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Know Before You Owe: Introducing our proposed mortgage disclosure forms


This is the third post in a series on the Know Before You Owe project for simplifying mortgage disclosures. Last week, we explored the origins of the project and the process that brought us to this point. Today, we’re explaining the proposed rule we’re issuing to make mortgage disclosures more effective and easier to use.

For the majority of Americans, buying a home means taking out a loan. A mortgage loan is the biggest financial commitment most of them will make in their lifetimes. With something so important, you ought to be able to get up-front, easy-to-understand information that lets you compare different loan offers and find the one that’s best for you.

The first page of the proposed three-page loan estimate

The proposed loan estimate, which combines the original Truth in Lending disclosure and the Good Faith Estimate into a single three-page disclosure.

That idea was the starting point for the Know Before You Owe mortgage disclosure project. The Dodd-Frank Act requires us to combine the Truth in Lending and Real Estate Settlement Procedures Act disclosures, and we began Know Before You Owe to make sure the people who would use the new forms were part of the process of creating them.

Today, we’re presenting the results. After more than a year of research, testing, writing, and review, we’re submitting a proposed rule to the Federal Register to create new, easier-to-use mortgage disclosures.

Take a closer look and learn more about it.

There is more to the proposal than just the forms. Today, rules known as “Regulation X” and “Regulation Z” tell industry how to fill out the forms. We are proposing new rules in Regulation Z to tell industry how to fill out the new forms. We are also proposing commentary that interprets the rules to help industry understand how to comply. To help you see how the rules and the commentary interact with each other and the forms, we are showing you the applicable rules and commentary for each section of the first page of the Loan Estimate.

We’re doing this to save you the trouble of flipping pages to find the right rule for filling out the form, and then flipping more pages to find the right comment to help you understand that rule. Instead of you hunting for the rules and commentary, they will come to you.

We think this is a helpful way to present the proposed rules and commentary to busy industry stakeholders. If this is useful, we will explore doing it for the rest of the rule. See for yourself.

More about the proposed rule

The new disclosure – Compare our proposed disclosures to the existing ones.

How we did it – Review a timeline of the project, from the Dodd-Frank Act to today.

The proposed rule – See the full proposed rule, including a version of the first page of the Loan Estimate annotated with the relevant sections of the rule and commentary.

More resources – Proposal summaries, reports on what we heard in testing and the small business review panel, and more.

The proposed rule and forms would have benefits for both consumers and industry:

  • Simpler than the old forms. Lenders can explain the terms more easily using fewer forms. Consumers, meanwhile, can understand and compare different mortgages more effectively, and compare their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • Highlight information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. The forms also offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
  • Easier to look out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as adjustable interest rates and payments, prepayment penalties, and loan balances that increase (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.
  • More time to consider choices. The lender or broker must give the estimate within three business days of applying, and they must receive the closing disclosure at least three business days before closing.

The rule will be published in the Federal Register soon, and when it is, we’ll update this blog post to let you know how to comment.

In the meantime, please, check out the new forms and the process that brought us here. We’ve got a lot more for you to explore: a side-by-side comparison of the new forms and the old ones, a visual timeline of how we got here, summaries for consumers and for industry, and reports on what we learned.

Thank you for all your hard work. We couldn’t have done this without you.

  • Irritated

    You’ve got to be kidding.  1100 pages to discuss the consolidation of 2 simple documents and then you actually cause them to be longer than existing documents!
    How much money is being WASTED by this agency!  Consumers still won’t read these documents with significant levels of understanding as they are still only small parts of a loan closing package.   Have you read the standard 16 page deed of trust lately?  How about the multipage note or notice of recission? 
    This is why Americans do not want to pay higher taxes.  Stop the waste!

    • Paul Halter jr

      Amen this is ridiculous and the 3 day delay is even more ridiculous stop wait and do nothing is not the solution shorter, quicker, easier that is the solution!!!

  • Wvsarafan

    1100 pages? You people are insane.

  • Shame on you CFPB!

    I couldn’t agree more.  Do I think there should be more protection for the consumer of course.  However, taking two years to make a form better just doesn’t seem reasonable.  How much of the tax payers dollars have they wasted on trying to figure this out.  The sad thing is, most of the people making the decisions are not in the industry and have no fundamental knowledge of how it works.  Government at it’s best!  NOT!!!!!

  • Anonymous

    This agency is just a rogue federal agency. It does not abide by the rules dealing with public comment periods that all other federal regulatory agencies have to live under. The comment period starts from the day it is published in the Federal Register. How hard is that?

    The costs involved with this proposal are so understated. It does not consider the thousands of community banks and credit unions under $10 billion that have to read, undersand and implement this proposal.

    This will be the first regulation to be tossed when the appointment of the CFPB Director is ruled unconstitutional by a federal judge or group of judges.

  • Paul Halter jr

    As a 40 year veteran of mortgage business, past Chapter President MBA and FAMB I am appalled at the take over of non elected government buracrats. Not protecting consumers cost is up triple already you will double it again you are only printing money to fund a below market rates killing the private market

  • Guest

    I think the new forms are great.  I look forward to the day when people without advanced degrees can make a good choice on a home loan.  None of this would have been necessary if the banking industry hadn’t hidden so many fees and “gotcha” charges into loans in the first place.  

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