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Know Before You Owe. Go!

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We’ve just posted two draft designs for a single, simpler mortgage disclosure form on our Know Before You Owe page. Now, we need to hear from you!

The task is pretty simple: Consumers would receive a form similar to one of these versions within a few days of applying for a loan. Take a look, and tell us which one would do a better job of disclosing the necessary information.

What information should lenders and brokers share with consumers when they apply for a mortgage?
Know Before You Owe graphic that links to Feedback Tool
Right now, anyone who applies for a mortgage gets two disclosures that contain basic information about the mortgage: the Truth in Lending form and the Good Faith Estimate.

The feedback process we’re starting today is one of the first steps in combining the Truth in Lending form and the Good Faith Estimate into a single, simpler disclosure form. While you’re looking at one of the forms, think about these questions:

  • Would this form help consumers understand the true costs and risks of a mortgage?
  • Could lenders and brokers clearly and easily explain the form to their customers?
  • What would you like to see improved on the form? Is there some way to make things a little bit clearer?

At the heart of our work is the idea that the consumer financial product and services market should work for you. We think we should learn from you what you want to see. One of the best ways to do that is also the simplest: we’re asking.

This is the first step in a process that will last months. There will be more opportunities to weigh in as we move forward.

But if you want to help set the direction of a new mortgage disclosure form from the beginning, you should weigh in today.

  • Evan LeFloch

     The new form still doesn’t address the two biggest problems in the industry…1) The form doesn’t express how soon the customer must return the form in order to receive this rate and fees. 2) It doesn’t express the assumptions that were made in the broker/lender in quoting the loan.  The form should state the assumed value, property type, credit score, and purpose of the loan (purchase; rate/term or cash out).  This would prevent one company from quoting a loan at 75% LTV and another quoting at 80% and the borrower not being aware.

    Both forms are also calling prepaid items (per diem interest and escrow deposits) “closing costs”.  These are part of the settlement charges but not “closing costs” by industry standards.  This may confuse a borrower and prevent a borrower from acting on a beneficial refianance because they’re calculation the escrow deposit into the cost of refinancing.  This is not really a cost; just a deposit and the borrower typically receives a refund from their current lender for their exisiting escrow account making this a wash.

    The other problem is that there needs to be an industry standard for quoting escrow deposits.  All banks use the same system in calculating this deposit at closing.  But some lenders will quote 2 months and some will quote up to 6 on the GFE.  This could trick the borrower into taking a higher cost loan because they’re not aware that this deposit will be the same no matter which lender they use.

    • Whenry

      It has a spot for the experation date of the fees and the rate in the first couple sections of the good faith. Would that not be assumed to be the latest date it can be returned to receive those rates and fees?  

      • Don

        The operative word here is “assumed”.  The whole idea that a borrower can actually get the loan that’s quoted is a hoax by the government and getting worse.  Many of the reasons are outside the originator’s control, with bad appraisals being near the top of the list.  Under the Appraisal Independence rules, appraisers are sanctioned for high appraisals, but there is no sanction for low appraisals.  Fannie Mae has a vested interest in low appraisals because with risk based pricing, they collect higher fees when the appraisal is unrealistically low.  In a recent case, the borrower paid extra fees of $1,042.50 (0.5% on a $417,000 loan) because of a document ably bad appraisal.  If the borrower had a lower credit score, the pricing change from the appraisal difference could have been $5,212.50 instead of $1,042.50 because of the bad appraisal.
         
        This month, we got a purchase contract for $333,000.  The appraisal came in at $300,000.  The borrower went to another lender who got an appraisal at the purchase price so they could buy the home.  The borrower paid for an extra unnecessary appraisal.  I lost the commission.  Who won?  The winners were the AMCs and the appraisers because they collected fees for two appraisals instead of one.
         
        As an originator, I have no control over how long it will take to get an appraisal.  Once ordered, the appraiser can sit on it for weeks before completing the assignment.  Locks can expire.  As an originator, I am responsible for delivering loans if I lock them.  Under current rules, I will not lock a loan until I have an appraisal simply because I don’t know when I will get it and if the appraised value will bear any resemblance to the actual property value.  The borrower is defenseless against market rate changes until the loan is locked.
         
        Under the rules in effect more than two years ago, I ordered appraisals from a large appraisal company.  They chose the specific appraiser.  The appraisers delivered good appraisals in a predictable time.  I routinely would lock a loan when I got the application and close in a predictable time.  I never had an appraisal problem.  Sometimes I didn’t like the value, but the value was always supported by the data.  Not anymore!
         
        Another issue is predictability of underwriting.  I used to be able to run a file through an automated system, check for overlays, and have confidence the file would be approved.  This month, a file was declined for the very reason I questioned before sending it in.  I was told it was OK and then it was declined with 52% LTV, 14% DTI, 792 Credit.  Last year, I had a file approved, we went to closing, signed the docs and the wholesaler refused to fund because the docs they prepared were unacceptable.  A week later, we still didn’t have closing docs.  I called the company owner to get the loan closed.  Then a few weeks later, I had the same issue again with another loan.  There is far too much uncertainty today about what is or is not acceptable.  Whether the borrower can or will pay doesn’t matter today.  The regulators have made such a mess of the market that underwriters and compliance people are afraid to make loans.  Half my borrowers from 2006, people who paid their loans as agreed, cannot get the same loan today and we wonder why home prices are depressed.
         
        Under the old rules, I could order an appraisal and it was good with any investor.  With the appraisal independence rules, appraisals are no longer portable.  If a file is turned down by one underwriter, I cannot take it to another lender without a new appraisal.  In the bad old days, I often got the appraisal first, and then decided how to structure the loan and where to take the file.  It was particularly appropriate in divorce cases because I could choose an appraiser who was qualified to testify in court, get the appraisal, and then set the loan amount to settle the divorce.  It can’t happen today becasue I can’t select an appraiser that’s qualified to testify in court.
         
        The “can’t change” and originator compensation rules have also hurt my borrowers.  In the bad old days, I routinely absorbed changes to give borrowers the rate and fees I quoted.  I even took cash to closing to deliver what I quoted in the old days.  The GFE and compensation rules have stopped that. 
         
        The net effect of all the rule changes is that I don’t lock any loans until they are clear to close.  I cannot absorb pricing increases.  I have had borrowers end up with a rate 1% above what they expected.  It never happened this way for my borrowers under the old rules.  I’m earning more per loan becasue I am not absorbing changes, but it is harder to deliver what I quote and have a happy borrower.  From what I see with my borrowers, all the rule changes have not helped one of my borrowers, but they have hurt everyone by creating confusion, stopping good borrowers from getting loans, and depressing the real estate market.
         

    • Bill Duff

      I think that the most significant piece of Evan’s comment is the assumptions taken by the lender/originator.   Credit Score and Loan to Value should be displayed prominently and the lender should be responsible for explaining to the borrower, or potential borrower in this case, that both number heavily influence the rate or origination charges.  

  • Pam

    Would it be possible to do an estimate for a fixed rate mortgage?
    I assume since this does not show any lender credits under “G” on the 2nd page that this is a “borrower paid” scenario – can we get a “lender paid” scenario as well? 
    Will this also eliminate the “Servicing Disclosure” and “Right to Receive Appraisal Disclosure”?
    In my humble opinion, I think the “Ficus Bank” estimate is the clearest and that both of these are a million times better than the current GFE & TIL.

  • Pam

    Also, will the new form have a signature line for the borrower(s)?  Or will the “acceptance” still be required on a seperate form? 

    • Dennis

      This is a very important feature.  A primary purpose of disclosure is to reduce bait and switch and fraud, what good does it do if the applicants do not sign and/or initial each page? 

  • Eric Peltier

    Just as with the GFE that came out on 1/1/2010, we need documents going forward to quit lumping prepaids such as escrows, homeowner’s insurance,  and interest in with the COSTS.  These are not lending costs!  Clients are STILL confused by this.  If the forms broke out the transactional costs from the prepaids, Borrowers would have a better, clearer understanding of the moving parts of their mortgage.  When I tell them my closing costs are $2600 and then the GFE says $5000, it’s confusing.  I will not vote for either of these options because they are both fundamentally wrong

    Eric Peltier, Mortgage Lender in Boulder CO

  • Ch

    THIS IS VERY POOR. VERY, VERY, POOR.
    HOW MANY OF YOU HAVE ANY EXPERIENCE IN EXPLAINING A TIL OR GFE TO A CONSUMER ?
    NONE, I WOULD ASSUME.
    THE MORE THE GOVERNMENT TRIES TO FIX IT, THE WORSE IT GETS. 

    • Anonymous

      Wow, that’s constructive criticism.  How about helping them improve it instead of just shouting it down? 

    • Bill

      I agree with Ch.  We went DECADES with the same transparent, user friendly GFE’s and we are on the second monstrosity that this administrations regulators have created in the last TWO years!  What’s wrong with keeping it simple by using the old GFE with the new tolerances.  That way the fees are all broken out, the consumer protection tolerances are in place, they see what their monthly payment will be, how much they need to bring to closing and a signature line.  NONE OF WHICH IS CLEARLY INDICATED ON THE CURRENT NEW & IMPROVED GFE. 

    • tenaciousD

      I agree. On the same point how much experience do any of the authors of these forms have in trying to get the right loan (that will be approved) for the customer’s individual needs and unique situations without even knowing what the house is worth?  Appraisals should be able to be ordered and paid for by the consumer in an AMC and then use it to shop with AND use it for the loan.  After all that is ususally what determines the program. Then the consumer can shop for the best rate on the available programs that a particular lender may or may not have acces or experrience with.  As it is we are wasting SO MUCH time and effort and frustrating the clients.
      The good thing is that there is a forum for those of us who actually work within this whacky system where we can inform the government of what is right and wrong with the form (and the system). My sincerest hope is that they will PAY ATTENTION, use the wealth of experience we in the industry have to offer in order to make this work once and for all. 
      While we are at it why don’t we make LO compensation STANDARD like the Realtor’s and maybe we can make a living at this crazy business. 3% just like the Realtors.

  • Dennis

    I don’t like either one, still too complicated and the inability to adapt the origination fee is ridiculous.  It prevents brokers from relocking a loan at another lender for lower rates for one, and what if redraw fees, etc?

    Why can’t the old Good Faith be used and adapted with a big bold line, “This loan contains features that could change your rate and/or payment.”  If checked then an addendum is provided.  On the form there can be line(s) detailing which of the fees are being paid to the originator. 

    It seems by providing the options we are acquiesing to the government over-stepping and over-reacting to what happened in the past.  As a result we are providing no more clarity to clients, in fact less due to the confusing forms.

    Any form that does not require applicant signature is meaningless. 

  • Evan LeFloch

    I couldn’t agree with Eric Peltier more.   These forms are even worse because they refer to the prepaids as “closing costs”.  And when one lender is quoting 6 months reserves and another is quoting 2 months how does this level the playing field?  They need to seperate the prepaids from the costs and develop an industry standard for amounts of months for escrow deposits and days of prepaid interest.

  • Keithf

    Either is much simpler than the gobbledy gook that must be provided today. I am assuming that a fixed rate mortgage (which is by far the majority of the loans written today) would simply show the same payments continuing on with no change. This would also render much of this documents moot.  

    The question I have, however, is where to borrower credits show up?

  • David Whitcomb

    Both of these forms worry me.  I like them more than the new GFE, and think these are more simple than the existing GFE and TIL.  I like the Ficus Bank form more than Pecan Bank because it seems more linear – you move from top to bottom, not down, right, down.

    I like that the projected payments give a range during the years.  If rates go up, they can also go down, and someone who stays in an ARM loan long enough may experience both.  People who went into a conventional, standard amortizing ARM 3 years ago have mostly seen rate changes that give them lower rates.  Is that a bad thing?

    My worries are primarily based on the Loan Estimate Details.  The section is called “Estimated Closing Costs”, but the Origination fee cannot change, and seems to include discount points.  This insinuates that discount points can’t change, but in terms of RESPA, they can with a change in circumstance.  So my worries are that the CFPB will do more rule changes and make changes even harder when loan circumstances change.  When discount points are a result of LLPA’s, they have to be able to change, and this form seems to say they couldn’t.

    Is an escrow account required?   – maybe this should say, Is an escrow account included on this estimate?  We don’t require escrows – the borrower has a choice in most cases to waive escrows if the LTV is under 80%.  As it stands the form makes escrow accounts appear to be lender controlled.

    In the Adjustable rate information section, I like the summaries of indexes and margins, and the max and min rates, as well as the caps.  What I don’t like is the language behind First Change: – “2 years from loan date”  What is the loan date?  The closing date, the date of first payment?  It’s too vague and I wouldn’t want that to be binding.  There’s no way a note could say that the first rate change date is 2 years from the loan date – it’s not specific enough.

    Again, my primary concern is that this could change the rules again and limit the types of changes that we can currently make on a GFE.  I like the form more than what we have now, but still think it could be improved upon.

  • David Whitcomb

    One final thing that this form does not address is affordability – maybe the borrower’s income should be on the form somewhere and compared to the monthly cost of the loan. 

  • Raven

     Pat,

    I like both forms.  I especially like the simplicity of them.  They will make it much much easier for a borrower to understand exactly what he/she is getting into.  And much for difficult for folks who want to hide that information to do so.

    This, of course, is why you’ll continue to get negative comments from mortgage issuers.

    Borrowers will benefit from these forms.  Folks who don’t want them to know what they’re really paying won’t.

    Raven

    • Dennis

      Raven are you an originator? Have you sat down with mortgage applicants and tried to explain the current GFE and TIL? Your comment “this of course if why you’ll continue to get negative comments from mortgage issuers” is either demeaning or ignorant of the mortgage origination process.  What I see so far are very fair and constructive comments from mortgage professionals who want to have input on a critical form and disclosure that will impact how we do our jobs and how we can better communicate with our clients.

      As said in earlier comments there is no simplicity to these forms and they are deceptive as to costs versus pre-paids.

      • GFE not easier for clients

        WELL SAID 

    • Jack

       You are wrong, Raven. Mortgage professionals object because some of the information is false. We DO want borrowers to know what they are paying. We want accurate forms, which means these forms still need editing. If you understood mortgages better, you would know that.

    • Danh

      Raven, Full disclosure is what we are trying to get so that every one is on the same page , but ever since we have had to use the new GFE it has been any thing but full disclosure due to lumping of fees and calling fees origination fees when they are not! Most in the industry would love to go back to the old Good Faith that showed the consumer the true break down off each and every fee they paid.

      I and the consumer could look at any companies good faith and  compare fees better then what we have today and better then these new forms they are going to want us to use THAT HIDE FEES

    • Mika

      Government cannot fix the problems they helped to create.  These forms should be revised by mortgage loan originators who actually have to use and explain to borrowers.  As a credit union, we have NEVER paid our LO’s with YSP.  We had no incentive to steer borrowers towards a higher interest rate loan or one making more YSP.  Yet we are still paying for the sins of others.  Our borrowers have been hurt by AMCs and over-regulation.  The only ones left in this business are the Good Guys. 

  • Jenny Harlowe

    Where is the page for industry people to comment?

    • Jeharris56

      You’re there!

  • Joann

    Consumers want some basic information.  I have been in the mortgage business 25+years and consumers do not use APR to shop.  They want to know what the note rate will be and what the P&I payment will be.  The consumer also wants to know what is the total cash they will need to bring to closing.  The old GFE gave them a total cash to close and PITI  the new forms do not acomplish this.  Lenders are having to direct consumers to the applicationn for the totals and the forms do not match up.   This is very confusing to the consumer.  We used to break out all of our fees individually now it is just one number.    

    On all new forms there also needs to be a statement that the lender nor the government guarantees that the property value will not decrease over time.  The lenders need protection from the new strategic default.

     

    • Jbuchanan

      You could not have said it better.   

    • http://twitter.com/mortgageporter Rhonda Porter

      Some of my clients DO use APR to shop…which is unfortunate since some LO’s will manipulate it.   

    • CW

      Well said  

    • Jimmy

      And who likes to explain APR to the average borrower.  The amount borrowed doesn’t match what the note states, the rate obviously doesn’t match what the note states.  Most have no clue as to how they should compare on APR.  Is the bank down the street using 10 day pricing or a more realistic 45 day pricing?  I say that a committee of bank executives with actual mortgage origination experience should be included on the development from a brand new piece of blank paper.  The customers will then benefit with a paper that flows well, and describes the loan in a detail that is intuitive and complete.  The folks are mostly confused with detail that is meaningless to them and hard to review.  This is a classic example of over working the plumbing til the sink backs up…  

    • DD

      Joann, I agree with most of what you said the consumer wants, except, I don’t think they really care about the break out of the cost, they want to know the bottom line, what it will cost them. 

      So, the lumping together of fees, really doesn’t bother me.  The borrower doesn’t care, they just want to know , how much I need to bring to the table (or roll into the loan).

