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Mortgage Disclosure Is Heating Up

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Previously, we talked about participation by people from locations all over the country in the Know Before You Owe project. Today, we want to share some insights about what we heard – or really, what we saw – from your feedback.

The tool we built let users give us feedback in two basic ways:

  • By looking at our two draft disclosures and picking the one that they thought worked best.
  • By clicking on specific parts of the forms and providing comments on what was or wasn’t helpful.
  • More than 14,000 people submitted a choice between the two forms, and we got more than 13,000 individual comments connected to specific elements of the form. While these comments are not a statistically representative sample of all consumers, they are an invaluable source of information.
Sample heatmap. Click to view larger.

Sample heatmap from the first round of Know Before You Owe. Click to view larger.

We have compiled these comments, and our Mortgage Disclosure team is reviewing them for insights as they create the next draft of this important form.

We were also able to compile the 13,000+ clicks into something called a heatmap.

Our feedback tool recorded where users clicked as they reviewed the draft disclosures. A heatmap is a way of displaying those clicks as a graphic that shows which areas were clicked on most. Simply put, it’s a way for us to see, at a glance, what areas of our draft disclosures attracted the most and least attention.

What you see on the right is one of eight heatmaps we made. The white/red sections received the most clicks; the purple/gray sections received the fewest. This particular map aggregates reviews of the “Ficus Bank” form by consumers who said they preferred it to our other prototype, which we labeled “Pecan Bank.”

So, what can this image tell us? Here are a few highlights:

  • Respondents were interested in the bottom line. The full loan amount at the top of the page, the projected payments section at the bottom of the page, and the estimated closing payment on the second page all received a lot of clicks.
  • People had a great deal to say about the “Key Loan Terms” and “Cautions” sections.
  • People commented on the first page of the draft form much more than on the second. This is a pretty common occurrence, and on its own, it serves as helpful advice for our designers about where to put certain important information. But the information on the second page (like closing costs, for example) is also an essential part of mortgage disclosure. That’s why the next round of testing will focus on the second page.

Heatmaps are also easy to compare. Here, for example, are heatmaps of the two forms. These represent clicks from consumers who preferred the form they reviewed:

Sample heatmap. Click to view larger.

Click to view larger. N = 3,676 clicks on the form.

Sample heatmap. Click to view larger.

Click to view larger. N = 2,563 clicks on the form.

These sorts of comparisons can help us see and understand a few things:

  • How the two different formats drew attention to different parts of the form.
  • Differences between what consumers and lenders commented on. (For example, industry reviewers were very interested in applicant or lender information at the top of the form. Consumer reviewers paid less attention to that.)
  • Differences between what positive and negative reviewers noticed on a form.

Of course, heatmaps can only show so much. In this case, the heatmaps raised a number of interesting questions. To find answers, we carefully read and analyzed the comments themselves.

There is symmetry here: heatmaps make it easier to understand and compare data. We want to improve disclosure so it is easier for consumers and lenders to understand and compare when they evaluate mortgage loans. Thanks again to all who provided feedback in helping to move the project forward.

  • SHV

    Thanks CFPB. Keep up the good fight!

  • Stan Brody

    this is all well and good, but bodes a question… now that congress, in determining that it was the mortgage broker that caused the melt dow, and that the banks were innocent of and free from all responsibility in this crisis ( and that Hitler was a misguided good kid)…has passed DODD-FRANK, and other regulations geared at eliminating the brokerage industry, what is the rationale for allowing the banks to basically “skate” yet again on full disclosure… why aren’t the huge profits about to be realized by them when loans are sold into the secondary markets disclosed… profits FAR IN EXCESS of the origination fees… lobbies win again… and we the people get screwed again… I am a huge supporter of Dr. Warren… but if this the best than we can expect… why bother with the smoke and mirrors…

    • Sky

      Hi Stan,  Speaking from a community banker’s point of view, these disclosures are hardly “skating”.  I have been originating, underwriting and processing mortgages for about 18 years and being one of many, many small community banks did not participate in the “program” and “high risk”  loans that were being offered by brokers.  As a point in fact, much to our surprise, many loans that we turned down because they could not be considered sound lending practices were picked up by brokers.  As far as disclosures, rarely did our closing costs vary greatly from any type of “Good Faith Estimates” from the past.  If they did, it was normally because appraisers or title companies changed their fees in the middle of the transactions.  Other than prepaid interest, as long as the loan amount and program remained consistant, so did the fees.  Speaking from the number of loans I have originated and closed, the more disclosures you have and the longer they are, and the more they contain, the less likely are consumers to read or even pay attention when you try to explain them.   I cannot remember a time when anyone actually did  more than sign the Michigan “Borrowers Bill of Rights”, “Consumer Caution and Home Ownership Counseling Notice”, “Servicemembers Civil Relief Act Disclosure”, or anyof the many other disclosures we provide them with.  Frankly, people are overwhelmed with the whole process and the numer of disclosures.   As far as fees, rates and premiums, we have a flat origination/processing fee that is only charged if closed, along required closing costs.  The most costly part of the loan process are the fees that the secondary market is now charging for the loans.   These fees are based upon credit scores, ltv, type of loan and other factors and go directly to the secondary market.  Yes, we do make something on the sale, but they are not the ”hugh profits” you describe.  In many cases, monies from the sale pay for those “secondary market” fees.  And rates, rarely do we increase a rate once we have quoted it, that is unless we offered a lock and the customer wanted to gamble and see if they would go down.  And when they go down we freequently give rates below our original quote, or if rates go up we have honored our commitement and closed with the original quoted rate.  Yes, we do make something on the sale, but they are not the ”hugh profits” you describe.   Believe it or not, it really is somewhat costly to originate, underwrite and close a loan.  Please remember, not everything is black and white.

  • http://www.insurancegofer.com Insurance Quotes

    Very interesting, I have never seen anything like that before showing where users clicked the most. 

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