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Know Before You Owe: Making the mortgage process easier for you


Know Before You Owe: Making the mortgage process easier for you

Since opening our doors over four years ago we’ve heard from homebuyers that the process of buying a home is overwhelming and confusing. We’ve heard that closing is often rushed, not allowing enough time to review before signing on the dotted line. For consumers who apply for most mortgages on or after October 3, 2015, the stress of shopping for a mortgage will be reduced, as our new mortgage disclosure rule takes effect. The new rule and disclosures ease the process of taking out a mortgage, helping you save money, and ensuring you know before you owe.

Here’s what will change:

  • Four overlapping disclosure forms will be streamlined into two forms, the Loan Estimate and the Closing Disclosure.
  • You’ll have more time to review your closing documents. Currently, lenders must give you your HUD-1 Settlement Statement disclosure 24 hours in advance, if you request it; after October 3, you’ll receive your Closing Disclosure three business days before you sign the forms and accept the terms of your mortgage, no request needed.

Here’s how these changes will improve the mortgage process:

  • The new forms will make it easier to understand complicated mortgage terms.
  • The Loan Estimate makes it easier to shop around and compare loan offers from multiple lenders. Consider applying for loans from at least three lenders before choosing a mortgage so you can find the best deal for you.
  • The three days required between getting your Closing Disclosure and signing on the dotted line allow you to make sure there aren’t major changes from the deal you were offered on your Loan Estimate. It also gives you time to ask your lender all the questions you might have about the terms of your mortgage and consult with a lawyer or housing counselor.

More resources to help make mortgages understandable

We’ve released “Your Home Loan Toolkit.” The toolkit has worksheets and conversation starters to help you at key points in the mortgage process. You’ll receive the toolkit when you apply for a home purchase mortgage. However, you can also download it now.

In addition, while these forms make the process of taking out a mortgage easier, we have also created digital resources to help you use and understand your Loan Estimate and Closing Disclosure. These tools give you definitions of terms like “balloon payments” and “points.” They also show you where to look, page-by-page, to check that terms and numbers on both documents match up.

For a better understanding of what it takes to get a mortgage, we’ve updated our “Owning a Home” site with an overview of the mortgage process. This step-by-step guide to getting a mortgage takes you from creating a budget to filing away your important closing documents after you accept the terms and sign on the dotted line. “Owning a Home” also has tools and resources to help you learn more about your loan options, make decisions, and prepare for closing.

Housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) are another great resource. They can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. To find a housing counselor near you, use our search tool.

The new forms work

Over the past four years, we’ve done extensive work, including testing the new forms with consumers around the country and getting feedback from industry. In our testing, we determined that these new forms helped people better understand the terms and types of mortgages in the market.

From our very first day as an agency, we’ve been working hard to improve your experience when it comes to purchasing and paying for your home. We’ve been working to make the market safer by educating mortgage consumers, challenging practices that are illegal under federal consumer protection law, and by enacting new mortgage lending rules. In addition, we’ve worked to get responses to your mortgage complaints, and we’re exploring ways to further improve the closing experience.

You have the right to compare offers and understand the terms before you sign on the dotted line. And the information you use should be clear and easy to understand. After four years of work, these new forms and tools will help you shop for the best deal and avoid costly surprises when you sign on the dotted line.

The mortgage process is easier when you know before you owe.

When you make student loan payments on an income-driven plan, you might be in for a payment shock


When you make student loan payments on an income-driven plan, you might be in for a (payment) shock.

Earlier this year, we asked you to share your #StudentDebtStress story. More than 30,000 of you answered, telling us about payment processing problems, servicing transfer snags, customer service confusion, and obstacles for borrowers in alternative repayment plans. You can check out the comments that were posted.

For borrowers who are experiencing financial distress and looking for a way to pay back their federal student loans, income-driven repayment plans can be the key to helping you make ends meet. But for some borrowers seeking to tie their federal loan payment to their income, we know the road can be rocky. You’ve told us about problems related to enrolling in income-driven repayment plans that ended up costing you hundreds of dollars in unexpected payments. These problems include delays in processing your paperwork and incorrect information from customer service personnel.

