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Working to Give Consumers the Transparency They Deserve


Today, Professor Warren is testifying before Congress on our progress in building the consumer bureau. In her written testimony, she discusses our Know Before You Owe project:

At the CFPB, we believe that a simple and straightforward presentation of key credit terms is the best way to level the playing field between borrowers and lenders and to foster honest competition. Our goal is shorter, clearer forms for the most common credit products, the kind that consumers can read in a few minutes with high levels of understanding. The CFPB is working to give consumers the transparency they deserve to make the choices that work for themselves and their families, while easing unnecessary regulatory burdens for their lenders.

In my first week on the job, the Treasury Department sponsored a symposium that brought together lenders and consumer advocates to discuss how to simplify federal mortgage disclosures. Consumer groups explained that many consumers didn’t use current disclosures to assess costs or to compare alternatives because the forms are complicated and hard to use. The forms came under even more intense criticism from those who have to fill them out. Mortgage originators, particularly community banks and credit unions that work closely with their customers, described paperwork that was costly to complete, even as it produced little value for borrowers. Now, after months of consultation with borrower and lender representatives, we have developed prototype short mortgage shopping sheets that will be tested with actual consumers and, eventually, result in a simple, streamlined mortgage disclosure that will replace the two existing, complicated forms.

The new consumer bureau is making the early form drafts publicly available, long in advance of the formal process of notice-and-comment for official rule-making. We are seeking feedback early and often from consumers, lenders, brokers, and others now, and we will continue to do so as we refine the forms. We have posted draft forms online, while they are still in the design phase, and we have asked the public to weigh in. We will share the input we receive with our testers and designers, factoring it into our design process. We hope that these expanded procedures will permit us to engage a broader constituency, helping us deliver on the promise of this agency embodied in the Dodd-Frank Act.

Read the entire written testimony.

  • Judy Maynard

    Why don’t we just give borrowers a copy of the Note and an estimated settlement statement.  They are easy to explain and easy to understand and, best of all, easy to compare to the final loan documents.  The note will override all other documents and disclosures anyway.  That’s what the borrower should understand!

  • Tomm

    The current good faith estimate and truth in lending forms don’t require a signature or date.  Don’t you want proof consumers read them? Your new ones should also have signature and date lines.  We use to draw out a set of stairs for ARMS to show how much they could increase, when they could increase, and the most they could increase.  Your new forms show it in words…. not as good but not bad.

    You should be classing home equity lines of credit as adjustible and especially if the index is the prime rate, show the range of that index in the last 35 years! When prime returns to 18% again to pay for the inflation/national debt people will be at high risk of losing their homes again…

  • Tomm

    As a mortgage broker who has seen my industry eviscerated by 34 new laws, I applaud your efforts to research how to help consumers understand our jargon. I have the following things to mention however about fostering honest competition: 1) How come it’s legal for lenders to own appraisal portals when there is an obvious conflict of interest in the outcome. One local bank here has an internal policy of cutting appraised values by 30% to protect themselves. They skim a profit off every appraisal and auction off the appraisal to the lowest bidder! They don’t even comply with standard appraisal guidleines requiring people who know our local markets.  We have had appraisers drive 150 miles to give misinformation. Then if a second appraisal is needed the lender gets paid again! Also had a customer doing a refinance and while all lenders allowed us to transfer his $950 appraisal out; none would allow us to transfer the appriasal in.  They would not accept it!   2) Am I the only one that sees a conflict of interest in Bank owned credit cards arbitrarily lowering your credit limit, droppin gyour credit scores by 85 points, so they can charge you a higher interest rate on your home mortgage? 3) How come the loans with the lowest default rate are ZERO DOWN Farm Home Loans with no monthly mortage insurance? Has anyone ever checked the impact that monthly mortgage insurance has on defaults? The $200 to $300 more in monthly payment may be crashing other loan types!

  • Kozan

    Nice Article…

  • Kozan

    Güzel yazı..

  • Anonymous

    Ms. Warren,

    I hope you have time to read the NYT comments.  You have lots of folks behind you.  McHenry is a miserable thug.

  • Khepry Quixote

    Professor Warren, after watching the congressional hearing today, I would like to ask you to please keep the faith.  I have been a follower of congressional hearings since the days of Watergate (which I watched in their entirety).  The level of outright animosity by the majority party of the committee before which you testified today was quite embarrassing.  You’d think that you were being grilled by a conclave of angry “Illuminati.”