  • Rdbadger356

    I believe it is deceptive to the borrower to include the “Non-required services” in the “total closing costs”.  These are OPTIONAL costs to the borrower – so to add them in to “Total Closing Costs” will not tell the borrower what their true required closing costs will be, depending on whether all lenders have to include certain items under the “non-required services”.  If some lenders, for instance, do not include costs for a “home warranty”, will their “Total closing costs appear to be lower to the borrower than other lenders who choose to include them?  They need to be excluded from the “total closing costs” – they should be put into an “optional additional costs” type classification.
     

  • Chris

    Option B is a much simper form to view.  However I recommend moving the projected payments section to the bottom (like option A).  Very excited and happy with the form in general.  It will be nice to have this replace the old Til and Good Faith!!

  • Leslie

    I have no comment on either form, but I believe that each and every customer cost should be itemized and identified and then totaled together.  No POC, no finance charges, no APR.  Show interest rate and interest charges calculated for the length of the loan. Total borrowed and total expected to be repaid, which would include the interest charges.  Make it plain and simple.  If the payment will include an escrowed amount, identify that, too.

  • Anonymous

    The most important piece of information a consumer needs is missing from the Good Faith Estimate!

    How much Cash will the consumer need to close the transaction.

    Purchase Price
    +Closing costs, pre-paids and escrow account
    - Loan Amount

    You will need X dollars availabe to close this transaction.  All a consumer needs to know is the terms of the loan fixed or adjustable..if adjustable how and when will my rate adjust.  What rate are you giving me and how much will I need to close on this loan.  With that information a consumer can make an informed decision.  What the fees are, how they a grouped, what we call them…has nothing to do with the bottom line.

  • http://pulse.yahoo.com/_RKG6OH5CCJLA7WZU5ML2TBMZJY Brigette

    If I HAVE to choose one, I would choose the Option A.  HOWEVER, I think it is MORE important to just STOP MAKING CHANGES!  Neither the originators, consumers nor examiners can keep up with how things are actually SUPPOSE to be done.  AND, each change costs money to software companies.  Who do you think the costs will ultimately be passed to?  THE CONSUMER.

    It is being estimated that it will cost banks $.40 of each $1.00 made JUST TO COMPLY.  And that’s before any payroll, overhead expenses or anything else. 

    You need to get some advisors CURRENTLY in the business to help design and implement any forthcoming changes. 

    The borrowers don’t care, nor do they understand which LINE a fee/cost is on . . . they want to know:  How much do I need to bring to closing, is my rate fixed, and how much will my payment be.  PERIOD.
     

    • bjp

      absolutely agree!  Why does the government feel the need to keep imporving when in reality they’re only compounding the confusion surrounding getting a mortgage.  Spell out the rate.  Spell out the costs.  Spell out the payment.    Let the borrower compare apples to apples by doing a line by line comparison in the linear form of Form A.  And stop penalizing banks for trying to comply.  All you’re doing is making the big banks bigger because the little banks are opting out of the mortgage business all together because they cannot afford to keep up with all the changes.

    • LAE

      “The Borrowers don’t care, nor do they understand which LINE a fee/cost is on….they want to know:  How much do i need to bring to closing, is my rate fixed, and how much will my payment be.  PERIOD.”

      That is exactly right!!! 

       The current TIL and GFE are the most confusing documents I have ever seen and worked with.  And it looks like the proposed ones are no better.  They need to be simpler and to the point.   

  • Lori

    I believe if something new is created, it should not have clumping of fees.  I believe every fee should have its own line item that you can explain to a customer.  I can see having the tolerances.  I like the Pecan Bank form much better than the Ficus Bank form as it is not so bold. Your eyes are directed to the heading not the form itself.  

    • John K.

      Yes, I found that same issue with the black box Tabs.. distracting, maybe.   But the linear quality of Ficus appeals to me more than the Pecan’s multi-column, 4-across, 2-across, jump-around quality.
      Does any mortgage loan consumer today want to know anything beyond 5 years?  Is this the CFPB’s assumption – that consumers do not have the foresight to see beyond the short term?  (And 5 years is now considered long-term?)

      We rarely do adjustable-rate mortgages (because consumers do not ask for it today as they used to ask for it more often), that section for “Adjustable Interest Rate Information” may have very little interest to anyone, most of the time.
      I echo another’s comment, the “bottom line” for a consumer is the Rate and monthly Payment and if things can change.  That info should be Bottom Line. 
      Shouldn’t we assume someone will explain this form?  It will not be a “lonely island” of disconnected data — it is meant to be explained to a consumer by a professional with greater knowledge of the process.

      Different formats, but not necessarily any improvement yet.

  • Sid

    I can see how lenders can tip the estimates their way by low-balling Items C, D & E.  That’s always been the Achilles Heel with GFE’s and TIL’s.  Until those are made uniform, these new forms will be as incomprehensive as all of the others that the Gov’t has tried to “re-engineer”. 

  • Craig

    Substantially better than the current form, which was a dismal failure.  Borrowers want to know the rate, payment and the amount they need to bring to closing.  Going beyond that confuses everything.  Purchase transactions should state the purchase price, otherwise simplicity is a primary goal.  Certainly a large step in the right direction. 

  • Ann

    Ann

    I too would like to see a fixed rate example.  Over 90% of our loans are fixed rate mortgages.  Also, I would like to see a break down somewhere on the specific services charged by lenders.  If this document is supposed to be a shopping tool, it is difficult to compare costs between various lenders.  From a compliance position, it is difficult to calculate the accuracy of fed box disclosures without a finer breakdown of fees.
     

  • Leev

    I would suggest that option A would be the easier of the two options, as consumers just want to buy a house and apparently have trouble reading or understanding the multiple forms that we already have and thanks to intervention by the powers that be, it is just making the process more difficult for the consumer and also the mortgage loan officer to be enthused about  helping the consumer get into a home. 

  • Kathy Broadwell

    I agree with Brigette’s comments, except that I favor neither of the options.  Until we have a form that tells the consumer:  how much do I need to bring to closing, what is my rate and is it fixed or not, and what is my monthly payment, we’re wasting everyone’s time and money and not helping the consumer at all. 

  • Magchicago

    Are you aware that since current regulation have been put in place that basically eliminate brokers the cost to the consumers has increased?  Brokers previously orginated approx 80% of mortgages due to their lower costs.  (The market place at work)  When the YSP disclosure requirement did not help the large banks, 12 years ago, the bank oligopoly has used the financial crisis to put the brokers out of business.  I believe there were many brokers that should have been better regulated but no more than to the extent than Wall Street or the large banks that almost distroyed our country.  Have you studied the amount the large banks have earned over the past 2 years on their orginated loans?  $5,000, $10,000 $15,000   The reduced competition the banks have bought through congress will cost the consumer between .25% and .5% on every loan.  Brokers are the most efficent and cost effective origination system. Broker’s only become problematic when left unregulated, no different than the large banks or any bank for that matter.

    • Community Banker

      If Mortgage Brokers originated 80% of the loans, simple math would dictate that mortgage brokers are responsible for 80% of the defaulted loans…..who caused the problem??????  

      • Bill

        Community Banker you must be one of those bank LO’s who don’t have to take the mandatory state and federal education and the mandatory state and federal exams like brokers. Brokers are now the more regulated and educated LO’s in the industry and last time I checked brokers never created loan programs, underwrote them, approved them or funded them…..Like the BANKS. Brokers just sold the banks products. I have been in the industry for over 30 years and the historical numbers, pre bank take over, was brokers providded 66.7% of all loans and the reasons are pointed out well by Magchicago 

  • Paul

    WOW!, where does one start?

     

    1) Why are you still lumping everything together? This
    causes originators to supplement the GFE with additional forms to explain the
    loan to the borrowers.  These additional
    forms are not standard and confuse the consumer even more.

    2) Escrows are NOT closing costs.  Why does the federal government insist that
    they are?  Escrows are the borrowers
    money held by someone else and are not a closing cost.  Escrows should be included in the GFE but
    should be treated differently, calling them a closing cost is not correct..

    4) Where are the signature lines? Are you really going to
    make that mistake again?

    5) Where is the credit for rate chosen? Is it all lumped
    together in A?

    6) It appears that you are now categorizing the 10% cure
    items in “B”.  This will
    require a RESPA rule change.

     

    I could go on for hours…

     

    Please, Please, PLEASE!!! let the industry guide you this
    time.  These proposed disclosures will
    not help the consumer one bit.  I would
    prefer that it is left the way it is unless the new forms are better than the
    old ones that they are replacing.  Don’t
    waste time and taxpayers money just to make the form the same or even worse.

     

    The CFBP can completely turn this industry around and has
    the ability to “make things right” without having to fight other
    agencies to accomplish what it long overdue. 
    The CFBP has a golden opportunity to make things right this time, please
    don’t squander it.

  • Paul

    Will the CFPB accept ideas from the originating public?  If so, how do we submit them?

  • Sid

    How does any lender/originator know what the cost of the homeowners insurance and property taxes are when we give out our GFE’s & TIL’s?  Suppose I underestimate and someone else overestimates.  What about per diem interest?  Suppose I show 1-day and someone else shows 31-days.  What about title insurance and endorsements?  Suppose I underestimate and someone else overestimates.  What about the survey?  I may underestimate; pest inspection, etc. 

    As much as the newly crowned CFPB, along with our elected rulers that imposed Dodd-Frank as well as all of the other micro-engineering they’ve tried, being successful only in eliminating the profession of mortgage brokers, when the real blame should have fallen on Standard & Poor and Moody’s, it’s all for show (certainly not for dough, unless you’re objective is to allow JP Morgage Chase, BOA, Wells Fargo & Citibank to run free without a worry in the world. 

    Mortgage brokers were an easy target.  Mortgage banks aren’t much harder.  I’m afraid the profession of mortgage originator will go the way of the blacksmiths after the invention of the automobile.
    Sid, a mortgage originator in Texas

  • http://www.facebook.com/people/Monique-Rawlings/674524660 Monique Rawlings

    I have viewed the two sample forms. Option B was more clear than Option A.  The section that says “Caution” should be  in red  as a red flag to the consumer. In addition, will the new form have a signature line or acceptance of the borrower and will there be a signature for the loan officer for the bank on the new form? 

  • http://www.facebook.com/people/Linda-Miller/1024897778 Linda Miller

    I agree with Eric Peltier and others who understand (as it appears the creator of these forms does not) that the prepaids are not closing costs. While these forms are slightly better than the disastrous GFE of 1/1/2010, these forms still miss on so many levels.  Borrowers want to see things on a linear level.  
    1. House Price - Down Payment + MI (if applicable) = Loan Amount
    2. Note Rate  (APR)
    3. Principal and Interest Payment + Insurance escrow + Taxes escrow + MI (if applicable) = Total Payment
    4. Lender Fees + Appraisal/Credit + Title Fees/Recording* = Total Closing Costs
    5. Down Payment + Closing Costs + Prepaids + MI(if applicable) = Cash Due at Closing

    I did not see MI anywhere on these forms. Both upfront and monthly are important numbers that need to be explained to the borrower.  As all the originators reading this know but the creator of the form did not take into consideration – MI can increase the loan amount or the amount of cash due at closing.  Monthly MI increases the payment – it is part of the equation.

    *Owners Title insurance in Utah is paid by the seller. It does not make sense that this fee is included in the closing costs since it is not a fee paid by the borrower. 

    I would not choose either of these forms. In my opinion, if the loan is a fixed rate loan, then you would only need one page giving the borrower the numbers above. If the loan is an ARM, then you add a second page to inform the borrower of worst case scenarios on rate and payment increases.

    I would not choose either of these forms. While better than what we are using now, they are still not consumer friendly.

  • Mocam

    Rule #1 The house purchase price should be no more that 3 times the verifiable household income.
    Rule #2 the buyer absolutely must have 25% cash down payment of the total house purchase price, whether a 1st time buyer, or a repeat buyer.
    Rule #3 the total debt servicing must be limited to 32% of household income.  Car loans, credit card loans, and other debts get factored in before the mortgage debt.
    Rule #4 The buyers must have five year history of verifiable employment income.  Less than that (says 3 years) it is averaged over five (3/5′s of the total).  The buyers shall establish a credit history with a financial institution first.
    Rule #5 The maximum deuation of the mortgage is 25 years, with the term being limited to 65-age.  So a 40-year old would be the oldest to get a 25 year mortgage.
    Rather than having interest deduction for mortgage interest, there would be tax-free savings accounts to save up for a home.

    • Paul

      That would be ideal but let’s think about that for a minute…

      That would limit the buyers to less than 5% of what we have now. 

      That house you own that you paid $150,000 to purchase is now worth about $15,000 because you took 95% of the buyers off the market with your new hypothetical mortgage guidelines.

      I don’t think the housing market and the economy need that right now.

      Anyway, let’s stick to the topic at hand.  What do you think of the new GFE/TIL proposed above?

    • Anonymous

      Sorry Mocam; your rules totally miss the point of these new “options” that are being imposed on mortgage originators.  Here are my rules:
      Rule #1 – Who cares what the house price and loan amount is!  If the borrower’s don’t have enough income, they can’t qualify, so they’ll never get one of these new fandangled GFE’s/TIL’s
      Rule #2 – If the buyer must have 25% down, then kiss home purchases goodbye and watch our economy turn into Pakastan!
      Rule #3 – See my Rule #2; kill home purchases and invite Hugo Chavez & Raoul Castro to convince American’s of the benefits of Communism.
      Rule #4 – “…. established history w/a financial institution:  OK, how about JP Morgan Chase, BOA, Wells Fargo, CitiBank…. these are the basta*d’s that screwed everything up (w/guarantee’s from S&P & Moody’s), so you suggest we turn our fate over to them and their $Billion Dollar Lobbyist’s.
      Rule #5 – Suppose a 65 year old wants to buy a house?  Screw ‘em?  You sound like a GWB clone.
      Go play in traffic and read the topic/theme before you embarrass yourself.

    • MtgBanker

      Looks like you’re really not interested in lending to borrowers. 

    • Pam

      Is this a joke?  Did you really just suggest age discrimination?  And exactly how are people with low to average incomes supposed to save up 25% while they are making rental payments that are higher than house payments? Glad I’m not your customer. 

    • Bill

      This is ridiculous and of topic but if you really want to get scared go look at what this idiotic administration is proposing in the new QRM mortgages. It literally is not far off from Mocam’s suggestion and will immediately choke off the housing industry and homeownership going forward…….Hmm, maybe that is the purpose for proposing this stpid idea. 

    • Slobue

      Wow!  Based on these rules every American should look to rent.  Those are absurd!  Not many people would qualify for a home..not to mention the process from application to close would take forever…5 years of verifiable income…Cmon…it comes down to math/statistics.  The loans being originated/funded today are the  best rated loans in 40 years.  Enough ideas from the peanut gallery.  

  • Egrathwol

    I like option 2.  I like the fact that the $$ at closing is listed right up front.  However, it’d be helpful to quickly summarize what that includes, lender fees, third party charges, prepaid items/reserves and down payment if applicable.
     
    More clearly distinguish actual transaction costs, and standard costs of homeownership (prepaid interest, reserves for taxes/insurance if applicable).  You call the latter “Advance charges you pay at closing” and that sounds like they’re additional costs of a transaction.  In reality, they’re costs of owning home that as inevitable as death and taxes.  Clarifying that will be helpful to borrowers, particularly first-time buyers who don’t necessarily understand costs of homeownership (let alone all the crap after owning the place, maintenance, etc., but…that’s another story…). 
     
    What are government charges?  Maybe include, if applicable?
     
    Provide subtotals for the above categories on page two in the detailed section.
     
    List credits as from lender/seller/realtor if applicable.
     
    Might be worthwhile to list discount points separately too.
     
    I think the focus on comparing APR is too complicated.  I can barely explain the APR calculation in a way a borrower understands, and I’ve been doing this for 10yrs.  It’s even more complicated when comparing ARMs to fixed loans.  I think comparing the term/amortization, note rate/pmt and costs (actual transaction costs, w/out prepaids, etc.) gives a borrower a better sense of what they’re getting vs. trying to choose by APR, which is an easily malleable calculation for most originators who don’t apply PFCs correctly.
     

    • Jimmy

      I agree with the difficulty in explanations.  I would recommend that the GFE and TIL have a definitions page that can be provided to the customer.  All of this is designed so each customer is treated the same way, but each originator has their own personal style of explaining APR to the folks that don’t even understand the difference between simple interest and pre-computed.  No offense intended.  Its just that the folks don’t deal with this every day.  The definitions page should also include the LLPA pages to divulge publicly just what the heck those are, and why each customer is being charged different amounts, and just who receives those funds and why.  If making the public aware of the costs and expenses are paramount, then there should be no problem in making this information public.  What is Freddie and Fannie afraid of in letting the people have some education on where their money is going?  

