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CFPB Releases New Forward Mortgage Disclosures, High-Cost Loan Rules

After extensive testing of new forward mortgage disclosure forms, the Consumer Financial Protection Bureau proposed its final iterations of the disclosures Monday, as well as rules to expand consumer protections for high cost mortgage loans. 

“When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal,” said CFPB Director Richard Cordray. “Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home.”

The new “Loan Estimate” and “Closing Disclosure” forms aim to present the costs and risks of the loan in clear terms by highlighting certain information and simplifying that information, the CFPB says. 

“I am here today to say about the mortgage market: ‘No Más,'” Cordray said Monday speaking before attendees of the National Council of La Raza’s annual conference in Las Vegas. “No more costs and risks buried in the fine print that do not become clear until it is too late.  No more mortgages designed to fail – mortgages that benefit originators but not borrowers.  No more last-minute shocks at the closing table that leave consumers stuck with fees they did not know about or plan for.  And no more costly surprises and runarounds by mortgage servicers that leave people with nowhere to turn when they need help the most.”

Additionally, new proposed rules would ban potentially risky features; would ban and limit certain fees; and would require housing counseling for “high-cost” mortgages. 

The high cost determination would be made based on the loans’ interest rates, points and fees, or prepayment penalties. 

Find out more about the proposed rules, for which the CFPB is requesting comments over the next 60 days.

Written by Elizabeth Ecker