    Please don’t get flustered by the questions you’re being asked in ever shorter and more strident staccato cadences.  The intent is to get you to quit by making the whole process more and more personal and in equal measure more vicious.  Please, get some rest, play some darts, have a brew or two.

    You are feared because you are an amazing communicator and have the ability to cut through the “fine print” to expose the reality behind the curtain.

    Mostly you are feared because you hold up a mirror of honesty and those that see their reflections therein are not happy with what they see they’ve become.

    Please continue on your quest.  You are on the right path.  

  • kmdd

    Ms. Warren,

    Stay strong, we support you!

  • James Walker

    Watching this spectacle today, I was embarrassed for Mr. McHenry, among others, and embarrassed that this dialogue could possibly be real.  I thought you were graceful, eloquent and always clear and concise, expressing your response in a fair, honest way.  I have never posted anything before, but wanted to thank you, and express my hope that you will continue to work for all Americans, whether they are intelligent enough to realize it is for their own good or not.  You are a true patriot, please continue to fight the good fight!

    • Mitchell T. Harter

      I agree with you 100 percent.

      I have gone so far as to start a website whose sole purpose is to shine a light on those who succeed through belittlement, bafflement and befuddlement.

      However, it brings to mind the “Sailor’s Prayer” which I paraphrase:

      Lord, Your ocean is so big (and full of fools) and my boat (website) is so small…

  • Peter Bosch

    Ms Warren

    The comments (as mentioned by Ned33) from the NYT story on McHenry’s attempt to intimidate you and derail your mandate show the voters see through the congressman’s agenda. His financial ties to the banking industry in North Carolina leave little to the imagination as far as motive. Thank you for your patriotism and strength of character… you and America will need it to clean up these rigged decks. Next: the always promised, never delivered, root of many of our problems… campain finance! 

  • Kathyto

    There are so many disclosures, I know I didn’t read a single one of them when I signed my mortgage in August.  It’s too much.  I read the titles and that’s all.  No one’s going to read the new gfe and til, except a couple engineers.  Even the note is too long to read.  Transparency should be about getting more concise, so we only have to read/sign one document.

  • Brian W

    Once again the proposed form will result in questions and is not self-explanitory.  It is page 2, the details of the costs.  ALL loan charges should be under one section “Loan charges” novel idea.  “Loan Origination” has always been undestood as “points” by the public.  So call points laon origination.  The other charges are “loan fees” allow lenders to detail the fees – processing, underwriting, doc fee, loan admin, apparisal, credit, flood cert, tax service, etc. etc. Allow us to breakdown all the “Origination” and “loan fees” seperately under “Loan Charges”   – not just one lump amount.  Also don’t include the SELLERS costs to be lumped with the buyers.  The form needs major work.  Why don’t they ask the professionals that have been doing this for 25 years what the form should include and how it should be laid out.

  • Mitchell T. Harter

    Thank you Professor Warren.
    If I may:
     1) please don’t run for Senate
          dilluting your obvious intelligence in a sea of those less fortunate would be a waste of your talent.
     2) please don’t allow those who would deter you from your path with their outright lies and sound bites.
     3) please update your Calendar since the detractors seem to be using the Calendar’s lack of update since Feb 2011 as ‘proof’ of your ‘deceitfulness’.

  • Laura Dawson

    One major factor that seems to be going unnoticed in this whole mortgage process is…the credit bureaus. These Big Three giants have ruled the road with unethical internal standards for too many years. Placing half-truths on people credit reports during escrows, or allowing secondary marketing access to personal information.

    Then some smaller bureaus pop-up to set their own standards with extrapolated data! Now it becomes the person’s responsibility to inform each of these agencies when they have made a mistake, or when the borrower has repayed the debts. Many times, there is no easy way to access the agency to share cleared credit information.

    And with identity theft, the borrow has to prove who they are to each of the agencies, before even accessing their own credit information, which is some cases is undentifiable, riddled with false claims and even judgements. I feel like surrendering to the behemoths during these times of simply working to manage daily life economically.

    PS/ Before the rollar coast economic bubble crossed the US in the early 21st Century, I had a job, raised two children, and had A+ credit scores.

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