  • Jack

    Why are these examples for the 2/28 loan which has been completely discontinued?

    Why does it say on page 2, bottom left, that the lender will promptly give the borrower a FREE appraisal? That is inaccurate. The borrower must pay for his appraisal, and most lenders require payment up front.

    Where is the spot to disclose PMI?

    Why does the form say the title insurance cost can vary by lender? That is not true. It varies according to which title insurance company they choose, not the lender.

    Th

    T

    • Michael

      The borrower is not getting a free appraisal. It clearly says that it is a “copy” of the appraisal.  Although better than what we have now, these forms are still misleading in my opinion.  We are sometimes guilty of giving too much information that may actually make it more difficult for borrowers to make a decision.  Remember the KISS acronym?  There are several good points as pertains to ”estimating” costs.  That just gives people the opportunity to lowball(within ranges) costs and make it appear that their loan is better than the other.  Also, why would we not have signature lines on the form.  Like we’ve all been told by regulators, “If it’s not documented or signed, it didn’t happen.”  If this form is so important that we are going to spend millions of taxpayer dollars to do, then it should be verified with a signature. 

  • http://twitter.com/enablefinance enablefinance

     there’s nothing wrong in owing. We just need to be a good creditor. A make sure that the money we owe is feasible enough to pay in a period of time.

  • Michael

    I am an attorney in a state where attorneys close loans. I am on the front line.
     
    I agree with the comments that ask if those designing these mortgage lending forms ever sit with borrowers to walk through an explanation of what they are paying.
     
    The new GFE does not even require the borrower to sign they received it at time of application. The old GFE was easy to understand and any problems with it came from enforcing its use, not the form itself.
     
    The new HUD is NOT more explanatory.
     
    In the old days, borrowers would come to closing with their (old) GFE and compare, line-by-line, the GFE with the HUD. An explanation was required for any variance.
     
    If the goal, at application, is to allow consumers to compare loans, then the GFE needs to show “loan related” costs set out together.
     
    If the goal, at application, is to allow consumers to estimate their “cash to close”, then closing specific costs need to be shown in a different area – tax escrows, oil tank adjustments, pre-paid homeowner’s insurance, etc.
     
    I think the old GFE did that more effectively.
     
    You can’t mix the goals of INFORMATION and EDUCATION on one form and think it’s easier. I also disagree that the new “bucket concept” increases borrower understanding.
     
    Borrower’s are overwhelmed with information – the more complex the forms, the less they will drill down into the details. That’s where we are now. We threw the baby out with the bath water.
     
    Please go SIMPLE – SIMPLE – SIMPLE

    • Anonymous

      Michael,

      I think you hit the nail on the head – these documents are trying to be both informational and educational. They are DISCLOSURES, and legal disclosures – the pertinent information regarding the loan must be in the disclosures. The loan originators do have the responsiblity to help educate the consumer on the product they are purchasing. However, I feel that the borrower should actively participate in their education. Perhaps this agency can develop a SIMPLE form for the lender to use (and please coordinate with HUD, The Fed, VA and FHA) AND develop necessary education/training that a consumer must attend prior to a first purchase and have it available to other consumers to attend as their choice.
       
      And, as many have already stated, neither of these forms is acceptable. As others have mentioned there are so many things missing on the form.

      The interest rate is missing – that is on current GFE.
      Expiration date is not clear if it is for the fees in the GFE or for the interest rate.  
      It is not clear where, if at all, the mortgage insurance amount is disclosed.
      Where is it indicated whether or not the loan is assumable?
      Of course, still no signature line
      Will this new form require another new HUD-1?

       

  • Momsmakeover

    The GFE disclosure is completely misleading to borrowers.  Lenders no longer are required to delineate exactly what makes up the origination fees.  Nor the the ‘kickbacks’ to mortgage brokers set forth.  The government is basically aiding and flourishing the subprime loan market by allowing the crooks to get away with not properly disclosing.  I close loans everyday with borrowers and lenders and I have yet to find a borrower who understands the GFE and nor can I properly disclose to the borrower what makes up the total origination fees.  Fees are hidden in this term by lenders.  Ironically, many many mortgage brokers do not have a clear understanding of the GFE!

  • Randy

    Both forms have issues, but also have some good points. Customers want to see amount they are borrowing, interest rate, total payments, term and how much they need at closing. Both forms have some of the information, but it is scrambled and hard to follow. I have been a lender since 1980 and I have yet to have a customer who cares about the APR. It just confuses them, get rid of it. The entire comparisons section can be eliminated, makes no sense.
    I favor form A, as it is a little easier to read. Under Key Loan Terms include a line to show total monthly payment (PITI) and remove it from the bottom section.  Under projected payments “At closing” total this up, so the customer can actually see the total they need at closing. Under the appraisal section on page 2, this reads as if the appraisals are free, this is misleading, as they are not free, the customer is paying for it. In summary, it appears that you are trying to consolidate several forms into one and I do like that, but the forms still need some modifications before rolling out.

  • Brian Stine

    Prefer the FICUS Bank Form – however a few concerns would be as follows:
    - credit score requirements to receive pricing offered
    -  LTV maximums to receive pricing offered
    -  Lock in period to receive pricing offered
    -  Cash out v.s. no cash out loans / pricing offered
    - Where do taxes to sellers appear (when a borrower is not escrowing?) – cash to close is not accurate without this number.
    -  Why not have the customer sign this form?

    Today’s FNMA / FHLMC Programs are very specific with regards to pricing and should be addressed accordingly.

  • Compliance for loan officer

      I think these would be easier to go over than the current GFE.  Option one was probably a little clearer but both are better.  I think less is more as our clients have so much to read that they don’t read it. 

  • WB

    The question on both of the forms “Will You Make Your Payment to Us?” needs to be removed and mainly only appears on the forms as a SELLING TOOL for the “TOO BIG TO FAIL” banks.  The same banks that received government BAILOUT MONEY and are MAJOR POLITICAL CONTRIBUTORS to Washington Politicians!

    It is more important that a consumers loan is serviced properly and less important who is doing the servicing.  Even the Too Big To Fail banks sell servicing when it suits their needs, so why give the consumer the impression that the servicing of their loan, or who they will make their payment to, will never change.  A “Yes” response to this question DOES NOT GUARANTEE that the borrower/consumer WILL ALWAYS make their payment to their initial lender.

  • Concerned

    I too am an attorney on the front lines in a state where attorneys close loans.

    Neither of the proposed forms are any better than the present GFE, which isn’t much good, either, but changing it again will cost all involved lots more money and time and lead to honest mistakes for which borrowers will have a right to sue.

    I suggest no further changes be made until this agency and all ‘consumer protection’ agencies actually spend significant time in the field acquainting themselves with the process in real time and address that reality, not  Washington bureaucrat speculation or pressure from lobbyists/congresspeople. 

    I note that the first horror story on this blog’s section about how consumers were mistreated by lenders involved a mortgage where the lender refused to disclose key loan terms to the borrower until the closing. 

    Neither the proposed forms nor any other will stop uncrupulous lenders from pulling bait and switch scams. This agency should consider beefing up enforcement, not finetuning regulations that only honest lenders will follow anyway. 

  • http://www.facebook.com/people/Irene-A-LeClaire/1283563387 Irene A. LeClaire

    s a title agent/closer, I closed many ”sub-prime”, 80/20 transactions, adjustables, etc.  I always explained the TIL and the note.  These consumers were well aware of what they were signing.   Many times, borrowers came back and paid $3000-4000 more in closing costs to refinance the same debt and take out even more equity to buy cars, boats, snowmobiles, etc.   They were riding the wave of ever-escalating home prices, and betting on the idea that they could continue to use the equity in their homes to pay for anything they wanted to have.  I also cloed loans where the federal government, the state or the municipality were subsidzing the down payments and closing costs for buyers who were financing 100% or more of the sales price, often with whopping monthly payments.  Thank you Chris Dodd.
     
    Of course, all of this has been blamed on the mortgage industry with the consumer being portrayed as the victim.  (Yes, I realize that does happen).  I have been closing with the new forms for over a year.   In most cases the consumer has no idea what the GFE comparison of the HUD1 means and most become impatient when trying to explain it to them.    As others have stated here there are only a few things that are inportant to them
     
    1.    What is my interest rate and is it fixed or variable?
    2.    What is my monthly payment including PITI?
    3.    How much money do I have to bring to closing (and why does it differ from what I was quoted).
     
    All the forms in the world are not going to stop a borrower from defaulting.  The lenders who made loans based on “no docs” applications and  pie-in-the sky predictions of future value should have had to keep these loans.  Using Fannie Mae and Freddie Mac to buy these loans is a sham.   If lenders, banks, mortgage companies, savings & loans, kept their own paper and made laons based on sound lending practices, we would not have this mess. 
     
     

    • Jimmy

      but then the fixed rates that we’ve seen would be a pipe dream.  We will go out maybe 5 years on a fixed rate, but much more than that is reckless.  The agencies have created this and now are stuck with it.  In house loans will look like 20% down, 20 year terms, ARM, DTI of 32 or lower.  Only the government can lend money out like we see now.  Not saying its good or bad, but the toothpaste seems to be all squeezed out on the sink basin…

      We just need to get back to the basics and punish the ne’er do wells that have tarnished the industry. 

  • http://www.facebook.com/people/Irene-A-LeClaire/1283563387 Irene A. LeClaire

    s a title agent/closer, I closed many ”sub-prime”, 80/20 transactions, adjustables, etc.  I always explained the TIL and the note.  These consumers were well aware of what they were signing.   Many times, borrowers came back and paid $3000-4000 more in closing costs to refinance the same debt and take out even more equity to buy cars, boats, snowmobiles, etc.   They were riding the wave of ever-escalating home prices, and betting on the idea that they could continue to use the equity in their homes to pay for anything they wanted to have.  I also cloed loans where the federal government, the state or the municipality were subsidzing the down payments and closing costs for buyers who were financing 100% or more of the sales price, often with whopping monthly payments.  Thank you Chris Dodd.
     
    Of course, all of this has been blamed on the mortgage industry with the consumer being portrayed as the victim.  (Yes, I realize that does happen).  I have been closing with the new forms for over a year.   In most cases the consumer has no idea what the GFE comparison of the HUD1 means and most become impatient when trying to explain it to them.    As others have stated here there are only a few things that are inportant to them
     
    1.    What is my interest rate and is it fixed or variable?
    2.    What is my monthly payment including PITI?
    3.    How much money do I have to bring to closing (and why does it differ from what I was quoted).
     
    All the forms in the world are not going to stop a borrower from defaulting.  The lenders who made loans based on “no docs” applications and  pie-in-the sky predictions of future value should have had to keep these loans.  Using Fannie Mae and Freddie Mac to buy these loans is a sham.   If lenders, banks, mortgage companies, savings & loans, kept their own paper and made laons based on sound lending practices, we would not have this mess. 
     

     

  • EdieClark

     There should be a “None of the Above” option.     These forms were created by the a Federal Government Agency without input from the Mortgage Industry.  As we work with Clients on a daily basis to explain the costs and benefits of different loan programs, the Feds should ask for our input.   The Consumer is concerned with what is my monthly payment (PITI) going to be, how much cash do I bring to Closing.    The original one page Good Faith Estimate that had been in effect for the past 30-years before Congress rolled out the current GFE January 1st, 2010 was much more clear than the 3 page Congressionally designed GFE.  We spend more time explaining how to understand that the Congressional GFE to borrowers and then the borrowers set it aside to examine our “Closing Cost Worksheets” which detail loan terms: Sales Price, Loan Amount, Interest Rate, Monthly Payment, and itemized line by line Closing Costs.    The only item missing from this form is the Down Payment Amount.   Borrowers want to know what is my Down Payment, what are the Closing Costs, what is my Total Cash to  Close, what is my interest rate, and what is my monthly payment.  The Congressionally designed GFE is a joke and is mainly designed to disclose Loan Officer Compensation rather than inform the borrower about what they care about most.

    Our Closing Cost Worksheets are the same GFE Form that we used to use, but we have to rename it a Worksheet to conform to Congressional mandates.    Why don’t we revert back to the original Good Faith Estimate and add the amount of the Down Payment to the Form?  I do like the new Truth-in-Lending form that highlights monthly payment.  Why not add a Box to that form that states:  Note Rate, Term, Fixed/Arm, IO or full amortization…make simpler not more complicated.  The only people that can read the new GFE are Loan Officers.   The Borrowers understand the Closing Cost Worksheet.

  • Wsmith

    some obervations on both forms

    - escrow - assumes both taxes and insurance, many banks escrow taxes only
    - Comparions – I don’t give TIL & GFE until loan appl. received, how does applicant compare loans without first applying?
    - Closing costs – confusing to consumer, optional items and prepaids should be clearly separated
    - escrow required? – see above
    - Make Pymt to us? – where’s the might option? or we may in future sell loan?

    Don’t think either form will make a difference. Some consumers will get it, not get it, not read it or don’t care.  Same as always. Let’s go back to the old TIL with a payment stream (and ARM disclosure if applicable) and use a HUD-1 statement as the GFE. 

  • Anonymous

    My suggestion is to list, under section B on page 2, exactly what the “government charges” consist of.

     

  • Bel

    All these various and varied  forms both before and during settlement  are overwhelming the borrower to the point where they are rarely reviewed and are of little use. The HUD Settlement Statement which has been in use for many years is a pretty comprehensive and informative statement and the Note to be signed at settlement contains all the necessary financial terms including loan amount, term, rate, payment and adjustable rate features. Giving a borrower a pro forma of these two documents at application will give the borrower all the essential information  we all seem to agree is most important. Further the borrower will then have had a chance to review two of the more essential settlement documents in advance (with or without the advice of another) and to which they can easily compare at settlement. 

  • Gordon Marlatt

    I am happy to find this site. Having spent the better part of 25 years in and around the mortgage lending business I have been wishing there would be something we can do to stop some of the deceiving practices of several mortgage lenders. More specifically the ones who’s radio ads preach, “no closing cost loans”. As most consumers must know the mortgage brokers do not work for free. There are always closing costs and somebody will pay them. Almost always the borrower, in one way or another.
    I do escrow signings for a number of the title companies as a mobile notary. So, I see doc’s and closing statements from all lenders. To illustrate by comments above, I recently had a signing for one of the radio advertisers I spoke about. It was an owner occupied refi., 750 to 800 credit scores and the borrowers received 5.75% interest with most of the costs rebated. We of course know how the costs were paid for. Lets just say I would not call them “First”. GM

    • Bel

      “Escrow signings” even when conducted by a licensed attorney are yet another problem as the Massachusetts SJC recently found.

  • Val Fick

    combining the documents is good for the initial disclosures
    I think that it is clearer for the borrower if all items are itemized and  not lumped together – it is easier for the lender to explain as well
    It would be good to work directly with more processors and lenders on how friendly the document will be
    Just take time before more changes are made and it is thought out thoroughly and will not need to be changed again  

  • Anonymous

    One consideration, while minor, I haven’t seen addressed is the ability for loan origination systems to recreate either of these documents. Both of these forms look like a nightmare for merging with real data. Even if a perfect new disclosure is created, if it can’t be easily and accurately reproduced for all loan situations it’s useless; disclosures are not and should not be completed by hand.

    A few previous comments I’d like to second: take the homeowner’s insurance out of the cost totals. Does anyone seriously want to make the argument that this insurance is optional? The ‘Escrow Required’ field should include a to-be-determined option if the customer hasn’t been decided/locked the rate yet. Regarding the ‘Mortgage Insurance Required’ field, until the appraisal is received it’s often unknown. If the NO box is checked that’s all the borrower will see – forget about changed circumstances due to a low appraisal. 

    Really enjoying the educated comments, hope the CFPB listens. I also vote for the ‘neither’ option until some revisions are made. Please don’t just choose a ‘winner’ and throw this form to the masses.

  • complygal 4 a community bank

    If we continue to “bucket” fees as we see in the samples and the current GFE, the consumer does not get a full understanding of their costs and we will continue to see lenders have to develop their own worksheets to break down and show the true costs of the loan.   Basically “here is the governement form” and “here is another form that shows what your closing costs are really going to look like”.  It then makes it look like we are hiding fees.  Consumers want to know exactly what they are “paying for”.  They want to be informed and educated.  Lets use the format of the OLD GFE for the itemization of fees (with some simplicity added) and add the “Details of Transaction” table from the URLA that will give the customers the amount of cash needed at closing. 

    I like the first page of the Pecan Bank disclosure with the exception of the “Comparisons” – I could see how a consumer would quickly read “$79,993 amount you have paid” as the amount I have “paid on my loan (principal)”  I think this should read “$79,993 amount of interest paid”. 

