CFPB Kicks Off Phase 2: Simplifying Mortgage Closing Forms

Now that it has tackled the front end of the mortgage loan process, the Consumer Financial Protection Bureau is moving on to the other end of the transaction: the disclosure forms for loan closings.

The bureau released two prototypes of the Truth in Lending Disclosure and the HUD-1 Settlement Statement on Nov. 8, the federal mortgage disclosure forms that list final loan terms and costs, as it’s working on combining these documents and certain other federal disclosure into one easier-to-use form.

“We believe the terms and costs on these disclosures should be similar to the ones you received when you first applied for the loan,” said the CFPB in a recent blog post. “Being able to compare these terms and costs is what it means to “’know before you owe.'”

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The prototypes may not look shorter or simpler at first glance, the CFPB acknowledges, because they contain some new disclosures required by the Dodd-Frank Act.

“Basically, we’ve boiled down content that could have filled ten pages into five or six,” the bureau says in the blog post. “Unfortunately, we don’t control most of what you receive at closing, so our page reduction efforts can only go so far. For now, we’re working on consolidating these forms and making this disclosure better.”

The two forms, the five-page “Hornbeam” and the alternative six-page “Ironwood,” feature changes that include a larger font type and a front-page focus on the terms of the monthly payments.

Throughout each round of prototypes, the CFPB says it will test different designs and content and seek to convey all necessary information to consumers in a “clear and simple format.” In the end, it says, the bureau is striving for a closing disclosure that meets the needs of both consumers and industry.

In October, the bureau announced it was testing the revised design of the combined Truth in Lending and Good Faith Estimate loan application form, en route to embarking on the next stage of loan closing disclosure forms.

The CFPB is currently testing the two prototypes in Des Moines, Iowa, and is looking for consumer and industry feedback through Wednesday, Nov. 16.

Go here to check out the disclosure prototypes.

Written by Alyssa Gerace

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  • What is clear is that the CFPB has shown that it is doing little more than going through the motions.  It has considered very little of the criticism its forms received.  It is showing itself as the uncontrolled bureaucracy many feared.

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