We’ve also heard about detours and dead ends that prevent you from keeping your payments affordable under these plans, even when you’ve filled out the required paperwork. One borrower told us:

I submitted the required documentation for the 2015 [income-based] repayment plan 8 weeks before the expiration of my previous IBR application, and within the time period [my servicer] indicated. Due to [my servicer’s]delays, my IBR application was not processed timely. While waiting for them to process my application, [my] monthly payment jumped from approximately $200 a month to $1400 a month, causing me to go into overdraft on my checking account. [My student loan servicer] failed to process my application timely even though my application was complete and no documentation was missing and failed to communicate the huge increase in payment.

Filling in the gaps

As the Bureau and other federal agencies consider ways to improve the student loan repayment process, stories like these focus our attention and raise new questions about how common these problems may be. That’s why we’re sending a letter to student loan companies asking for more information about how they make sure student loan borrowers have the information they need stay on track.

The most common income-driven repayment plans are Income-Based Repayment (IBR) and Pay As You Earn (PAYE). Each year, borrowers in income-driven repayment plans are required to submit information, generally an income tax return, proving that they still qualify for an affordable monthly payment (known as “recertification” in student loan-speak).

We’d like to learn more about how well the process of recertifying works for most people. Because student lenders and student loan servicers are not required to release this information publicly, we don’t know how many borrowers fail to recertify on time. When borrowers don’t recertify on time, their payments will snap back to the amount they would have owed under a standard 10-year repayment plan—a jump of hundreds of dollars per month, in many cases. This can be a shock to those already struggling to make these payments.

Earlier this year, the Department of Education released the first public information about recertification rates, noting that more than half of all borrowers in its sample (57 percent) missed their deadline to recertify and had their payments snap back.

What you need to know

We’ve put together some helpful advice and information for borrowers enrolled in income-driven repayment plans.

Why it’s important for your recertification to be processed on time each year

If you’re having trouble affording your federal student loan payments, getting enrolled in an income-driven repayment plan may be an important first step to staying on the road to repayment. These plans help you get a payment you can afford. If your recertification is not processed on time, it can:

  • Cause the amount you owe each month to snap back to a payment you may not be able to afford. When your recertification isn’t processed on time, even if you tell your servicer you still want to keep your payments affordable, you will probably have a gap where you are required to pay an amount that doesn’t reflect your financial circumstances. You may not realize that things aren’t going according to plan until your bank has processed an automatic payment at the higher amount or you’ve been hit with surprise overdraft fees.
  • Cost you thousands more over the life of your loan. When you enroll in an income-driven repayment plan, you may pay less each month than the interest that accrues on your loan. This means that your loan balance can grow over time. But these plans do offer an important protection for people who recertify on time each year and continue to qualify for a lower payment— any unpaid interest does not get added to your outstanding principal balance (so you don’t have to pay additional interest on the interest) unless you choose to leave the plan. But, if you miss your deadline to recertify, you lose this benefit. For some borrowers, this can cost thousands of dollars over the life of a loan.

  • Delay the date you’re eligible for loan forgiveness (and may cause you to make unnecessary extra monthly payments). The two largest income driven plans, Income-Based Repayment (IBR) and Pay As You Earn (PAYE), feature loan forgiveness after 25 or 20 years of payments, respectively. This means that if you have high debt or low income over a long period of time, you may still have an end in sight, even if you are only making low payments. If your recertification isn’t processed on time and you need to use forbearance while your recertification is being processed, you can’t count those months toward loan forgiveness.
  • Reduce the amount of interest that the government will pay on your behalf. For borrowers with subsidized federal loans, income-driven repayment plans feature another important benefit. For three consecutive years (36 months) from the time you first sign-up, the government will waive any interest charges your monthly payment does not cover, as long as you demonstrate partial financial hardship. Because the clock on this benefit starts running immediately and won’t pause even if you don’t recertify, you are giving up a benefit every month after your payments snap back.

Next Steps

Over the next few weeks, we’re going to keep working with leaders at the Department of Education and the Department of the Treasury to figure out how to address problems like these for student loan borrowers. Check back here for more information about what we’ve learned through our public inquiry and what comes next.

If you have questions about repaying your student loans, including questions about income-driven repayment plans, check out Repay Student Debt to find out how you can tackle your student loan debt.

If you have a problem with your student loan, you can submit a complaint online or call us at (855) 411-2372.