    Also on the Interest Rate on the first page it states “Adjusts yearly starting in year 3″ then on page 2 under Adjustable Interest Rate is states “First Change-2 years from the loan date”  – So when does the rate adjust?  The language needs to be the same (consistent) and simple. 

    There is no disclosure on the cost of Mortgage Insurance other than it is or is not required.  This could be resolved in the itemization of the costs as stated above.  Also included (if applicable) in the monthly payment.

    The disclosure under Origination Fee “This fee cannot change” is misleading.  What happens when the consumer locks the interest rate and pays discount points for a lower rate or when there are other changed circumstances?  The regulations tell lenders what they can/cannot adjust on fees (tolerances) and this is also disclosed on the HUD – why put this statement on the disclosure?

    I like the that the servicing and appraisal disclosures were added to this combined form.  We are on the right track of one easy combined disclosure but still have some work to do.  Kudos to the CFPB for taking our comments and suggestions and hopefully really take the time to understand the mortgage lending process from both the lenders and consumers side and developing a disclosure that will service everyone.

  • Mloffredo

    The ARM dislcosure is used to explain all of the loan’s rate-change features and should stay that way. I think trying to put these features on this new form would take up too much space and abbreviating the info is impossible to get right. 

  • Fran H

     Like many of the others who have previously commented on these forms, I prefer the pre-2010 GFE.  It was much easier to compare apples to apples, and was clear and concise.  The new combined forms look more like promotional material than disclosures to me and many origination systems will not be able to produce the “pretty” versions.
     
    My concerns are more about the application of the forms than the layout (although I have many thoughts about that aspect too)…we all need to consider how the combining of the forms will impact the industry as well as passing the cost of the enhancements to the consumers. 
     
    1.      MDIA requires a lender to delay the closing by the set number of days from the last time the TIL was provided (depending on delivery method).  Currently the GFE can be redisclosed because of a changed circumstance and this does not impact the borrower’s closing date.  When the two forms are combined, the borrower will have to delay closing for that set amount of time even when there is no change to the APR (if it remains on the form) unless this combination addresses these situations and overrides this requirement.
    2.      The HUD-1 & HUD-1A forms will inevitably need updating due to the proposed changes.  The new form does not indicate any categories for tolerances and does not have a clear way of distinguishing which charges will fall under each section.  Although I do not particularly like the 2010 GFE, I do feel that it clearly shows the tolerance categories as they apply.

    • John K.

      The two versions of the test formats DO look more promotional than like disclosures, as people in the mortgage business “know” that the appearance of disclosures is solid blocks of small print!  Consumers don’t want to read solid paragraphs of small print, although biz-people must read it. 
      To reach consumers, the appearance of a new format should be “promotional.”  In the past few years have we not learned that consumers live, eat and breathe “promotion”?  (We advertised a product as though they needed it, and consumers believed it, to their detriment!)  To present this type of information as intelligent, smart, good-consumerism, sensible or comprehensive didn’t seem to work well before… because consumers did not behave with those characteristics.  Consumers fall for advertising (no matter how terrible or poorly-made an advertised product may be), so a new format should advertise and promote!

      • Fran H

        I agree that it needs a new look and feel, but this is a mortgage, not a new sports car with all the bells and whistles.  Even though you say that the consumers do not read all of the small print, it is our responsibility as a lender to ensure they understand all aspects of the transaction (per the regulations) to ensure a successful investment.  I personally do not work for a deceptive institution that tries to hide trump fees, but I do realize there are those that do.  I do not feel that lumping the fees into the A-I categories on the second page ensures the consumer understands what they are paying for, nor do I feel that the synopsis on the categories on the first page is something the consumer will take the time to understand.

        If I were the one designing the form, I would have one page that details all of the fees individually so the consumer can see all of the individual charges that make up the total (and have the ability to compare line by line) and another page that details the Initial P & I payment, the amount required for closing, the payment stream as we do on the current TIL as well as the projected escrow amounts in a clear and concise manner.  I do not feel that they hit the nail on the head with either of these forms and have a long way to go. 

        We need a way to create a form that we can upload so there could be a fair vote.  With the ones they provided, we are chosing the lesser of the evils as we do in political elections. 

  • Catherine Cain

    These two examples are HORRIBLE.  The existing GFE and TIL are consumer not friendly and these are slightly better in format only.  
    1.No signature line and date for the consumer – we need one 
    2. Should look EXACTLY like what they get at closing – put it in the format of the HUD I

     There was a prototype released on March 16th, 2011 when Elizabeth Warren was testifying that was FANTASTIC!!  Please use this one.  I can’t copy the form into this Comment but here’s how it was presented
    excerpt of article:
    Consolidation of the Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) disclosure forms is a directive of the Consumer Financial Protection Bureau (CFPB) under the Dodd-Frank Wall Street Reform and Consumer Protection Act.Elizabeth Warren, assistant to the president and special advisor to the secretary of the Treasury on the CFPB, has already publicly announced that the merger of the GFE and TILA disclosure forms is a top CFPB priority.
     

    On March 16, Warren testified before the U.S. House Financial Services Committee regarding oversight of the CFPB, and she spoke about the new disclosure form that the bureau is working on. 
    “These are two forms that community bankers tell me have roughly about an 80 percent overlap in terms of the content. But they are written differently, and they are organized differently. They have different pieces to them, and, as a result, they are expensive to fill out. They have regulatory compliance costs — that is they’ve got to show that they’ve complied with the regulations. And there are real regulatory consequences if they get something wrong or if they leave something blank. In fact, in several meetings I’ve had community bankers and credit unions come to me and show me these forms, and show me what its like, and how much time they have to spend and how much training to fill these out,” Warren said.
    “So what we’ve proposed to do at the consumer agency, and we’re very much doing this in concert with the banking industry and with the mortgage industry, is to bring those two forms together,” she continued. “Because financial regulation has been scattered and consumer issues have been scattered among seven different agencies, this particular one has been held by two different agencies and there have been negotiations for more than 15 years to try to merge those two forms into one.”

  • Anonymous

    “The amount of loan principal that would be paid off in the first five years
    of the loan is also broken out from total payments made, most of which are
    applied to interest.”

    This is the biggest scam which has been going on in the mortgage industry
    since day one.  “Front  end loaded ,mortgage loans”, mainly in the fix
    load arena  i.e. 15, 30, 40 year, where
    the ‘bulk’ of the consumers payment is going towards the ‘bank’s’ pocket in the
    form of ‘interest’… and very little to principle.  Where the banks are borrowing the money from
    the Feds. for cheap…. and getting rich of the consumer.. they know that most people
    avg. 7-8 years in a new home.  

    We… the consumer… want the ability, and power to ‘negotiate’ the ‘terms’
    of the loan… one in which the payments of the loan are structured so equal
    payments of interest and  principle are
    applied ‘evenly’ or ‘flat’ over the life of  the loan. 
    Not ‘front ended’ or ‘back ended’ in any way.   This new form should allow for this…  If not… then this new agency of Consumer Protection
    should make it a ‘priority to fix this problem ASAP… Cheers

    Tommy

     
     

  • Brianc

    It is a start……..
    1. why are closing costs intermingled with pre-paid items, escrows, third party required costs and optional items? they can be separated.
    2. With all of the information on the form….. Can we retire the confusing concept of APR? Consumers DON’T get it or need it with the new forms.
    3. Will these forms be the same from Bank of America and Peacan City Mortgage Broker Co.? I hope so. IF the consumer knows what he is paying do we need to get into the income of the lender or where the credit back to the consumer comes from? (i trust the bureaucrats know about low cost/no cost loans).

    Get me to here and i will be back with the next three suggestions.

    Brian C.   Lexington, MA-Birth place of American Liberty (remember the concept E. Warren?)

  • http://www.regencymtg.com Quentin Keefe

     Firstly, I commend the CFPB on taking such a reasonedand thoughtful approach toward disclosure. Afterall, it is about having the consumer understand exactly what to expect, and to be able to shop rate and costs among several lenders with the confidence that they are comparing “apples to apples”. This is a very good first step toward that goal.
    With that said, I think that the expiration date is unclear as to what it is that expires? Is it the rate lock? Is it the rate offer? This could use clarification.
    I also think that the Loan-to-Value ought to be disclosed, as well as any pricing adjustments, or in lieu of actually itemizing the loan level pricing adjustments on this form, at least language should be added explaining that the rate and fees disclosed are based on a 740 plus credit score, etc.
    Otherwise, I think either of these will work well.

  • Originalmortgageguy

     You can make up all the sheets you want and it won’t matter unless you have good people explaining it.
     Loan Officers are tested and licensed now. It is important to look out for the consumer but also the Loan Officer.

    Good Faith Estimate -  Going from 1 to 3 pages with no payment does not make sense.
      —-> Consumer reaction – They prefer the old sheet. More informative and laid out better.
      —-> Loan Officer Reaction – Same as consumer, plus you add a shopping bucket(Really). Who does that?
                 Fees – Loan Offficer should not be responsible for quoted fees that they are not responsible for…ie…transfer tax
                 and title. Hence the word estimate.

    Til - Any positive change is fine. Most don’t know how it works, nor care as look as long the fees were explain on the Worksheet.

    Summary - The government should bring in Real Loan Officers if they truely want improvments that we feel will help Everyone. That we all can embrace.

  • Akrueger

    The two samples are reflective of ARM loans.  It would be helpful to see what a fixed rate would look like.  I don’t like the verbiage in the comparison section about what the loan would look like in 5 years.  To make it more easily understandable to a lay person, wouldn’t it be better to say something like “Your monthly principal and interest payments for 5 years will total $xx,xxx.  Of that amount, $xx,xxx will be paid against the principal amount owed on your loan and the remaining $xx,xxx will be interest you paid.”  Also, I still dislike to combination of various fees.  I think the fees still should be listed individually, such as Service Fees Required by Lender $xxx Appraisal, $xxx credit report, $xxx whatever.  There needs to be a subtotal in bold type indicating CLOSING COSTS that are associated with the loan, then additional detail lines for prepaids that is called “PREPAIDS or OTHER SETTLEMENT CHARGES NOT RELATED TO YOUR LOAN”, another subtotal for those items and a total line that would represent  total amount of cash needed at closing. 

  • Crystal

    Both of these forms are a lot better than what we currently have, however none of them are great! 1. There should be a place for the borrower to initial/sign, nothing here to prevent a ”shady” lender from switching out the form. 2. The ACTUAL closing costs should be listed seperately from the pre-paid items. 3. It needs to show what the loan to value assumption is. 4. Needs to have a line showing an estimated total needed at closing, it shows the down payment amount and the total “costs” but there should be 1 line that shows the combined total, I know that is what buyers want to know.

    Having said that, I personally like the one from Pecan Bank better out of these 2, it is easier to read/follow.  

    Crystal, Licensed Mortgage Loan Officer, Bloomington, IN

  • Bob Kurtz

    28 Years in the business and I have never seen anything so ridiculous and confusing for our clients. both of the options and the 2010 GFE are confusing to the applicants. The old Good Faith Estimate gave a detailed line by line breakdown of the closing costs and prepaids along with escrows. surprisingly it corresponded with the HUD-1. They could have easily just made the section of the old Good Faith Estimate with the Lender and broker fees a No tolerance section and the balance of it with the 10% tolerance. Then add a page to it with all the terms, cautions, comparisons, type of transaction, LTV, dates, etc.
    “OH” Lets have everybody sign it.
        

  • ZK

    I welcome the introduction of this disclosure, but I think each example form is a bit disorganized.  Information about the loan estimate, the loan officer, and the applicant are jumbled together in various combinations at the top of each form.  The content of the first page is full of “fluff” (such as circles and arrows in the case of Ficus) or is repetitive and non-linear (as in the case of Pecan).

    The forms also seem to suggest that all ARMs are always bad — for example, that rates, payments, and fees always increase.  A form such as this should carefully describe the facts (e.g., “adjustable” payment not “increasing” payment) and remain objective about the loan terms.  Real information, rather than ambiguities like “as much as” and “as high as,” would also help with clarity, for example by providing actual ranges of possible payments.

    I have created a new example, combining and revising what I believe to be some of the best elements of both forms:
    https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0By7PVkEZXWr6MDk2Y2Q5MjItNWM4ZC00NmNjLTkwZTUtYWI1MWIxMzg3MTU2&hl=en_US

    However, further discussion on all of these ideas is certainly warranted, since many valid issues and additions have already been raised by prior commenters — most notably those about distinguishing the many applicable fees and distinguishing true fees from prepaids.

  • Kare

    I have been originating mortgages for 30 years and have worked in 4 different states;  10 years for banks, 18 years as a broker and now 2 years as a mortgage banker.  In all of those years, I never had a customer report of “hidden” or surprise costs at closing, and stood behind every estimate I gave.  The 2010 GFE is probably the most convoluted and confusing document our industry has ever provided to a borrower.  The new forms are a modest improvement  , but still far more confusing than the old forms.  This week another lender that my client had shopped tried to convince him that their fees were over $700 less, when in fact they simply eliminated per diem interest and our fees were lower.  The forms need to show closing costs and not lump in the escrows. They should allow us to show the breakdown of costs and identify what the consumer is actually paying for.  Call them “lender fees” and within the section show application, processing, underwriting, etc.  The term “origination fee” has been confusing to consumers and should be removed. And they must, must have a signature line, rate locked or floating, and rate expiration date.

  • Logo Design

    Nice one through  this form help consumers understand the risks of a mortgage and true costs.

  • http://www.facebook.com/profile.php?id=534432898 Don Burke

    I applaud this effort.  

    Of the two forms, I tend to like option A because it seems to have a natural flow from top to bottom and the black boxes for sections really focus your attention on the key elements of the form.  Form A also feels less cluttered to me.  

    The main point I would like to make is that it is the 21st century, so why are we only thinking in paper form?  Human beings are visual creatures.  When I look at these forms, my eyes start glazing over…just as they do with any big block of text and numbers.   At least one person has commented about how a consumer wants mainly to know what the payment will be and the P&I.  I tend to agree but not sure that is the only thing we want them to understand.  I think we want them to understand what this loan will really cost them and visualizations in the form of charts and graphs can really help bring abstract terms like APR, changes in rates, and amortization into clear focus.   Consequently, while I realize that moving beyond paper is probably step too far at this point, what about including something like a QR code that would take interested users to a companion website that visualizes the data on the form for them?  Imagine a graph showing total interest paid over time or amount of principle paid as a function of time.  You could even overlay other metrics such as cost after deductions for different tax brackets.     You could have a total cost graph that even shows the non-recurring up front costs as a step function.   There is so much you could do to augment paper and help people really grasp the data on these forms in a much more powerful way.   

  • J___

    A f ree copy of the appraisal? Even if the loan does not close?  How about you get a copy of the appraisal once you pay for it…even if the loan does not close.

    There should be a “maybe” choice in the servicing section. Some lenders keep a portion and sell a portion. They may not know which will happen at application.
     

  • LarryK

    Although not part of the loan process, nor the obligation of the lender, I think an appropriate inclusion, as a cautionary closing statement (bottom of page 2) should be, to the effect of:
    “Borrower should be aware, loan costs (including taxes and insurance) are not the only expenses related to home ownership.  Maintenance, utilities and possible HOA fees must be considered in determining overall affordability.”
     
    When I bought my first house, I was told what my monthly loan payments would be, and I based my determination of affordability on that information.  However, as a naive first-time homebuyer, I had no concept of all the ancillary expenses and how much they added to monthly, overall housing expenses.
     
    It never occured to me, living in the summer heat and humidity of Florida, my electric bill could go as high as $200/month.  Cable is now required for TV reception, and what home would be complete without internet service — another $100+ per month.  Of course, I wanted to protect my investment, so, $100/quarter for pest and termite control.  I am unable to do my own yard maintenance, so $110/month for gardener service.  And, the “et ceteras” add to this list.  I think a “stop and think” statement, as suggested above, could be helpful to other first-timers.

  • Wjh2

    I had major problems completing the exercise.  I picked a form, then was provided and answer I did not agree with (ie; I picked this form because the other was missing info) .  I think both form showed the same info in different formats.  I was not provided a way to change the answer so I just added a comment.  I was told I could add 3 additional comments, but was unable to figure out how to add them.  Did anyone else have this experiance?

