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Know Before You Owe: Closer to closing (mortgage disclosure, that is)

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Last month, we unveiled two new prototypes for a single mortgage disclosure to replace the HUD-1 Settlement Statement and final Truth-in-Lending disclosure. Currently, you receive both of these at closing. Consistent with the requirements of the Dodd-Frank Act, we are working to combine them. Our goal is to make this one combined form that is easier to understand and use for consumers and industry.

We’re giving a close-up to closing costs this month by trying to figure out which of two different designs communicates both the closing costs and transaction details clearly. One is similar to the existing HUD-1 settlement statement that consumers now receive when they close a mortgage loan. The other is based on our prototype for the disclosure you get when you first apply.

It’s another step forward, and we need your help deciding between the two designs.

Our first step in getting here was to start with our application disclosure for the loan terms, so consumers could easily compare their final loan terms with the ones they were offered. Then, we wanted to see how we could improve the disclosure of closing costs and transaction details from the existing HUD-1. We changed some things to make it easier to understand and easier to use with our application disclosure. We also added some new disclosures required by the Dodd-Frank Act. Finally, we gave the design a fresh, updated look.

The result was two prototypes that displayed closing costs in a format similar to the current HUD-1. Most of you liked our prototypes and found them easy to navigate. But we also received over 3,000 comments, and we’ve used them to make improvements in a single new prototype based off of the last round’s designs.

Now we also want to keep working hard to make things clearer for consumers, so we are testing an entirely new design for disclosing closing cost details. We’re curious to see if something different may work even better. This new design provides the same information as the other prototype, but it uses a format for the closing costs that is based on our application disclosure prototype. It has sections that correspond to the application disclosure and a little more plain language. We’re wondering if this design will make the disclosure even clearer and easier for consumers. Also, what improvements could we make to both designs?

We are testing both designs this week in Birmingham, Alabama, and we want your feedback, too. So please take a look, compare both forms and tell us what you think.

As you do, here are some of the things we hope you’ll consider:

  • Which design works best? Why?
  • Is the information presented in a consumer-friendly format?
  • Could consumers easily identify key loan terms and closing costs?
  • Does the disclosure cover all the important information you need?
  • Is the document easy for lenders and settlement agents to use?

Since we started the “Know Before You Owe” project in May, we have been impressed by your commitment to helping us create mortgage disclosures that work for both consumers and industry. Your ideas have shaped the designs we present in each round. Dive right in. The feedback you provide today will help move us closer to the finish line.

  • 20sidedguy

    The latest form has been in use for less than two years, isn’t it a little early to ditch it?

  • Timothy James

    Why is the cost of funds field still on the form?  Take it off!!!

  • MtgMgmt

    How will the HUD settlement cost booklet “Shopping for your Home Loan” be affected by changes to the HUD-1 form?  Will it still be required?  Will it be reduced in size?  When do you anticipate changes to these forms becoming effective?

  • Klewis

    As a 21 year Veteran in the title industry. Neither form is “consumer friendly” Consumers are more baffled and confused now then when we used the forms prior to 2010 new HUD change. This is by far the worst yet. You are punishing the title agents who had nothing to do with the mortgage demise to work harder at the table with consumers and harder to explain these new documents. Consumers DO NOT KNOW WHAT THEY ARE LOOKING AT. They are looking at when is my closing and what are my closing costs. Hold the mortgage lenders accountable for these forms. make it a disclosure and not a new HUD or something additional for the title agent to do! As simple as you can make it, the more consumer friendly it is. Do you know what it is like explaining ROLL UP fees? Its outrageous. Please make a form that the mortgage lender has to sign 3 days prior to closing and not another confusing form for the titleagent to discuss at the table. Thanks!

  • Golde64

    INSANITY!  All both new forms do is further complicate an already-complicated situation!   THEY ARE WORSE THAN THE NEW GFE HUD!!!    The consumer/borrower is NOT being aided whatsoever by these proposed changes – only confused!   And the additional costs incurred by everyone involved via hardware/software updates, training seminars, etc. and so forth, is unbearable by many in the industry.   Lender accountability is sorely needed but why continually at the cost of the title companies?

  • Accurate321

    Just leave the frigging forms alone. They are not that hard to understand (they were actually easier BEFORE the Feds decided we needed something “clearer” and gave us the RESPA HUD from on high).

  • http://www.twistfix.co.uk/ Damp Proofing Products

    i definatly prefer the layout of the new form. great work

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