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CFPB reveals larger prototype mortgage form for public scrutiny

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After collecting feedback from thousands of members of the industry on its prototype mortgage disclosure forms, the Consumer Financial Protection Bureau is ready to accept public opinions on the documents. The new federal agency is proposing a five-page form, codenamed "Hornbeam" and an alternative six-page disclosure document, known as "Ironwood" to function as the final mortgage disclosure form for consumers. The forms were fleshed out using feedback collected during a five-month study period conducted by the CFPB. Obvious changes include top sections where any monthly payment changes during the life of the mortgage must be clearly noted. The text is also less cramped and the type is larger. The current form that provides this service, the HUD-1 settlement statement, is a few pages in length. The form is an itemized breakdown of all the fees a borrower pays when buying a home via mortgage-based financing. The HUD-1 also contains the good faith estimate of the home's value. The alternative mortgage disclosure forms, which are available for review online, cover all of the details of a mortgage loan, while also spelling out closing costs for borrowers. The CFPB says the roll-out is the second phase of its "Know Before You Owe" mortgage project, which aims to inform borrowers about mortgage terms using clear and transparent loan disclosure documents. The CFPB is accepting feedback on the latest prototypes online. Under federal law, borrowers closing on a mortgage are required to review two documents – the federal Truth in Lending Disclosure form and the HUD-1 Settlement statement. The final prototypes combine these required documents into one, single mortgage disclosure form. "The CFPB also is consolidating other new and current federal mortgage disclosure requirements – boiling down unnecessary paperwork by as much as 50 percent," the agency said in a press statement Tuesday. Justin Ailes, vice president of government and regulatory affairs for the American Land Title Association, responded to the forms' release this morning. "ALTA is pleased to have an opportunity to review and comment on its first look at the CFPB's draft of the final settlement statement," Ailes said. "The first page has basic information that attempts to help consumers understand their loan and closing costs. Additional pages ensure that when you buy or sell a home, you will know where the money comes from and who it is paid to. It sounds basic, but a disclosure that is transparent and itemizes costs is especially important." Write to Kerri Panchuk.

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