Warren, CFPB introduce proposed mortgage disclosure forms
Elizabeth Warren and the Consumer Financial Protection Bureau revealed two prototypes of mortgage disclosure forms Wednesday as part of the agency's effort to simplify documents for homebuyers shopping for mortgages.
The two prototypes combine the federal Truth in Lending Act mortgage disclosure form with the Real Estate Settlement Procedures Act to remove redundant information and allow consumers to make decisions based on clear and concise language, Warren said.
The sample loan forms, which are part of the CFPB's Know Before You Owe project, will undergo five rounds of testing and evaluation in six test markets.
During the testing stage, which ends in September, the new federal regulator will interview brokers, lenders and consumers living in Albuquerque, N.M.; Baltimore; Birmingham, Ala.; Chicago; Los Angeles; and Springfield, Mass.
"Getting stuck with the wrong loan can cost a family tens of thousands of dollars over the life of the loan, " Warren said while launching the initiative. "With a clear and simple form, consumers can answer two basic questions: Can I afford this mortgage? and Can I get a better deal someplace else?"
The Dodd-Frank Act requires the CFPB to draft a proposed mortgage form for comment by July 2012. Once the testing phase ends this summer, the bureau will continue conducting quantitative tests.
The Mortgage Bankers Association welcomed the proposed forms, and plans to review them carefully and offer feedback as needed.
"The CFPB staff has obviously put a lot of thought into the new forms and we look forward to participating in the review and revision process alongside consumers," said MBA President and CEO David Stevens. "One of MBA's primary goals will be to make certain that not only do the new forms provide consumers with the information they need in a simple, clean way, but also that they can be implemented into lenders' operations and systems with a minimum of disruption."
Stevens said the mortgage finance industry spent a lot to implement RESPA changes about 18 months ago, and the MBA wants to ensure the new form "is highly beneficial to consumers who will bear the implementation costs."
The CFPB is accepting comments from the mortgage industry online. To submit a comment, visit the CFPB prototype forms, click on the form you want to review, and when you are ready to submit feedback about that particular prototype, click on the section of interest to activate a comment box.
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