  • Jon Volpe

     When we make our comments of these two proposed forms, we must remember that the Consolidation of the Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) disclosure forms is a directive of the Consumer Financial Protection Bureau (CFPB) under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  This is now a top priority of the CFPB so trying to fight this change is an uphill battle that most likely won’t be won.  We must make suggestions that will conform to the intentions and/or purpose of this mandate and not ridicule efforts being made by Elizabeth Warren and the CFPB.  I’ve read a few negative comments that suggest the government has not involved our industry in developing these forms.   I certainly understand this assumption after the development of the 2010 GFE, but I believe Warren has spoken to community bankers to get these forms to their current state and this public comment section is providing us an opportunity to make suggestions for additional changes and/or modifications.   Let’s focus on providing positive feedback and stick to the topic.  
    Based on Elizabeth Warren’s excerpt provided at an earlier date in this public forum, it appears the purpose of this new format is to consolidate an overlap of content that currently exists between the GFE & TIL;  reduce the time, effort and cost to complete; and reduce the future regulatory compliance costs.   She goes on to say, “Because financial regulation has been scattered and consumer issues have been scattered among seven different agencies, this particular one has been held by two different agencies and there have been negotiations for more than 15 years to try to merge those two forms into one.”
    I believe we all agree that the 3 page 2010 GFE is a bit confusing, misleading, and incomplete.   Additionally, with no required signature from the Borrower(s) and the Loan Officer, two additional forms must be provided which include 1) Acknowledgement of Receipt of GFE; 2) Intent to Proceed with Loan Application.  With the new 2011 TIL, there is certainly an overlap between the “Summary of your loan” section of the 2010 GFE and the new 2011 TIL.  Our 1 page simple “Old” GFE has now turned into 5 pages of confusion.  
    Many loan officers do NOT even disclose the GFE and TIL until they have reached acceptable terms through the issuance of the “Old” GFE which has now become known as the “Itemized Fee Worksheet”.   This may be one of the several feedback issues the community bankers have provided to Elizabeth Warren.   The purpose of the mandate to combine the GFE & TIL into one disclosure is to eliminate overlap, reduce costs, and potential for future regulatory compliance costs.    Issuing an itemized Fee Worksheet without a TIL is certainly an open invitation for future litigation.    
    In this public forum, I read from several, including an attorney, who felt that the “old” GFE provided transparency which “would allow a borrower to compare, line-by-line, the GFE with the HUD.  An explanation was required for any variances”.  
    While most feel both proposed forms are an improvement over the current 2010 GFE, there are still itemizations and breakdowns provided on the “Old” GFE that neither of these proposed forms provide.  “The new “bucket concept” certainly does NOT increase the borrower’s understanding.”   Additionally the two proposed forms seem to try and combine disclosures that are currently provided separately such as 1) RESPA – Servicing Disclosure Statement; 2) HVCC – Appraisal Report Delivery Disclosure.  
    I’ve also read comments in this public forum recommending LLPA disclosures based on fico scores, LTV’s, etc.   Let’s keep in mind that we are already required to provide separate disclosures for credit scores and how that affects their cost of credit.  It’s our job as the loan officer to educate the consumer about their credit score during the loan application process.    
    “You can’t mix the goals of Information and Education on one form and think it’s easier.”  
    The 2010 GFE provides 4 important dates that I feel is important and an improvement over the “Old” GFE.   As commented already, the new proposed forms “Important Dates” are vague at best.  
    Based on all of the feedback provided on this public forum, I recommend the following:
    1)      Modify the simple “Old” 1 page GFE (aka – Itemized Fee Worksheet) and combine with modification to the new 1 page 2011 TIL.   This can still be one form on two pages but separating the detailed closing costs from the APR and payment streams will offer more clarity. 
     
    Changes to old GFE:
     
    a)      Add the Important Date section of the 2010 GFE to the “Old GFE”
    b)      Designate the section of the GFE’s that must comply within 10% tolerance.
    c)       Designate the section of the GFE that fees cannot change. 
    d)      If necessary, use the buckets of categories “A thru E” and modify the section headers of the old GFE.
     
    Changes to the new 2011 TIL:
    a)      The “Cautions” sections of both the “Pecan” and “Ficus” Bank proposed forms are already disclosed on the 2011 TIL.  Maybe they can be highlighted somehow in BOLD print. 
    b)      Add the “Amount you have paid” and “Amount of loan paid off” in 5 years from the “Comparisons” section of the proposed forms to the payment summary of the new 2011 TIL
    c)       Add the Adjustable Interest Rate Information such as Index, Margin, Caps, and Change Frequency to the “variable rate feature” section of the new 2011 TIL.  (I currently have to type in my index, margin, and caps into all of my TILs under this section)
     
    2)      Eliminate/Delete the questions on the proposed form that asks the following:
     
    a)      Is an Escrow Account Required?  Not all loans that are escrowed require it.   Some portfolio lenders will not allow for escrows.   It is the loan officer’s job to educate the borrower whether an escrow account is required for the particular loan.   This box is checked “yes” when the loan officer has impounded for taxes and home insurance and “No” if he has not.   The old GFE will provide this same information without asking this question.    
    b)       Is Mortgage Insurance Required?  It is the loan officer’s job to educate the borrower whether MI is required for the particular loan.   This box is checked “yes” when MI is disclosed and “No” if it is not.   The old GFE will provide this same information without asking this question.    
    c)       Will You Make Your Payments to Us?  It is the loan officer’s job to educate the borrower of this and to provide a RESPA – Servicing Disclosure Statement.   Unless this question will eliminate the need to provide the “RESPA – Servicing Disclosure Statement”, this question should be deleted.    Answering this as “Yes” to only find out that the servicing has been transferred in the future is an open invitation to litigation.  
    d)      Appraisal: We will promptly give you a free copy of any written property appraisal or valuations.  You will receive a copy even if the loan does not close.   It is the loan officer’s job to educate the borrower and provide an “Appraisal Report Delivery Disclosure”.   Unless this question is going to eliminate the need to provide the “Appraisal Report Delivery Disclosure”, this question should be deleted.    This statement is also misleading and an open invitation to litigation.  
     Again, we can’t mix the goals of Information and Education on one form.   Trying to do this often leads to confusion as we have all learned from the 2010 GFE.   It is time to go back to the basics and keep it simple.   Combining the old GFE and the new improved 2011 TIL under one 2 page Form with the modifications outlined above should offer the most transparency and clarity to the consumer.   It will also eliminate overlap, reduce costs, and potential for future regulatory compliance costs.

  • Wild Cat

     I am so confused. Why not use the old GFE listing all fees in plain sight but group them together by things that can’t change, things that can increase by 10%, and things that can change.  The borrower can plainly see all the costs and each title section will state what can happen. Same for the HUD all fees should be listed and plainly defined. Keep it simple.

  • http://www.homebuyinginstitute.com HBI

    When will the new forms be implemented, after the design is finalized? I could not find that information anywhere. Thanks.

    • Amy

      From what I’ve read, I wouldn’t even expect a proposed rule with the proposed form until July 2012.  

  • GNero

    Why is there only one date field on the forms? We need to disclose how long the rate is good for if the loan is not locked ~ under RESPA it is not required to be available for any specified length of time as rates change constantly. Then another field to show the required 10 business days all other fees are good for.

  • Jkarow

    Could someone explain what the Government Charges of $2,015 are?  

  • aloanagain

    1. Please look at any rate sheet used by any mortgage loan orginator.. Note the mutitude of adjustments to pricing.  Those pricing adjustments need tobe disclosed to the borrower. Those pricing adjustments affect their interest rate and monthly payment.

    ie: LTV, Credit score, Rate lock period, Loan size, Cash out, Mortgage insurance

    2. Seperate out loan related fees. Borrowers shopping for a loan need that information. All the other costs such as down payment, escrows, insurance etc will be the same from lender to lender.

  • Piazza660

    Let’s not kid ourselves – consumers will not make better decisions as a result of a reformatted form.   So, how much have the taxpayers had to pay for this agency thus far? 

    The only way to have consumers make better decisions is through education and individual responsibility.  We do not teach our kids the first thing about finance and fiscal responsibility in high school.  Political ideaologies, both left and right, are taught, but without the associated financial consequences.  I think this is where we need to start.

    On individiaual fiscal responsibility, the federal governement is the most ill-suited organization in the free world to teach this.  The facts speak for themselves.  Every dollar spent requires 40-to-50 cents of borrowing.  What type of individual fiscal responsibility is this?  I have always taught my children this - do not pay too much mind to what the federal goverment says, but watch closely to what they actually do.

    This agency will surely grow, but is unlikely to accomplish anything substantive.    

  • Steph

    I like the simplicity of Form A. However, I can not understand why we can not use the old GFE and adapt it to contain the new required verbiage. I also think the costs need to be better explained. Simple is good but interest etc., are not lender costs and this needs to be made more obvious so that borrowers can literally compare apples to apples when looking at the actual fees charged by the lender to close the loan.  

  • Phoward

    The Ficus Bank form could be the most suitable format for loan forms.  I would like to see a Balloon loan disclosure for an over view of both the products that banks are allowed to offer.
    Loan Estimate section should be amended to provide an improved description for the “Expires date”.
    The Comparison Section needs to provide description language as to the 5 years amounts (which items are interest and total payments). Projected Payments section has the insurance decreasing in years 9-30, insurance and taxes should remain the same or more in future periods.
    Loan Estimate Details need to have the escrow amounts moved to a separate area of the disclosure, since this is not a closing cost. Lenders title Insurance has become an issue, with real estate agents recommending companies to buyers. We are unable to provide a due diligence as to the safety and soundness of the insurance providers. Consider allowing these to be a required provider.
    Will banks be allowed to provide legal information in separate disclosures or as part of these disclosures?
    These forms look simple on review, but when the regulation is written can the format for the regulation be simple.
    Twitter and Face Book has not been an acceptable network for our bank employees to have access when using the internal secure network as required by regulators.   
     

  • Melissa Eckstrom

    Overall, I like these forms compared to what we have today. I prefer the “Ficus Bank” example as it just seems to be more attractive to the eye.
     
    BUT, there are some things that are still missing, or need restructuring:
     
    *The parameters of the loan are not given (Appraised value, purchase price, LTV)*Total payment, including escrow should be reflected and broken down (show tax, insurance, and MI, and then list total payment so the borrower doesn’t have to add it up)*There is an expiration date, but the form doesn’t state if the rate is locked.  This should be noted.*The APR should be explained (“this rate is reflective of closing costs involved in your loan. The higher the APR, the higher the costs”).  Most borrowers still don’t understand why APR is different than the interest rate.*The form needs a signature line*Pre-paids should be separate from closing costs.  Borrowers need to know the pre-paids aren’t closing costs and that lenders don’t control them.*Section B:  Explain why the costs cannot increase more than the listed amount (10% tolerance not explained)*Section I is not accurate as it does not include Down payment, which is due at closing.*Change verbiage on “Escrow account required” to “Is Escrow collected?”*Re: appraisal – We will not give a copy of the appraisal if the borrower hasn’t paid for it.  This should be noted on the form that if they want a copy they have to pay for it.*Section G should be broken down so the borrower can account for where the credits are coming from (lender vs seller).  What about a credit from the borrower if they have made a deposit on the loan?
     
     

    • Anita Rubeck

      I applaud
      the Consumer Financial Protection Bureau for launching these two forms to
      initiate such an exchange of great information. 
      I’ve read all the comments and here are my thoughts.

      I think the
      big issue is just implementing a requirement that all lenders complete the same
      form, so that the consumer can compare the same information when
      loan shopping.   Either form looks fine
      to me, provided a couple of things are added.

      ·        
      Borrower
      needs to sign the form.

      ·        
      Borrower
      needs to check a box affirming that the loan agent has explained the
      terms of the loan to the Borrower.

      ·        
      Loan
      Agents needs to sign the form.

      ·        
      Impounds
      should be called Impounds, and not called escrow.

      ·        
      Provide an impound breakdown for the amount of taxes vs. the amount to pay for insurance
      (separating it out)

      ·        
      Provide
      a breakdown of the amount of credit from the lender vs. a credit from the
      seller (separating it out)

      ·        
      I’m
      not convinced the consumer needs the APR information, they don’t seem to care,
      doesn’t seem to be useful information

      All this
      upfront information for the consumer is a good start.  But when it really counts, is when the
      Borrower is actually signing the Note, Deed of Trust and other loan documents.  

      Currently in
      California, when it comes time for the Borrower to sign the loan documents, the
      Loan Agents go into hiding, do not explain the documents to the Borrower ,and
      do not answer questions asked by the Borrower. 
      There are a few Loan Agents that do attend the signing and do explain
      the documents to the Borrower, but those Agents are a minority. 

      Escrow and Signing Agents commonly hear
      comments from the Borrowers (while the Borrower struggles to sign the documents)
      that: 

      ·        
      The
      interest rate is not what was promised,

      ·        
      The
      terms of the loan are not what were discussed,

      ·        
      There
      was not suppose to be an impound account,

      ·        
      The
      loan amount is wrong,

      Most of the
      time, when the Borrower is signing the loan documents, it is the evening before
      their purchase agreement is about to expire, or the loan documents expire the
      next day.  It is common that the Borrower
      signs their documents late into the evening, because the loan documents arrived
      at the escrow office late in the afternoon, the same day.

      Often these
      Borrowers feel they have no choice but to sign the documents, or suffer worse
      consequences.

      My suggestion
      to improve disclosure, consumer knowledge, and ability to make choices is to
      mandate that the Loan Agents do their jobs of explaining the terms of the loan
      to the Borrower.  This explanation should
      be provided both prior to the  ratelock/commitment
      of the loan, and while the Borrower sign the loan documents. 

      The most
      important issue is confirmation from the Borrower and the Notary Public
      that the Loan Agent has done their job of educating and explaining the
      documents to the Borrower.   
      Accompanying the Borrower and explaining the documents to the Borrower while the Borrower signs the documents
      is the highest priority of the Loan Agent. 

      There needs
      to be a place for the Borrower and the Notary Public to affirm that the Loan
      Agent explained the documents.  If you
      just ask the Borrower to sign an affidavit, they will just sign it, even if the
      Loan Agent isn’t present during the signing. 

      I’m not sure
      this is fair to ask the Notary Public to sign such an affidavit, but then
      again, the Notaries are being asked to sign other non-notary-function forms too.  This idea needs some more thinking.

      Such an Affidavit form could be included with the Note and Deed of Trust.  Making the return of this form, fully
      executed by the Borrower, Notary Public and Loan Agent, to the lender prior to
      funding, could help weed out those Loan Agents that don’t perform their duties.

      Perhaps the
      Bureau can impose penalties when the Loan Agent does not attend the signing, and
      for not explaining the documents to the Borrower?

      As to the
      debate over the impound account being called a closing cost vs. an amount held
      by someone else, I do agree, it really isn’t a closing cost.   I would
      add that the impound information should be included for the borrower to
      consider as a part of their over-all costs of the transaction.  The amount deposited with the lender to start
      the impound account can greatly increase the amount due to close.   

      I agree with
      the suggestion that a panel of experienced-in-the-know-industry-related-affiliates
      help with creating a positive process. 
      There are tremendous differences between the east coast and west coast
      style of closing a loan transaction.

       I propose a panel of representatives from
      the West coast made up of a Notary Public, Signing Agent, loan Agent, and Loan
      Broker.  Additionally, from the West
      coast an Escrow  Officer, and from the East coast an attorney who practices
      escrow.  Such a panel should be able to
      contribute meaningful insights from each industry.

      I do like
      the suggestion of a definition page!

      In California,
      the title insurance fee can vary by which title insurance company is selected, by
      what type of policy is requested and which endorsements are requested by the
      lender. 

       

  • BoltBling

    It seems to me that President’s from both political persuasions have been asking Congress to provide them with the “line item veto” for decades…right?  Of course they have because THAT would make sense.  That would protect the taxpayers against all of the unnecessary “pork barrel” items.  That would be a logical and easily understood form of governing, and would also allow the taxpayers to more easily UNDERSTAND where their money was going to be allocated.  Agreed?  Well, having said that….

    I would respectfully suggest to the CFPB that making changes that will “PROTECT” the consumer, means they go BACK to the old GFE format and ask themselves the following:

    Why would a one page line item GFE, which was easily and clearly understood by the consumer, be turned into a three page document that is not only NOT understood by the consumer, but has long time professional Originators confused and baffled, and ALWAY left feeling they are unable to provide the consumer with their best professional abilities?  Most originators are left to use the old GFE format anyway, so their clients have the most necessary and critical information clearly and SIMPLY imparted in the form of an ESTIMATE of information that is almost always FLUID throughout the transaction, allowing the Originator to adjust to the best possible loan strategy for their client.

    SO, while I think the Ficus GFE is better than the Pecan GFE, I wouldn’t professionally endorse either one because they are BASED on the GFE we are currently using which has been a bigger bust than the Ford Edsel!  Neither of these plans provide the consumer with the basic information they NEED, yet continues to befuddle them with issues that do not pertain to THEIR UNIQUE transaction!  Keep it SIMPLE!   And just as a little piece of advice from someone who was Originating loans before ANY GFE or TIL existed… as long as you, the CFPB, or ANY other entitiy continues to restrict the professional originators from effectively doing what is in the best interests of our clients, the consumers WILL be paying more in every capacity.  They already are.

    This entire mortgage loan industry has effectively become like an insurance company, tying a doctor’s hands by ignoring what the doctor believes is in the best interest of the individual patient, and decisions instead being made  from a board room or an office cubicle by people not qualified to render that decision. 

