Consumer Will Benefit From Simpler Mortgage Disclosure Form
For more than 35 years, two federal laws (the Truth in Lending Act or “TILA,” and the Real Estate Settlement Procedures Act or “RESPA”) have required lenders and settlement agents to give consumers who take out a mortgage loan separate but overlapping disclosure forms regarding the loan’s terms and costs. This duplication has long been recognized as inefficient and confusing for consumers and the industry. However, TILA and RESPA are separate laws with different requirements.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau is responsible for solving this problem by combining the disclosures and will propose rules that integrate the statutory requirements and resolve any inconsistencies.
Since late last year the CFPB has been testing two mortgage disclosure forms, nicknamed Butternut and Hemlock, and asking for feedback to create a single mortgage disclosure form. The form is scheduled to be released July 21.
Their goal, as clearly stated on the website, is “to provide consumers all the information they need in a clear and simple format: Are you closing on the loan you want, for example, a fixed as opposed to an adjustable rate? Do you know how much money you will need at closing and what you are paying for? Are the conditions and requirements for your loan clear? And we want to provide lenders and settlement agents with a document that is easy to use and reduces unneeded regulatory burden. In the end, we want a closing disclosure that meets the needs of both consumers and industry.”
The CFPB’s thorough and innovative approach to the disclosure forms not only clearly conveys the information that the laws mandate but also highlights the information consumers really need to know.
Combining overlapping disclosures for consumers that clarify and help the consumer better understand their mortgage terms is good for consumers and good for the mortgage industry.
Combining the various agency interpretations and forms is needed in an industry that has evolved over many years with agencies acting sometimes prior to analysis of how their actions affect other regulations or the industry as a whole.
In my opinion, the consumer would be better served and protected with a more concise to-the-point disclosure written in plain English. The mortgage industry is already complicated from a consumer’s point of view. Fewer and simpler disclosures will help the consumer focus on what is important versus redundant and hard-to-understand technical and legal jargon.
— Cal Haupt, Chief Executive Officer, Southeast Mortgage of Georgia, Inc.