Seth Frotman is a Deputy Assistant Director of the Consumer Financial Protection Bureau and the Acting CFPB Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit

Four years working for you


CFPB - Four years working for you
On July 21, the Consumer Financial Protection Bureau (CFPB) will turn four years old. While our doors have only been open for a short time, our work is helping to create a financial marketplace that works for you. We’re listening to your experiences through the complaints you submit, creating new consumer protections for financial products and services, holding bad actors accountable for breaking the rules, and developing useful tools and resources to empower you to make informed financial decisions.

The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act as a direct result of the financial crisis in 2008. We were created to stand up for consumers and make sure everyone is treated fairly. To us, our work is about hearing the struggles you face in the financial marketplace and empowering you to make the best financial decisions. It’s also about rooting out bad actors or bad practices that cause harm or stand between you and your financial goals.

We hear stories like that of Ari, a servicemember, and his dad Harry who were dealing with predatory auto loans, and Venida who found an error on her credit report. They are not the only ones dealing with these problems. Their stories exemplify how you can make a difference in your financial situation.

We are here to protect consumers

Your complaints and stories play an important part in our work. As of this month, we’ve handled more than 650,000 of your complaints. When you submit your complaints and tell us your stories, it helps us spot problems and risks, and work to ensure a fair financial marketplace.

The mortgage servicing rules we enacted have brought more transparency to the home-owning process, keeping your mortgage servicers from giving you runarounds or losing your documents. For those who send money out of the country, we have created rules that make sure you know how much money will actually reach your intended recipient.

We’ve also held bad actors accountable in the marketplace, securing $10.8 billion in relief to consumers who were harmed by illegal practices. Over our four years, we have taken action against credit card companies, payday lenders, banks, mortgage companies, debt collectors, and many more.

We are your resource

Just as Venida and Harry used our resources to get help in the financial marketplace, we welcome you to do the same. We have created a number of tools and resources for you to use to help avoid financial problems, plan for the future, and reach your financial goals.

Whether you’re getting ready to make big financial decisions like Paying for College or Owning a Home, or just looking for unbiased answers to financial questions about your mortgage, your credit score, or how to deal with debt collectors, we’ve got tools to help you get answers and make the best decisions for you and your family.

You have the right to fair and transparent financial products and services and we’re committed to continue working for you.

In the coming days, we’ll share more about the work we’ve done leading up to today, so stay tuned.

Updated July 21, 2015: Graphic and text updated to reflect the amount of relief to consumers who were harmed by illegal practices.

CFPB - Four years working for you infographic

Tell us about your student debt stress


If you are paying back student loans, you are not alone. Over 40 million Americans are repaying more than $1.2 trillion in outstanding student loan debt. Significant debt can have a domino effect on the major choices you make in your life: whether to take a particular job, whether to move, whether to buy a home, even whether to get married. For many of you, student debt stress makes these big milestones seem out of reach.

We’ve heard that some student loan servicers (the company that sends you a bill each month) may be adding to that stress. We’re seeking information from the public about the student loan servicing practices that may make it harder to get ahead of your debt.

We want to hear from you about your experience with your student loan servicer. If you’ve run into roadblocks, tell us about it – for example, we want to know if you’ve had payment processing problems, servicing transfer snags, communication confusion, or any other challenges when repaying your student debt.

Simply click this link to send us an email, which will be included in the public record. Please don’t include sensitive information like account numbers and social security numbers. We’re accepting comments through July 13.

In the infographic below, you can learn more about roadblocks some borrowers have encountered when dealing with their student loan servicers.

We’re also calling on other stakeholders, including financial institutions, colleges, consumer advocates and policy experts to share their feedback. A full list of questions we’re asking the public are available in our Request for Information.

In the next few weeks, we encourage you to check back for more information about our work to strengthen student loan servicing and to hear the experiences of others with student debt. Be sure to tell others about the chance to include their stories in the public record. Spread the word to friends and family with student debt stress using  #StudentDebtStress on social media, but remember you must click this link to email an official comment.

If you have questions about repaying your student loans, check out our Repay Student Debt feature of Paying for College to find out how you can tackle your student loan debt.

If you have a problem with your student loan, you can submit a complaint online or call us at (855) 411-2372.

Having trouble with a link in this blog post? You can also submit an official comment online.