     

  • all4cats

    Prefer the Ficus Bank layout and formatting.
    As good as it is to combine the TIL and GFE – it’s not enough.  There are so many regulations, so many forms.  Why not include a statement that if the property is found to be in a flood zone, then you must buy flood insurance?
    More importantly – why not include a calculation that says that the monthly payment (what lenders call PITI) shown is XX% of your stated monthly income, and that this percentage should not exceed 28% according to most financial planners?
    As others have written – most customers simply want to know
     - how much $ to bring to the closing
     - how much $ they’ll have to pay monthly
    Is that clear in either sample?

  • Greg Raven

    I don’t like either of the forms.  Both forms contemplate that the rate quote is valid from 5/18/11 – 6/2/11.  Where is there a provision for a rate quote time period which is different than the fees quote?  If they are going to be the same, then what will the minimum quote period be?  We cannot hold a rate quote out for 10 days.
    In neither form is there any disclosure regarding up front mortgage insurance premium.  I presume that is because this is a conventional loan.  How would the UFMIP in an FHA loan be disclosed?  How about the VA Funding Fee?  Nor is there a discussion about the reduction in assumed tax and insurance payments in years 9-30.  I presume that someone has computed that he MI payment will go away after year 8, but the customer cannot see that.
    In form A, you do not include under “Cautions” the fact that the monthly payment can go up.  Even though it is disclosed in the prior section, some attorney will have a field day with this.
    We disclose “govenment charges” but do not specify whether these include transfer taxes with zero tolerance.  Is that important?  If not, why is it in the current form?  Does this line also include recording fees which are a “govenment charge”?  They are not zero tolerance.
    In the escrows section, there is no provision for aggregate adjustment.  These numbers are just presented with no explanation as to why the lender needs it and what cushion is being provided.
    What if there are other fees that are not enumerated in your example?  There is no provision for other feess.  Do we just ignore them?
    There is no provision for the borrower to see / acknowledge that the loan will be secured by a lien on the property as is currently contained in the TIL.  Nor is there any disclosure about late payment penalties, assumability of the loan, etc.  Are these no longer important?
    Since the FRB in its infinite wisdom decided to break mortgage loans into two categories (borrower paid and lender paid), there really is no origination fee for a lender paid transaction.  Most lender are terming that “broker compensation paid by lender”.  Are you going to change the terminology?  Also, where is the credit for interest rate chosen shown?  Is it tucked down under “G – Credits from Lender or Seller”?  There is nothing to indicate that the lender credit is based upon the interest rate.
    Bottom line is that neither form is an improvement over what we have.  In addition, large sections of the form become irrelevant with a fixed rate loan …. which happens to be the predominant loan in the marketplace and probably will be for many years.
     

  • Anonymous

    The fee disclosure aspect of the GFE and HUD  is my concern.  My suggestion is to make the GFE and HUD match exactly except on the GFE add an expiration date for the interest rate, LTV, property type, etc.  All other categories would be designed to match exactly on each form.  This would stop the convoluted method in place now of combining fees on the GFE and seprating out some of the fees on the HUD.  The proposed  method can be used by the consumer to easily compare apples to apples.  The consumer would also be able to understand exactly what a particular fee is covering and what fee may have changed and how much the fee changed between the application phase and closing.  The fees listed on the GFE and HUD in place now are like comparing apples to oranges.

    Further, I would appoint a committee of bankers, mortgage brokers, and title reps/closers to design the forms.  These people are the ones who use the forms daily and have to explain the forms to the consumer.  The existing GFE and HUD can  and should be simplified. 

  • Egrathwol

    I like the interactivity on the new CFPB site, and think the proactive style to engage the public for comment is great. 
     
    I reviewed the new sample GFE/TIL disclosures and commented.  In general, I think they’re a great start to simplifying disclosures for borrowers.  I also emailed my client list of some 700 folks, pointing them to the links – reserving my thoughts – and asking them to review and comment, too.  The more feedback the better, I figure.
     
    I tried finding a forum to post my thoughts on the APR and other than the “comments” section for specific articles – and with my comments specific to the new sample forms, for example – I didn’t see any place appropriately designed for these thoughts on the APR as a loan comparison tool.
     
    So, I’m bugging you, in the hopes you can forward them to Elizabeth, or someone on her team over there who can take a look, and put some thought into this.
     
    As a successful loan originator with nearly 10yrs of experience, I can still barely explain the APR calculation to my borrowers in a way that they can understand it.  More importantly, even if they do understand how it works, comparing one loan’s APR to another is not – in my opinion – the best tool to know which loan best serves a borrower.
     
    Borrowers simply need to compare:
    Note rate Total transaction costs (including ysp credit or discount point cost, but without prepaids and reserves) Term Amortization Special features
     
    I’ve long felt that the APR a bit arcane, and possibly outright misleading in comparing one loan to another.  I was recently having a conversation with a client of mine about his loan options, and this drove home this glaring point one more time.  The loan with the lower APR, was actually NOT the best loan for his scenario.
     
    Here are the details:
    We’re doing a no points, no fees refinance, of $181k, to 4.375% on a 15yr term, saving him $70/mo or so in cash flow, while also increasing his monthly principal contribution by shortening his term (he has 17yrs remaining on his existing 30yr loan) and lowering the rate, so he’ll be paying an extra $200 or so/mo in principal, giving him a net savings of $270/mo or so, for free. He’s a retired guy, who’s lived in the same place since 1998.  I’ve known him for 5 years, and…at every conversation – including now – he’s still unclear how much longer he’ll stay in this home.  So, he has an unclear, and potentially short-term ownership horizon. With the loan we’re doing, at a note rate of 4.375%, with total transaction costs of $5600 (including appraisal) and a lender credit/ysp of $5464, his APR is 4.498%. He inquired about the same loan at 3.75%, with full costs, which would carry an APR of 4.096%.  This particular client happens to be a real estate attorney.  Not a dummy.  He gets it.  I’d already covered the mechanics of higher rate/lower fees, vs. lower rate/higher fees, and discussed why we felt this loan as outlined above with no costs at 4.375% He still asked “Eric, wouldn’t the lower APR be the better loan for me? I explained that that depends.  At 3.75% he would save an additional $50/mo or so, but he would incur $4200 of closing costs that he does not have at the 4.375% note rate.  So, to save an incremental $50/mo it costs him an extra $4300.  Dividing that incremental savings into the incremental costs, his cost-recovery period is 86 months, or 7+ years.  In his scenario, he “loses” if he ends up keeping this home/loan for more than 7 years.  At that point, he could realize an extra $50/mo of savings than the current loan – which already saves him $270/mo for free – offers. So, you see, if he compared his loan options solely by APR he very well might make the wrong choice. And, even if he does stay in this home for more than 7yrs, yes THEN he could’ve saved another $50/mo by taking the lower rate and APR loan.  But, by choosing the loan he is with the higher rate/lower cost structure, he can’t lose.  He’s still better off than the loan he has.  He just “might” not realize every penny of savings he could have, if he could foresee the future…
     
    I saw that on the newly proposed forms, APR continues to be the primary loan comparison tool.  I truly hope that Elizabeth Warren, and the folks at the Fed and CFPB put some thought into helping to educate the public as to how they should really compare loans, which is by comparing your note rate, your actual transaction costs, your term, amortization and special features (if any).  Simply focusing on APR can be a very costly mistake.
     
    And, the comparison is even more complicated when looking at APRs of fixed loans vs. ARMs.  Not to mention that some originators don’t even know how to make their disclosures accurately calculate APR, which makes it even less practical as a true comparison tool for borrowers.
     
    Comparing one loan to another is pretty much second grade math.  Using the APR turns it into a calculus problem that most people really don’t clearly grasp, AND relies on the originator to have disclosed the PFCs correctly.
     
    I hope this information is well received, and helps you guys continue streamlining our disclosures, and educating our borrowers to make financing much simpler and efficient all the way around.
     
    Thanks for your continued time and consideration.

  • MM

    The TIL and the GFE should not be combined into one document. They are designed to accomplish two different results. One is designed to inform the borrower of the line by line costs of the loan and what can and cannot be shopped for and the other is designed to demonstarte to the borrower that if certain charges ar rolled into the loan that the borrower is paying interest on those items over the life of the loan.
     
    Let’s start with the value of the ” APR ” disclosure in and of itself, that many originators do not know how to explain i. e. my fixed rate is 5.500% on my mortgage note and my ” APR ” states 5.950%. ” why is that “, is the question asked by most borrowers who even take the time to review these documents. The regulators/goverment valid attempt to demonstrate to people that they are paying interest on costs rolled into loans has valid merit but like most goverment intervention is poorly accomplished. As example the TIL takes a 100k loan with an additional 5k in costs rolled in to it or in otherwords a 105k loan @ 5.500% over 30 years and states the total amount paid over 30 years is $214,624.24 which is correct over 30 years @5,500%. They then state the APR is approximately 5.950%. because they take they 30 year payback total on 105K loan and divide it into 100k loan as though the borrower had only borrowed the 100k without fees rolled in to it. Which of course is going to make the calculated interest higher. The borrower is not borrowing 100k but instead 105k. If they wanted to demonstrate that a borrower was paying interest on the fees rolled into the loan here’s a simple idea. If you borrow 100k and pay the fees out of paocket at closing your payback over 30 years is $204,404.04, if you decide to roll fees into the loan that you could pay out of pocket at closing your total loan will be 105K and the total payback will be $214,624.24 both examples are at 5.500%. the cost of rolling those fees in the loan are approximately $10,220.20 for borrowing the additional 5k in fees over 30 years. The rest of the items included in the current TIL would remain.
     
    The current GFE is explainable but needs a signature line to eliminate the new disclosure that the borrower signs stating that they have received the new GFE if this isn’t redundant I don’t know what is. If you wanted to improve the new GFE you would use the old format of the GFE prior to the ” 2010 GFE ” and simply leave it line by line and catogorized into the 3 new sections and sub-totaled at the end of each section and totaled at the bottom and have a signature line on it.
     
    If the federal goverment really wanted to reduce and simplify they would co-ordinate with the states and eliminate state and federal redundant disclosures. They need to stop believing all originators are crooks and call in people with real documentable experience to streamline this process, making it easier for the borrower and more understandable.
     
    Comments on appraisers and lenders differring policies is really off the subject but the same concept applies to those matters also.

  • K1Roma

    In my opinion the problem has never been in the forms themselves, but in the standardization of the language.  I work on the closing end of the settlement process, and what I always received calls saying “you call it a title processing fee and they call it a prep binder fee”.  I guess the “lumping” of the fees was supposed to address this, but most of our clients (and a great number of lenders) still ask me for a “breakdown” of the fees.   So it is difficult for the borrowers to compare fees when there is not standardization of the language.    Same thing with prepaids.   If you want companies to be able to compare “closing costs” everyone should have to quote the same amount for prepaids.  For instance, 2 months of each and every escrow required and say 15 days of interest.  That way, the amounts would be standard on each form but listed as Estimates.

  • kingbean

    They both say virtually the same thing, just in different format.  I think “B” is a bit simpler, but seriously the borrower needs to be able to understand the loan product, whether there’s a form in front of them or not.  There’s no paper replacement for a good loan originator…………   That being said, all of these changes in forms have done nothing but make things more tedious, arduous and confusing for the consumer.  I’m the one who sits at the closing table going over documents with every borrower.   The new hud, connected with the new GFE is one of the worst examples of disclosure I’ve seen in nearly 30 years.  How does lumping a bunch of fees into 1 or 2 lines make things more transparent or more fully disclosed than the hud we had a few years back?   The best form for a borrower would actually be a post closing “pop quiz” to have them answer questions about their loan to see what their knowledge is of their loan.   How much time and money is going to be spent before we have a form that makes everyone understand 100% of everything?

  • Dwalsh

    The archaic TIL disclosure has baffled consumers since its inception. Consumers do not shop and compare by APR. The current GFE may be even worse. It is encouraging that the CFPB is focusing on combining the two documents and revising the content.

    The lumping of closing costs has proven exteremely frustrating to consumers and originators alike. The proposed Estimated Closing Costs Section is an improvement, but still lumps some costs. Originators value clarity as much as the clients! Breakout title expenses and government charges.

    Treating escrow deposits as closing costs is certainly not appropriate.  Tax and insurance expenses are no different on an all-cash transaction. Put a “reseves to be deposited with lender ” section into the disclosure. 
    Our company focuses exclusively on provding FHA-insured reverse mortgages. As reverse mortgage recipents do not make payments but rather receive them, neither the current  nor the proposed disclosures are appropriate for disclosing such loans. We urge the CFPB to work with reverse mortgage providers to produce a meaningful product specific disclosure and to do it now, while it is focused on the mortgage disclosure matter.  

  • Lori

    First and foremost of importance to the majority of customers is, what is my interest rate and what is my monthly payment. I think page one of option B shows that fairly clearly.  The top half of page two of both options are still to cumbersome I think.  In my experience reviewing the existing forms with customers, they are confused with the lumping together of fees.  The majority of questions are what does that amount consist of?  It appears that the lumping is still present on the new forms; I would like to see that shown differently; in my humble opinion, I’d break out the fees.  Will the bottom half of page(s) two eliminate other forms? i.e.:  Servicing Disclosure, Right to Receive Appraisal.Also, showing the entire amount of a fee (i.e.: Owners Title Insurance) on the GFE that is going to be split by the buyer/seller and crediting back at closing is confusing to the customer.  Why are we disclosing fees that are not going to be paid by the buyer??  Doesn’t that just add muck to the already muddy waters?

  • Ken Baebel

    The Ficus form seems to highlight information more clearly than does the Pecan format.  It would help to make the loan amount disclosure somewhat larger and separate from the other loan estimate information.  Another suggestion would be to clarify what the term “Program” actually means since describing Conventional when the loan type is an adjustable product and that distinction is not necessarily understood by consumers.  It would also help if the Projected Payment portion was relocated to the area immediately under the Loan Estimate portion of the format.  This would assist potential borrowers about the major aspects of the loan more quickly. 

  • Larry Arch

    I commend Congress and the CFPB for beginning the process of rationalizing the morass of paper and eliminating counterproductive duplication. It seems that, prior to the CFPB, government agencies viewed “full disclosure” as the cure for all evil in the world. As a result, the stack of documents to be signed at closing can be an inch thick, with countless disclosures, including multiple forms disclosing the same information (many of which were also signed at loan application). Many of the disclosures are unintelligible to me; yet as a settlement attorney I’m the one charged with explaining them to borrowers. Too much disclosure has defeated the intended purpose of disclosure, as most consumers’ eyes quickly glaze over and they wind up blindly signing documents just to get finished with the process.
    I have a preliminary question on the proposed forms: what are the ground rules?
    Are the new forms to be based on the current RESPA and TIL regulations, none of the proposed, but not-yet-finalized regulations, and no new, but not-yet-proposed, regulations (except with respect to the design of the forms)? Or is the CFPB considering changes to the substance of the current regulations and/or adopting some form of the existing or new proposed regulations? The latter would allow much more flexibility and permit the elimination of the worst problems in the current regulations.
    What is the purpose of the new form? Is it a tool for comparison shopping? Or a disclosure form? Or something else? Or all of the above? Too many purposes muddles the message and leads to a confusing form.
    I believe that Consumers want to know several basic things on a fixed loan: the interest rate and loan amount; the costs of closing; the amount to bring at closing; and the monthly payment, with and without escrows. If the purpose is a disclosure form, I recommend using the pre-2010 GFE as a starting point.
    With respect to ARMS, both of the suggested forms include the additional basic information for Consumers – the fixed period, the adjustment frequency, the index, the spread over the index at adjustment, the adjustment caps, and the minimum and maximum interest rates.
    Between the two forms, I like the Graphics of the Ficus Bank form better, and the layout of the Pecan Bank form.
    If the forms are going to be used for comparison shopping, they need to include all of the underlying assumptions upon which the GFE/TIL is based (including such factors as credit scores & property values). This form will not be a useful shopping tool unless consumers can rely on the fact that they are comparing apples with apples. As some of the commenters have observed, unscrupulous Loan Officers will use low-ball assumptions on a GFE to “hook” a consumer and rely on “changed circumstances” to adjust the loan terms later. This tactic is aided when underlying assumptions are not disclosed. Even ethical loan officers use assumptions which, if not disclosed on the form, could mislead.
    If the form is intended as a comparison shopping tool, and the concept of “APR” will be retained, I suggest that the term “APR” be eliminated and replaced with something like “Comparison Index.” This will focus Consumers on its function as a method for comparing different loans rather than getting distracted trying to understand why the APR is different than the interest rate.
    I agree with all of the commenters who opined that the closing costs should include ONLY true out of pocket loan costs. Escrows and other charges that are not actual closing expenses should be separately itemized.
    Charges that vary depending on the closing date should also be segregated. It can be confusing to a consumer when two similar loans have different “closing costs” because they are projected to close on different days of the month. The closing date used for the estimates should be disclosed on the form.
    One of my pet peeves is the inclusion of transfer/recordation taxes in the zero tolerance bucket. There are rare, but not uncommon, situations in Maryland where lenders are blindsided and the taxes are significantly higher than in normal transactions. I would guess that the majority of title companies and virtually all of the lenders would not pick up on the subtleties causing the issue and miscalculate the taxes in these situations.
    I suspect that many, if not most, consumers who take an ARM do so with the intent of selling or refinancing before the time the loan begins to adjust. The form, therefore, in the “Comparison” section might be more useful if it broke down the loan by the fixed period and adjustment period or periods. Thus the years broken down on the “Projected Payments” would be different for each type of ARM. That way a consumer could compare “apples with apples.” I think any form is/can be misleading if used to compare ARMS with different terms and adjustment periods or to compare ARM’s and fixed rate loans.
    The form should disclose the adjusted interest rates used to calculate the amounts paid in the “Comparisons” section. On ARMS, it is useful to know the best and worst case scenarios over time, but it would be just as useful to include the most likely payments after the rate adjusts, as long as the projected interest rate is disclosed.
    Both forms have an option for “Required Escrow Accounts,” and “no Escrow Account,” but no option for “Optional Escrow Account.”
    Nor does either form have an option for “we will service your loan, but we may sell it later.”
    This form should also be a “living document.” By that I mean it should be tweaked regularly. For example, if prepayment penalties are not permitted on consumer loans why include them on the form? In the short term it may be useful to let consumers know there is no prepayment penalty, as they were common in the recent past. However, after some period of time (if they are not re-introduced) their inclusion as a “Caution” becomes unnecessary clutter. Also, as new loan products are introduced over time, the form should be contemporaneously modified to account for these products. It should not be a roadblock against innovation.

