costly to lenders.

“Changes are expensive to operationalize,” David Stevens, former FHA commissioner and now Mortgage Bankers Association president and CEO, told Bloomberg. “We are not against this, but we want to study the forms,” he said.

Bloomberg reported that Warren’s plan could affect “everyone throughout the chain” of home finance, from title firms and loan originators to risk-hedging systems, according to Stevens. The changes “could involve lawyers and create a class-action nightmare,” he said.

The bureau is collecting feedback and is encouraging those in the mortgage lending industry to vote on the form that is best suited to mortgage lending.

View the sample disclosure forms.

Is there anything in particular you’d like to see in the new documents from a reverse mortgage perspective? Please share your comments, or contact us at the email address below.

Written by Elizabeth Ecker

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  • It is clear that the CFPB reflects the experience of its executives including its de facto Director.  This idea of “choose a form” is at best under division college nonsense.
     
    Most of the credible government agencies create a form and then ask for public comments.  If comments point out elements which need change, changes are made.
     
    This start to more understandable mortgage documents is hardly stellar.  Academia has its place but it is in academia.  While there is no problem with making things more understandable, this methodology looks like a lead into the childish blame game of “well you chose the form, the Bureau didn’t.  If it is not as understandable as you would like, don’t blame us.”
     
    What this type of action clearly demonstrates is that the leaders of the CFPB have no idea of what a more understandable form should look like.  Worse it appears they did not take the time necessary to survey consumers or mortgage lenders to gain sufficient insight as to what type of form produces the desired results.  I find this markedly cynical and unprofessional.
     
    In its initial action towards more understandable mortgage documents, this looks like little more than more paperwork with little testing of its effectiveness.  For me this was an initiation into how skillfully this Bureau will be run.  It is not impressive.

  •  Well Critic seeking comment from lenders,
    brokers and consumers is exactly what the CFPB is doing. I read your critique several times and other than your insults which announce your opposition to the CFPB loud and clear there’s not much there. Out here in the economy the financial industry crippled most of us tend to agree with Paul Volcker, the only banking innovation that provided any benefit to the economy in the last 30 years was the ATM. Anybody who can’t make a living selling their products honestly and transparently ought to find a different line of work. The CFPB is working for consumers to make sure that happens.  

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