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Mortgages

The Know Before You Owe mortgage rule will take effect October 3, 2015

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Know Before You Owe mortgage disclosure forms

Today, we’re issuing a final rule delaying the effective date for the Know Before You Owe mortgage disclosure rule to October 3, 2015. The Know Before You Owe rule will improve the way you’ll receive information about mortgage loans, both when applying for a loan and when you’re getting ready to close.

We’ve been talking about the Know Before You Owe mortgage disclosure rule for a while, and we’ve also been hard at work to provide helpful information for the mortgage industry to understand what the requirements are, including how to fill out the disclosure forms.

You can check out more information about the project that got us here and what the Know Before You Owe rule means for consumers like you.

We want it to be easier for you to shop effectively for mortgages and to make the decisions that work for you and your family. We want consumers to be confident in the information they receive, the lenders they work with, and their ability to make good comparisons. The Know Before You Owe mortgage disclosure rule is a key part of that effort, so we’ve spent a lot of time testing the new disclosure forms with consumers. We’re confident that the new disclosures will make information clearer and easier to use, and we look forward to their implementation starting October 3.

To learn more about the effective date, including why there was a delay, read our press release.

You have the right to a fair financial marketplace

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We've secured over $10.8 billion dollars in relief for consumers harmed by illegal practices.

The Consumer Financial Protection Bureau (CFPB) was created in the wake of the financial meltdown to stand up for consumers and make sure they are treated fairly in the financial marketplace. One way we accomplish this mission is by enforcing consumer protection laws, holding law breakers accountable for their actions. Since 2011, we have secured over $10.8 billion dollars in relief for more than 25 million consumers harmed by illegal practices.

Mortgages

We’ve secured billions of dollars in relief for consumers harmed by systematic misconduct and illegal practices by companies in the mortgage industry. We’ve taken several actions against mortgage servicing companies for failing to tell borrowers when their loan modification applications were incomplete, denying loan modifications to qualified borrowers, failing to honor modifications for loans transferred from other servicers, and illegal foreclosure practices. We have also taken action against companies in the mortgage industry for steering consumers into costlier loans, for paying illegal kickbacks in exchange for business, and for making inadequate disclosures or using deceptive ads.

Credit cards

We’ve secured billions of dollars of relief for millions of consumers harmed by deceptive marketing and enrollment of credit card add-on products, unfair billing, and illegal debt collection practices.

Payday and installment lending

We have taken action against payday lenders and installment lenders for unlawful lending and collections practices that include using false threats of lawsuits or criminal prosecution to collect debts, charging undisclosed fees to servicemembers, and robo-signing court documents related to debt collection lawsuits.

Learn more about how we’re enforcing consumer protection laws in other product areas including auto lending, debt collection, debt relief, student lending, checking accounts, and more.

You have the right to free, unbiased financial information

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CFPB - Four years working for you

If you are confused and lost when you are shopping for a mortgage or when you are figuring out how to pay for college, you are not alone. If you wish you had a financial expert to turn to for trustworthy guidance about paying off debts, or opening a credit card, you are not alone.

If you believe you have the right to free, unbiased financial information, you are not alone – because at the Consumer Financial Protection Bureau, we agree.

It’s our job to provide you with reliable, trustworthy information about the consumer financial marketplace. So, in the past four years we’ve worked hard creating online tools to inform your financial decisions that are truly free – no charges, no ads, no referral fees.

Three financial tools you can trust

Owning a Home helps you understand one of the most important financial decisions you’re likely to make: getting a mortgage. It explains the complex options you have when shopping for a mortgage loan, for example whether to consider a fixed rate or an adjustable rate. It lets you play around with different factors to see how they affect interest rates. You can also find an easy to use checklist for the closing process that will prepare you to sign on the dotted line.

Paying for College helps students, students-to-be, and their parents compare financial aid packages. For people paying off student loans, Repay Student Debt, a part of the tool, helps you understand your options for repayment, gives you resources to avoid missing payments, and offers helpful resources if you’ve defaulted on your loan. You’ll find a sample letter you can send to student loan servicers (the companies that send you a bill each month), and tips on how to communicate with debt collectors.

In Ask CFPB, you’ll find expert answers to more than 1,000 questions about financial products and services including student loans, credit cards, mortgages, credit scores, credit reporting, getting out of debt, and more. Over four million people have found reliable and unbiased answers to common questions, and we’re adding and improving questions all the time thanks to your feedback. You can rate each Ask CFPB question, letting us know if the answer was helpful, too long, incorrect or confusing. You can also submit questions you think would be good additions to the collection.

We will continue to add more features to our tools, create new tools for other major financial decisions, and make sure our resources stay up-to-date as we and other government agencies update rules. Try out our tools, send us your feedback, and share them with your friends.

When key financial decisions arise in your life, you are not alone. You can trust that our tools and resources will provide you with accurate, unbiased information so you can make the financial decisions you believe are best for you and your family.

Applying for a mortgage can be complicated: Navid’s story

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Imagine you’re applying for a home loan. You’ve spent months calculating costs, comparing home prices, researching neighborhoods, and you’ve finally found a home you love and think you can afford. You meet with a lender and you’re assured that you will qualify for a loan to buy that home. Based on the lender’s assurances that you qualify, you pay a non-refundable earnest money deposit to the seller. After putting down a $12,000 deposit, you’re told that you do not qualify for the loan. Your non-refundable earnest money deposit appears to be lost.

That’s what happened to Navid and his wife.

“All of these things were new to us,” Navid said. In a very short period of time, we lost $12,000.”

Navid tried to contact the lender who had given him false assurances that he would qualify for the mortgage loan, but was getting nowhere. With no help in sight, he assumed his money was lost forever. Then he found out about the CFPB.