  • Anonymous

    1. It is very helpful to see samples of the proposed disclosures. However, in order to get a full understanding of the requirements, it will be essential to see proposed and final regulations. What is the timeline for publication of the proposed and final regulations?These drafts reflect the proposed disclosures to replace the “early” Truth in Lending disclosure and the Good Faith Estimate, both required within three days of application. What will be the requirements for the “final” Truth in Lending disclosure that will be required before consummation? How will this draft document work with the HUD-1 that will be prepared for consummation?The Loan Estimate Details section appears to be “replacing” page 2 of the current Good Faith Estimate. The Loan Estimate Details section appears to have an inadequate amount of room for displaying the fees associated with a typical transaction. Given the two-page limitation of this new document, how can we make changes to the draft in order to accommodate more fees?The drafts demonstrate a number of different format requirements (e.g., use of shading, a number of different font sizes, arrows, circles, circles with arrows, the “cfpb” green logo, etc.). It will be essential for the industry to understand what design elements are required. Can we anticipate that these items will be addressed in the proposed and final regulations?Some institutions in the community bank market offer ARM products in which the monthly payment is held constant; an increase in the interest rate would affect either the term of the loan or the amount of the final payment. We would urge the Bureau to provide specific guidelines for the proper disclosure of these types of ARM products.

  • Wholesale Lender

    Some
    edits/revisions that I saw that need to be addressed are:

     

    With
    regards to the expiration date- the form doesn’t specify if the quote for the
    “fees”, the “lock”, or both expire on the expiration date.
    This needs to be more clear.

     

    Also, the
    fee section does not have a space to input a “discount fee” if the
    borrower is choosing to bring in cash to pay down the rate through the lender.
    The discount fee paid for the rate is missing.

     

    Also,
    missing is a space for the Lender’s fees (in the case of a broker transaction,
    the bank’s or Lender’s fee should be separate for more transparency).

     

    Lastly
    section B and C of the fees needs to have more room, lines, and/or space for
    other fees. I often see other fees that may show up in that section (for
    example condo docs fee) and there are no additional lines for these
    miscellaneous fees.

  • Wholesale Lender

    Some edits/revisions that I saw that need to be addressed
    are:

    With regards to the expiration date- the form doesn’t specify if the quote
    for the “fees”, the “lock”, or both expire on the expiration
    date. This needs to be more clear.

    Also, the fee section does not have a space
    to input a “discount fee” if the borrower is choosing to bring in
    cash to pay down the rate through the lender. The discount fee paid for the
    rate is missing. Also missing is a space for the Lender’s fees (in the case of
    a broker transaction, the bank’s or Lender’s fee should be separate for more
    transparency).

    Lastly section B and C of the fees needs to have more room,
    lines, and/or space for other fees. I often see other fees that may show up in
    that section (for example condo docs fee) and there are no additional lines for
    these miscellaneous fees.

  • Frankheartland

    1. The form should indicate representations the rate quote is based on–whether made by the LO to the consumer, or the consumer to the LO:  FICO, Value of property, occupancy, type of property and desired loan product.  Just look at the pricing grid of Loan Level Pricing Adjustment on a rate sheet, and you will see why these representations are essential to accurate rate and price quoting.

    2. There should be a financial benefit statement/goal.  Whether the borrower is refinancing an existing mortgage, or currently renting, the financial teeter totter needs to be titled towards positive net cash flow after an analysis of budget.  The loan officer should be willing to sign his/her name to this benefit to demonstrate a financially prudent thought process has gone into the reason for the mortgage loan on the consumer’s behalf.

  • Frankheartland

    3. There bottom line effect of the options should come into play once the financial objective has been determined. Trade offs between rates, points, options balloons will be analyzed.

    4. The underlying value of the home should be analyzed with a 1 year, 5 year & 10 year disclosure.  This is easily obtainable by looking at Zillow zip code of the property, or as Tired Compliance noted at bare minimum stick an arrow on a historical chart like Case Shiller so at least an awareness is created of where the value trend of the asset lies form a historical perspective.

    5. Last: detailed form (like the old GFE) gives the itemizations of the fees, and explains what they are for. 

  • Frankheartland

    6. Last but not least–the proposed benefit should be become the delivered benefit, signed by borrower and loan officer at closing.

    This is the result of conversations with clients, non profits, government housing agencies with a passion for financial literacy especially as it pertains to buying a home, or in less romantic terms, leveraging the market value of shelter .

     As one of the contributors to this effort commented “to have a simple form means that the consumer must be knowledgeable.  If they are not, then a “form” won’t solve that problem.”   Thanks for allowing input…best of luck with the finished product.

  • Nikki Griffith

    I think both forms are a good start towards simplification of the process.  However, there are two additional areas I believe need to be addressed.

    First is the myriad of fees and miscellaneous charges that borrowers are faced with that have different names depending on which lender is used.  I believe there should be a regulated and mandatory use of a defined list of charges that institutions can choose from which are included in the form’s “Required services you can shop for” and non-required services”.  And it should be kept to a minimum.  I have seen many cases where people get to closing and find a variety of fees on their closing statement that were not on the TIL and have a new name.

    Secondly, I a definition of terms should be included.
     
    Secondly,

  • Clint

    Need a seperate form that addresses and standardizes the “Safe Harbor” provisions of the Fed’s regulations.  Such a form would mitigate the risk aversion lenders have in designing compensation packages for loan officers and allow for more competition between loan officers.  In my opionion, the key to making “Safe Harbor” work to the benefit of all interested parties is the notion of “Client Qualification” and “Suitablilty of Product”. 

  • Compliance Department

    It is difficult to know where to start in summarizing the issues these draft forms present. It appears as though the worst aspects of the current RESPA rules are retained (consolidation and grouping of fees, etc.) and new issues and problems are also created with the drafts. Following are a few of the more obvious issues.
     
    There is no clarity on how HUD’s RESPA FAQ Document and HUD’s related informal comments will apply to the new form. Just to cite one specific issue, will third party document preparation fees be placed in “origination fee” or “required services you cannot shop for”?
     
    There is no indication as to how this rigid format can be used to disclose a construction/permanent loan on a single form.
     
    There is no indication as to how this form would be used to disclose a balloon loan or a buydown loan. Currently many lenders are not making buydown loans to lack of clarity in existing TILA disclosure rules.
     
    It is not clear how the current RESPA tolerance categories will apply to the draft disclosures and be compared to the HUD-1.
     
    The applicability of the expiration date is not clear. Does it apply to the fees, the rate or both? Current RESPA rules disclose a date for how long the rate is available and another for when the other non-rate-related fees expire. RESPA requires that the quoted fees must be available for at least 10 days, but brokers and lenders are generally not willing or able to keep a rate quote open that long without a formal application and rate lock agreement, driving the need for a second date to specify how long the rate quote will be effective.
     
    The intended effect of the “Appraisal” and “Will You Make Your Payments to Us” sections is unclear. Will these disclosures be adequate to replace the existing stand-alone disclosures that are currently required, or will these sections simply create a redundant and potentially misleading duplication of those existing disclosures?
     
    The “Will You Make Your Payments to Us” section is inadequate and is an open invitation to litigation. There must be an option indicating that the servicing “may” be transferred in the future, since it is impossible for an originator to guarantee that servicing definitely will or definitely will not be transferred.
     
    The language on page 2 for Change Frequency, First Change: says “2 years from loan date”. That is very unclear. What is the loan date; the closing date, or the date of first payment?  If it is the closing date the entry would almost always have to be a fraction since loans do not generally close on the first day of the month. For example, if a loan closes May 13, 2011 and the first interest rate change is effective on June 1, 2013, this blank would say “2 and 18/365ths years” or “2.039475 years”.
     
    The Interest Rate explanation on the first page on the first page says “Adjusts yearly starting in year 3″. However, on page 2 it says “First
      Change-2 years from the loan date”. This is extremely confusing. The language needs to be consistent and simple. 
     
    It seems deceptive to include “Non-required services” in the “estimated closing costs” section. These are optional costs to the borrower. In some jurisdictions and on certain transactions the seller may pay for those items. Some lenders, for instance, would never include costs for a “home warranty”, and their estimated costs will appear to be lower, when in fact the opposite may be true.
     
    Where is the borrower credit for paying a higher interest rate placed on the forms? Is it all lumped together in A? Or is discount shown in A and credit for rate chosen lumped together in disclosed in G with all other credits from the lender and/or seller?  Either way is not transparent and will cause much confusion.
     
    Mortgage insurance is not adequately disclosed on either form. There is no clear disclosure of the up-front MI (or VA funding fee) or the monthly collection for MI, as applicable.
     
    The payment information shows the potential for increasing and decreasing payment amounts. Apparently changes in monthly MI payments, including termination of MI at 78% LTV as required by law, are factored into those amounts on the draft disclosure. MI should be much more clearly disclosed, including when it will terminate and how it impacts payment amounts.
     
    The “projected payments” section of the forms does not comply with the current TILA “payment tables” rule, which is a good thing, but those rules will need to be extensively rewritten to fit the format noted on the draft forms. This will be an opportunity to fix those ill-conceived, inaccurate and misleading “payment tables” rules.
     
    The wording next to “origination fee” on page 2 says “This fee cannot change”. That is extremely misleading. If the consumer locks or re-locks the interest rate (which would be a borrower requested change) the origination fee (discount portion) can change. Likewise, if there are other changed circumstances, it is also possible for that amount to change.
     
    TILA currently requires a separate, specific ARM program disclosure to be provided at application. That disclosure addresses all ARM-related matters such as caps, adjustment periods and maximum payment amounts for a sample loan. There is no need to try and repeat that information on this form. This disclosure should simply refer to the specific ARM program disclosure that is already required.
     
    TILA currently requires a lender to delay the closing by a set number of days if the previously provided TILA disclosure becomes inaccurate. However, RESPA permits a revised GFE to be provided due to a changed circumstance or borrower requested change without impacting the closing date. When the two forms are combined it is unclear if the TILA delay will apply to GFE-related changes on the form.
     
    There no clause on the form for the borrower to see/acknowledge that the loan will be secured by a lien on the property, which is required by current TILA regulations. Nor is there any disclosure of late charges or assumability of the loan, both of which are also required under current regulations. Are these no longer important and will the regulations be updated to delete those disclosures?

  • Rcarothers

    The Ficus Bank form could be the most suitable format for loan forms.  I would like to see a Balloon loan disclosure for an over view of both the products that banks are allowed to offer.Loan Estimate section should be amended to provide an improved description for the “Expires date”.The Comparison Section needs to provide description language as to the 5 years amounts (which items are interest and total payments). Projected Payments section has the insurance decreasing in years 9-30, insurance and taxes should remain the same or more in future periods. Loan Estimate Details need to have the escrow amounts moved to a separate area of the disclosure, since this is not a closing cost. Lenders title Insurance has become an issue, with real estate agents recommending companies to buyers. We are unable to provide a due diligence as to the safety and soundness of the insurance providers. Consider allowing these to be a required provider.Will banks be allowed to provide legal information in separate disclosures or as part of these disclosures?These forms look simple on review, but when the regulation is written can the format for the regulation be simple.   

  • Slobue

    The good faith estimate of 2010 is extremely confusing for most especially when you are a broker.  The old GFE itemized all the costs, provided the payment, and cash to close all on one form.  I believe page 1 of the new GFE should be combined with the old GFE.  Additionally, to tell a borrower as a broker there are no origination fees per say but have to explain upon issuance of the GFE that our compensation has to be included as origination in Block 1 but you are getting a credit for it in Block 2 is too confusing.  It puts doubt in the minds of the consumer who already are weary because of all the bad press Mortgage Brokers received.  Not to mention the borrowers would much rather see who is charging the fee on the GFE…bank fees should be listed as such…not origination fee. 

    Although block A is easy math the origin of such fees is difficult.  At the end of the day the borrower wants to know what it is going to cost me, what is my rate, and how long is that good for?  

    Let’s answer those questions for them.  Go back to the old GFE with the important dates and call it a day.

  • Frank

    In a perfect world, it would be nice to have one form that’s a combination of the TIL and GFE.  As a compliance officer at a bank, I’ve reviewed many HUD-s’ and I would say that well over 50% are wrong to some degree. This included forms prepared by the bank or by outside title companies.   The average loan officer can’t figure them out, much less the average borrower. 

    I find it hard to believe the minds in this country can’t come up with a simple form that consumers (and loan doc preparers) can understand.  Maybe a version of one of these forms is progress, but I’m skeptical. 

    Just make it simple and accurate.  Tolerances of this and that, putting certain charges on the correct line number, crediting back charges on page 1 of the HUD-1, itemizing some charges but not others……..it’s a recipe for disaster.

    One novel idea for a GFE (and HUD-1)  form would be to design one that consists of ideas from children…..maybe that would get it back to short, sweet, and simple.

  • Roman Shulman

    Please do not say “see details on the back”. Application and disclosure documents are one-sided. Printing on the back side of GFE would require the industry to adjust more than just software. It would cause confusion and will not be convenient for consumers who will probably miss the “back side” altogether. It should say “see details on page 2″.

    The forms ignore the fact that it is not possible to specify the deadline for rate pricing (until lock). Pricing of rate can change with market at any second. Specifying prior to lock that the entire GFE is good until certain date and time is misleading, if not fraudulent.

    Pre-paid items are not closing costs but consumer own funds and should be clearly separated. Closing Costs + Pre-paid Items = Total Settlement Funds Required. Bundling the two together is one of the biggest sources of confusion. Also, It would be of good benefit to consumer to standardize how many months of taxes and insurance to specify on GFE, or at least to show this. Consumer make bad decisions because lender A quotes 2 months of escrows and lender B quotes 4 months, while at the end of the day the amount collected will be the same.

    Basic
    assumptions (loan characteristics) should show on GFE – LTV, Credit Score,
    Property Type, Occupancy. While it is not possible to account for all factors
    which may cause price adjustments, the most basic factors should be listed so
    that consumer could see which factors the lender accounted for when preparing
    the GFE.

  • Anonymous

    This new GFE does not level the field for all kinds of lender (brokers,mortgage bankers, banks, credit unions,etc)

    When somebody buys a taco do consumers really need to know how much the restaurant owner is making as profit or the menu price is ok?

    Banks do not disclosure their profits even though consumer could get the identical product offerred by the broker and brokers are forced to disclose their profits

    at the end the important thing for consumers is the interest%, if  it fixed , Arm or exotic loan,down payment,total closing cost. prepays,APR and any else is just of waste of time and paperwork that the consumer will pay

  • Spade

    The two options have the same defect.  In attempt simplify the form, the provided options have forced the consumer to bring a calculator to determine how much the bank is making.  Although the appraiser fee is stated (this is good), A $548 bank charge has not been calculated or specifically disclosed to the consumer.   The consumer must manually determine this.  Bank charges, such as appraisal management company fees, are lumped in with other charges.  Shouldn’t the consumer know what fee is going to the appraisal management company?  It appears that the big banks are hiding a cash cow right in the middle of a disclosure form.  That’s not full disclosure. 