Sprint and Verizon will refund $120 million to consumers harmed by illegal billing practices


Today we’re announcing settlements with Sprint and Verizon, who illegally billed consumers over a hundred million dollars in unauthorized third-party charges. If approved, these settlements will return $120 million directly to affected consumers.

Sprint’s and Verizon’s customers became victims by clicking on ads for “free” digital content such as ring tones or daily horoscopes, and were then charged without their consent. Many people did not know that third parties could add charges to their wireless bills. The illegal billing often continued undetected for months.

Sprint’s and Verizon’s billing systems invited illegal third-party charges and the companies did little or nothing to root them out. Sprint and Verizon also failed to properly track and respond to consumer complaints about these charges, while collecting hundreds of millions of dollars in revenue by serving as payment processors for these third-party companies. Sprint and Verizon received a 30-40 percent cut of every third-party charge.

Under the Dodd-Frank Act, we can hold companies, including payment processors and lenders, accountable when they engage in unfair, deceptive, or abusive practices.

If you believe you may have been impacted

Verizon customers can submit claims for refunds at and learn more about the settlement by calling (888) 726-7063. Sprint customers can submit claims for refunds at or learn more about the settlement by calling (877) 389-8787.

Consumer advisory: You’ve got options when it comes to overdraft


Today, we’re announcing an enforcement action against Alabama-based Regions Bank for charging overdraft fees to consumers who had not opted-in for overdraft coverage. We’re requiring Regions Bank to fully refund all affected consumers – hundreds of thousands of consumers have already been refunded $49 million in fees. We’re also fining the company $7.5 million for its illegal actions and its slow response to correct the errors.

We want to take this opportunity to remind you that you have a choice when it comes to overdraft protection programs and these programs can be costly.

What is an overdraft?

An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays for it anyway. Transactions include ATM withdrawals and debit card purchases. Many banks and credit unions offer overdraft protection programs in which your institution will pay for the transaction and charge you a fee (in addition to requiring you to repay the overdraft amount). For most banks, the overdraft fee is a fixed amount regardless of the amount of the transaction. And, you could incur several fees in a single day.

Overdraft programs are optional

You can choose not to have debit overdraft. Knowing your status allows you to decide what is best for you. Your bank or credit union can’t charge you for overdraft fees on ATM or debit card transactions unless you’re enrolled in an overdraft protection program.

If you decide not to enroll, your bank will likely decline ATM or debit card purchases when your account doesn’t have enough funds to cover them, but you won’t be charged a fee.

You should also keep in mind that banks and credit unions are allowed to charge you overdraft fees when the bank or credit union pays a check or certain recurring electronic payments that would have overdrawn your account, even if you did not opt in to overdraft protection.

How you can reduce or eliminate overdraft fees

  • You can opt out of overdraft protection programs anytime. This means that your debit or ATM card may be declined if you don’t have enough money in your account to cover a purchase or ATM withdrawal. However, it also means you won’t be charged for these transactions.
  • Link your checking account to a savings account. If you overdraw your checking account, your bank will take money from your linked savings account to cover the difference. You may be charged a transfer fee when this happens, but it’s usually much lower than the fee for an overdraft.
  • Ask your financial institution if you’re eligible for a line of credit or linked credit card to cover overdrafts. You may have to pay a fee when the credit line is tapped, and you will owe interest on the amount you borrowed, but this is still a much cheaper way to cover a brief cash shortfall.
  • Track your balance as carefully as you can and sign up for low balance alerts to let you know when you’re at risk of overdrawing your account. If you have regular electronic transfers, such as rent, mortgage payments or utility bills, make sure you know how much they will be and on what day they occur. You also need to know when the funds you have deposited become available for your use.
  • Shop around for a different account. Get a copy of your bank or credit union’s list of account fees, or ask about them, then compare them with account fees at other banks or credit unions. Assess your habits honestly and consider penalty fees, such as overdraft and non-sufficient funds charges, as well as monthly maintenance, ATM surcharge, and other service fees. When comparing banks or credit unions, also consider factors such as the hours of operation, locations, access to public transportation, available products and services, and reputation for customer service.

You can get a printer-friendly version of this information about overdraft options to share with friends and colleagues.

You can also check out Ask CFPB for more information about overdraft protection programs and fees. If you have a problem with overdraft fees or any other financial products, you can submit a complaint online or by calling (855) 411-2372.