“One night we were watching the Daily Show with Jon Stewart and the director of the Consumer Financial Protection Bureau was the guest,” Navid remembered. “He talked about this organization and what they do.”

After the show, he decided to submit a complaint and soon after, the couple received full compensation and a formal apology from the lender that had assured him he would be approved for the mortgage loan.

“I came to [the] United States because I thought this is a country [where] there are rules and regulations, and the government is for the people. This is why I chose this country,” Navid said. He added that it’s a wonderful feeling to know that there are parts of the government that are trying to reach out and help people.

We know that buying a home can be complicated, and that’s why we’ve created tools to help home buyers understand and shop for mortgages. We’re glad that Navid and his wife got the help they needed, and we’re here for you, too! To share your experience or learn more from others, visit us at consumerfinance.gov/yourstory.

Updated July 22, 2015 to clarify consumer complaint and outcome.

Consumer advisory: Don’t be misled by reverse mortgage advertising

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Reverse Mortgage Ads photo

You might see enticing images of youthful retirees on the golf course or enjoying other leisure activities in a reverse mortgage advertisement. A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the accrued equity in their homes. The loan must be paid back when the borrower dies, moves, or no longer lives in the home.

Ads for reverse mortgages are found on television, radio, in print, and on the internet, and many ads feature celebrity spokespeople discussing the benefits of reverse mortgages without mentioning risks. We looked closely at many ads and found incomplete and inaccurate statements used to describe the loans. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.

In conducting our study, we met with older homeowners in Washington DC, Chicago, and Los Angeles to learn about their thoughts and impressions of reverse mortgage ads. After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid. Instead, some thought they could access their equity interest-free, or that the federal government provided the money as a benefit to seniors. Homeowners told us that the most attractive messages in the ads were “you can live in your home as long as you want,” and that you “still own your home.” Many ads, however, didn’t mention that seniors could lose their homes if they don’t satisfy the loan requirements, such as paying property taxes or homeowners insurance.

Seniors said the ads made reverse mortgages look like a good way to travel and enjoy retirement while they were still young and active. Yet Americans are living longer, more active lives than ever before. Reverse mortgage borrowers can outlive their loan funds by borrowing without careful planning.

Reverse mortgage ads don’t always tell the whole story, so consider these facts when you see advertisements:

1. A reverse mortgage is a home loan, not a government benefit

Reverse mortgages have fees and compounding interest that must be repaid, just like other home loans. With most reverse mortgages, federal insurance guarantees that borrowers will receive their loan funds if their lender has financial difficulty or if their loan balance exceeds the value of their home. However, borrowers pay for this insurance and it’s not a government benefit.

2. You can lose your home with a reverse mortgage

When a reverse mortgage ad says you’ll retain ownership of your home, or that you can live there as long as you want to, don’t take these messages at face value. These statements are true only if you continue to meet all requirements of the reverse mortgage. If you fall behind on your property taxes or homeowners insurance, are absent from your home for longer than six months, or fail to satisfy other requirements, you can trigger a loan default. If you don’t take care of the default in time, the lender can foreclose on your home. Sometimes these requirements are listed in fine print, but not always. If you have a question about reverse mortgage requirements, contact a HUD-approved housing counselor near you.

3. Without a good plan, you could outlive your loan money

After seeing a reverse mortgage ad, you might think that a reverse mortgage guarantees your financial security no matter how long you live. Americans are living longer today than they were just a generation ago. Make sure you have a financial plan in place that accounts for a long life. That way if you need to tap your home equity, you won’t do it too early and risk running out of retirement resources later in life.

If you have a problem with your reverse mortgage

Check out Ask CFPB to learn more about reverse mortgages. You can also download a printer-friendly version of this information to share with friends or clients.

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint to us online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.

For more information about how reverse mortgages work and questions to ask, read our guide to reverse mortgages for older consumers and their families. Do you or a loved one have a reverse mortgage loan? Here are three steps you should take.

Know Before You Owe: You’ll get 3 days to review your mortgage closing documents

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On October 3, 2015, the Know Before You Owe mortgage rule goes into effect. One of the important requirements of the rule means that you’ll receive your new, easier-to-use closing document, the Closing Disclosure, three business days before closing. This will give you more time to understand your mortgage terms and costs, so that you know before you owe.

Giving you three business days to review your Closing Disclosure before you sign on the dotted line is designed to protect you from surprises at the closing table. It also gives you time to consult with your lawyer or housing counselor and ask all the questions you might have about the terms of your mortgage.

Will the new mortgage disclosures delay my closing?

The answer is no for just about everybody. Here’s a factsheet to clarify some questions about the three day review period.

If there is a change to any one of three, very specific, and very important items, the lender must give you another three business days to review the updated disclosure.

The only three changes that would require a new three-day review period:

However, many things can change in the days leading up to closing that won’t require a new three-day review period, including typos on the forms, problems discovered on a walk-through, and most changes to payments made at closing, including changes that require seller credits.

Implementing the rule

We also delivered a letter to Members of Congress stating that our oversight of the implementation of the Know Before You Owe mortgage rule (also known as the TILA-RESPA Integrated Disclosure rule) will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time. We have spoken with our fellow regulators to clarify this approach. This is consistent with our approach in the implementation of the Title XIV mortgage rules .

Over the last couple of years, we’ve taken many steps, including publishing guides, templates, and webinars, to support industry implementation of the Know Before You Owe mortgage rule so that lenders and financial institutions can effectively comply with the rule. Learn more about our work to make the mortgage process easier to navigate for consumers and the resources available to lenders and financial institutions.

Updated on July 27, 2015 to include the new effective date of October 3, 2015 for the Know Before You Owe disclosure rule.