  • Dblanchette

    To the members of the Consumer Financial Protection Bureau;
     
    As a vice president of a small community bank I would respectfully like to submit my feedback on the proposed options for a combined Truth-in-lending/Good Faith Estimate and the Bureau’s “Know Before You Owe” project. 
     
    I applaud the Bureau’s attempt to combine the two disclosures into one.  I believe this will make it easier for the consumer and the lender.  I voted for Option A for the combined format because I believe that the bolded subtitles make it easier to read for the consumer.
     
    However, I suggest that the Bureau consider returning the format of the Good Faith section to the “pre-RESPA” Good Faith format.  The “post-RESPA” format with “buckets” for origination charges and title services is confusing for customers.  The feedback we have received from the consumers has been that people do not know what they are paying for.   The “pre-RESPA” format listed every fee individually and allowed the lender to note those fees that were paid outside of the closing.  This format clearly showed the consumer what they were paying for and gave them an accurate total of what they needed to pay at the closing.  The “post-RESPA” form hides important fees from the consumer.  The origination charge does not show the borrower that a portion of the fee is to obtain tax transcripts, run their loan through an automated underwriting engine, and register the loan with MERS.  The title service, lender’s title insurance and settlement agent does not clearly identify how much the borrower is paying for lender’s title insurance, the lender’s attorney and other documents the attorney may need.      
     
    The feedback we have received from our consumers is that the new format of the Good Faith is confusing and consumers are leery of hidden fees.  The Bureau can still have buckets that indicate what fees can change and which fees cannot change but we respectively ask that the buckets have individual line items so all fees can be adequately and correctly disclosed to the borrowers.  We also ask that they allow lenders to indicate “paid outside of closing (POC)” items so that the bottom line correctly reflects how much the borrower has to pay at the closing.
     
     

  • Ready2Retire

    I agree with others who state that neither of the forms are yet acceptable.  It would be advisable to form a group of bankers from different size banks and from different parts of the country to help design a new GFE/TIL.  The bankers are the ones who knows how it works “in the real world”.  I am a compliance officer for a large bank who still considers ourselves as a “community bank” also.  We deal with secondary market loans as well as in-house loans.  We are located in many rural areas as well as urban.  Mortgage lending is different from in-house loans to secondary market true mortgages.  The regulations seem to all be geared toward true mortgages which makes it extremely difficult to make (and be in compliance) with in-house loans when we try to accomodate our customers borrowering needs.  The new tabular format TIL has been a nightmare to complete for in-house loans. 

    On another note, it sure would be nice if you would make the closing attorneys be accountable for completing the HUD Settlement Statements instead of the banks.  Many attorney still don’t have a clue how to complete the forms and some even think that the 1/1/10 HUD format does not have to be completed for in-house loans, just those sold on the secondary market.  We spend hours and hours going behind them and correcting their mistakes so that we won’t be cited by FDIC for violations. 

  • Consumer Bankers Association

    The Consumer Bankers Association appreciates the opportunity to comment on the first version of the TILA/RESPA combined disclosures.  Our first set of comments below raise general questions and issues with this process, while the second set of comments raise specific issues with regard to the forms.  As for the comments on the specific forms, they for the most part would be applicable to either the Ficus or Pecan form, unless otherwise noted.  We are also continuing our review of these forms and look forward to reviewing the revised versions that result from the CFPB’s consumer testing process.
     
    General Issues
     
    ·        Are these disclosures intended to substitute for the early Truth in Lending Act (TILA) and good faith estimate (GFE) forms?  If not, when would these forms be provided to the applicant?
     
    ·        To what extent will other mortgage loan requirements need to be changed.  For example, will HUD-1 be changed so it remains consistent with the GFE part of the new form for purposes of allowing consumer to compare closing costs?  Will this affect current redisclosure requirements, GFE tolerances, or liability for errors?
     
    ·        The new forms seem to not include many statutory requirements.  How will CFPB address this?  Will CFPB pursue statutory changes?  Will CFPB propose additional rule changes so this new form will be compliant with all regulatory requirements?  Will there be changes in the current timing requirements?  Will banks be protected from liability to the extent these forms do not include all the current information?
     
    ·        Will the CFPB provide a “safe harbor” from liability for using the form?  If so, can lenders modify the graphics and still be covered by the safe harbor?
     
    ·        The forms only show the disclosures for adjustable rate loans.  Much of the information is about features for adjustable loans.  Does this mean the fixed rate forms will be drastically shorter or will the fixed rate forms include other information and what would that be?
     
    ·        It is unclear whether these forms will be conducive to loans with features beyond the traditional 30-year adjustable rate mortgage.  Will forms be developed for these other types of loans?  If so, when will they be developed and tested?
     
    ·        As for the list of fees and costs, it is often not clear what they represent and the extent they are required.  Specific examples are listed below.
     
    Specific Issues with the Forms
     
    ·        General
    o       The form should be reorganized so loan details are on the first page and closing cost information is on the second page.  As proposed, the form has loan details on both pages, and the heading “Loan Estimate Details” on the second page is misleading since the information that follows relates to closing costs.
    o       We suggest lenders have the option of including a borrower signature line.
    o       The current disclosures regarding late payments, loan assumability, and payment due date should be included.
    o       There should be an indication that the property will secure the loan.
    o       The first page indicates the loan adjusts in “year 3” and on the second page it indicates the first change is “2 years from loan date.”  Although this means the same, this different terminology will confuse borrowers.
     
    ·        Loan Estimate on top of Page 1 – This includes the expiration date but does not indicate whether it is the rate or costs that expire.  We suggest deleting this information as it is repeated on the second page, and clarifying the information on page 2.
     
    ·        Key Loan Terms on Page 1 – The information as to how high the rate can go and when it starts to adjust should be reversed as that will better inform the borrower as to how the rate may change.  The monthly loan payment should indicate this includes principal and interest.  The monthly taxes and insurance payment should indicate if this includes private mortgage insurance (PMI).
     
    ·        “Cautions” on Page 1 – If any of these features (increasing loan amount, balloon payment, prepayment penalty) are included, how does the lender disclose this?  Would it indicate “yes” and would it then need to indicate the amount and when they apply?  Will there be model forms or clauses?
     
    ·        Annual Percentage Rate (APR) Information on Page 1 – The APR indicates it includes costs but is misleading in that certain costs are not currently required to be included in the APR.
     
    ·        Comparisons on Page 1 – The amounts of the loan amount paid off and the amount of total payments made over the first five years should be deleted as it is confusing and would not be helpful.  For example, we do not see how the total amount of payments can be calculated with certainty for an adjustable rate loan in which the future loan rate is not known at the time this disclosure is provided.
     
    ·        Projected Payments Information on Page 1 – This is complicated and confusing.  For example, on the Ficus form, we do not see how loan payments can decline in the future if the initial rate is 2.5% but then can be no lower than 5.5% when the introductory rate expires.  Also, the indication that payments will decline will be confusing since it does not clearly indicate this would be primarily due to the removal of PMI in the future.  In addition, this disclosure indicates amounts may be adjusted for “deposits” but we are unclear as to what this means, and we also believe the closing costs and downpayment should be added to indicate to the borrower the total amount needed to close the loan.
     
    ·        Phrase Indicating “no obligation to choose this loan” on Page 2 – This is critical information and should be on the top of page 1.
     
    ·        Estimated Closing Costs on Page 2 – There may be other costs that would need to be included, in addition to the costs are currently included on these proposed forms.  We suggest additional blank boxes lenders may use for these additional costs.
     
    ·        Origination Fee on Page 2 – Should not indicate that it cannot change, as it may change if the borrower chooses a different loan product.  Also need additional clarification as to how to disclose discount points and/or credits.
     
    ·        “Required services and costs you cannot shop for” on page 2 – The indication they cannot exceed a certain tolerance is problematic in that they could change beyond the tolerance due to unforeseen circumstances, which is currently permitted.
     
    ·        “Total Closing Costs” on page 2 – Should include the word “estimated” in this phrase.
     
    ·        “Credits from Lender or Seller” on page 2 – Lender and seller credits should be two separate categories.
     
    ·        Line “D” – “Non-required services” – We question whether these should be included here since they are optional and could, therefore, overestimate the amount of closing costs.
     
    ·        Escrow Account, Mortgage Insurance, and Payment Information on the bottom of page 2 – Having only “yes” or “no” options is not appropriate since decisions about escrow accounts, mortgage insurance, and whether the lender will service the loan may not have been made at the time this disclosure is provided.
     
    ·        Appraisal information on the bottom of page 2 – This is misleading as it can be read to mean appraisals are free.  Banks can charge for appraisals, and this is especially confusing since appraisal costs are referenced in the list of estimated closing costs.  It seems this reference means the borrower is entitled to a free copy of an appraisal that was paid for by the borrower, and the language should be changed to reflect this.

  • Brian

    Buying a home is a complex transaction with a lot of ifs, ands, and buts.  Devising a form to cover every condition will make it much too complex unless each borrower is given an underwiting manual to study so they understand just what they MIGHT qualify for.  Because even then there are no guarantees due to the many unknowns that can affect pricing; tiered LLP’s, unknown LTV’s, final FICO, ect.  Consumers do not want complexity.  They don’t care about compensation (which the current law should be reversed, or applied to banks), which has nothing to do with the offers presented.  If compensation did matter, how on earth can consumers compare bank offers?  Seeing a ‘credit’ only confuses borrowers.  More often than not LO’s would swallow any market change to deliver the expected rate and ensure consumer satisfaction, just like the banks do now.  Unfortunately, brokers have to charge borrowers now if the market moves the wrong way before a lock.

    All consumers want t0 know in order to make a decision is the rate and closing costs for any given program (30yr fixed, 5 yr arm, etc).  Borrowers understand that their loan is not approved until all the information is in and it is actually APPROVED.  There are no guarantees in life, even with the ‘perfect’ form.  Keep it simple – the old one page form with itemized charges was best.  It should have been tweaked just a bit to improve it, but instead we got a new 4 pager in it’s place that doesn’t even show the cash in/out amount.   The old form with a section indicating max payment for ARM’s would be a great start.  Save the APR (which very few care about) for the TIL.

    From a loan processing perspective the old form made it easy to track charges between the GFE and settlement statment, as well as clearly answer questions like ‘What are my closing costs?’ by showing true costs and how prepaids and escrows would affect things.

    Having an ‘expiration’ date on a gfe is rediculous and may cause borrowers to act too quickly. 

    While we’re making a wish list, how about disposing of the abomination which is the HVCC process and maybe we’ll see the housing market recover.  Appraisers don’t work hard to justify value when they earn half of what they should.  As long as they are not accused of bringing a property in too high we’re good right?  Oh the PMI companies, Fannie and Freddie love it and the LLPA, but millions of homeowners cannot refinace to these low rates which would put more money in thier pockets and eventualy into the economy.  Instead strategic foreclosure looks like a real option to them.

  • Sruffin

    Thank you for creating a forum to comment on the proposed new mortgage disclosures.  The Ficus Bank format is easier to read, however, one of the most important pieces of information the customer wants is not at the forefront, that being total costs to close the loan.  These new forms appear to give the same information as the current GFE with more concise explanation (which is good), however it does not address the problems with the current GFE.

    There is no signature and date line for the customer to acknowledge he received the form.

    Comparison of the APR for shopping purposes does not include all aspects of the loan the customer should compare, such as loan type, term, breakdown of the origination fees as this can vary from lender to lender (what are the origination fees really “buying”).

    Escrow and prepaid property taxes and assessments are not closing costs and should be excluded from the “Total Closing Costs”.

    “See details on back” should be changed to “See details on page 2″ as not all forms will be printed two sided.

    Remove the word “free” from the appraisal section.  In most cases the customer is the one paying for the appraisal so in reality the copy is not free.

  • http://twitter.com/approvedfunding Approved Funding

    Let me preface this post by saying that when I saw the website, and when I first saw the proposed new forms, I rolled my eyes and thought, “what genius form have they concocted today?!”  Needless to say, it’s not as bad as I thought it would be but it’s not really as comprehensive as it could/should be.
    What’s the real difference between the 2 forms?! Some graphic arts and layout? Big deal. We need to include credit scores (even if just a range); max loan to value; signature lines; expiration dates/terms; better clarity on actual broker/lender fees vs third part fees vs escrow fees vs loan related fees; as well as some other small items that are missing.
    Furthermore, the forms shouldn’t primarily be geared around predatory products. Hardly any loans these days are IO, Balloon, or Prepay. Why dedicated space on half the form to these wary items?!  Personally, I think if the loan DOES contain a ‘cautious’ item there should be a separate 3rd page disclosures that highlights the specifics of that scenario. The “core” 2 pages should focus on the majority of the loans being made today with the purpose of helping borrowers shop for the best mortgage. As for predatory issues – yes, they should be disclosed, BUT addressed in a separate form. No standard disclosure will be able to encompass all the quirks of a cautious loan.

  • Chris

    The proposed docs aren’t perfect, but they do have some features that are better than the current version.  I prefer the Ficus Bank option, but like the shorter length of each of them.

    Ficus Bank Disclosure:

    *  I prefer the top/bottom format of this document to the side/side of Pecan Bank.  It is easier to miss something with the side/side and it seems to be busier – more distracting.
    *  Loan ID# – Is this necessary at this stage of the transaction?
    *  Loan type – Should be more specific…30 year adjustable rate isn’t clear enough
    * Under Key Loan Terms:  Monthly Loan Payment would be clearer if shown as Monthly Loan Payment of Principal and Interest
    * Under Cautions:  Instead of ….Can loan features trigger higher or additional payments?  How about…Will any of the cautions listed below apply to loan terms and trigger higher or additional payments?
    *  Under Cautions – Increasing Loan Amount – should be N/A, not No
    *  Under Comparisons – APR calculation of 5.59%  How did you calculate this?
    *  Under Projected Payments – Where did the $317  in year 9 come from?  Is this because the loan has PMI and the premium will decrease at this point? …  The doc doesn’t mention PMI until 2/3 of the way down on page 2.
    *  Estimated Closing Costs – Section B – Consider changing the wording to be…Total cannot be higher than $…at closing unless there is a change in circumstances.
    *  Is an Escrow Account Required? Y/N….Is this the only option?  Customer may choose to escrow, but it isn’t required that they do so.  How would a situation like this be disclosed?
    * Under appraisal – The appraisal isn’t typically free.  What is the definition of promptly?
    * PMI  – It would be helpful if PMI was broken out – so the customer can clearly see what the premium will be and how much is expected to be collected at closing.

    I appreciate the opportunity to provide input and hope this is helpful.

  • Wlg

    Option 2′s layout is better but many sections are missing.  One page GFE before 2010 does much better job I think.
    The borrowers want to know the TOTAL funds needed at closing including down payment  and How much is their TOTAL monthly payment. -
    This form does not give borrowers neither TOTAL funds to close nor TOTAL monthly PITI.
     
    On this form:
    Expires – is this for the Closing Cost OR Rates?  It does not specify
    B – Appraisal service and credit report should not be at B section- this should be separate section
    D -What is Non-Required Service – Owner’s title insurance is required for purchase in FL.
    No place for Flood Insurance 
    No place for discount point
    No place for Survey
    No place for upfront MI
    No place for borrowers to sign and date

  • Patric

    I have been in the business for over 28 years. I have always tried to honor my clients by giving them a fair deal for my hard work. It did not matter if they were black, brown , yellow or white or a mixture of all, they got my best deal I could give them based n credit, income, down payment and any lender add ons for whatever. I made the same usually around a point or so. I beat the banks in service and my competitors in rate and terms of the loan. Now all that is gone I have to charge what ever is par to the bank or lender. I can’t shop for my clients or take less to make a deal work. The Client is the loser in all this. The Banks are ravening wolves circling the prey. Every time the Government try’s to fix what they perceive as a problem the ones who created it are still in Charge. Remember the RTC. Now we have the CFPB. May consumers should do their homework or just rent.  Here is my GFE Your payment is: $$$$, your APR is  % Your Rate is % your closing cost is $$$$$$ your need $$$$$ to purchase this home and if you don’t pay as agreed you’re in the street. How’s that for simplifying things.
    Signed a Licensed MLO with a chip on his shoulder.

  • STCook

    Many good comments.  Believe two have been overlooked:
       1)  There does not seem to be any provision for any payment the borrower has made early on- like credit and appraisal deposits, nor for any earnest money deposit.  Where do they fit into the form?
     
        2)  Though there have been many comments about getting working “bankers” involved in the further review process, I believe we need to make sure there are Licensed Loan Originators and Brokers as well (though some may have assumed they were included in “bankers” I don’t want to make any assumptions.

    Believe the problems some are pointing out, are based on fact that some assumptions were being made in creating these formsthat may not have been true.

    Thank you for this opportunity for providing input.

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