When you take out a loan to purchase a home or to refinance your mortgage, you generally receive two key federal mortgage disclosures with your final loan terms and costs: the Truth in Lending Disclosure and the HUD-1 Settlement Statement. We are working to combine these documents and certain other federal disclosures into a single, easier-to-use form.
In January, we are testing two different designs for these closing disclosures in Philadelphia, PA (named Butternut and Hemlock). We’re now working to apply the lessons from your comments and our testing in Philadelphia to improve the forms.
When you see these prototypes, you may think, “This doesn’t look shorter or simpler than the current disclosures.” You’re right. These prototypes have some new items that you may not have seen on the current disclosures they’re replacing. These additions are new disclosures required by the Dodd–Frank Act. Basically, we’ve boiled down content that could have filled ten pages into five or six.
Unfortunately, we don’t control most of what you receive at closing, so our page reduction efforts can only go so far. For now, we’re working on consolidating these forms and making this disclosure better. Our goal is an integrated disclosure that works for you, so we need your feedback. Take a look and let us know if we included the information you need.
Taking out a mortgage loan means going to settlement or closing, which is where you review and sign your loan documents and the money is paid out. If you recently closed on a loan, you received a two-page Truth in Lending disclosure form (JPEG image) and the three-page HUD-1 Settlement Statement. These forms are intended to help you understand the loan you purchased, the cost for the services needed to close the loan, and any conditions and requirements that apply. These forms give you more detail about your costs and a final chance to ensure the loan you want is the loan you receive at closing.
Unfortunately, the technical and legal jargon used in these forms may be more confusing than helpful. Complicated and lengthy disclosures can make it hard to answer or even ask the right questions. Many buyers don’t know what they don’t know until it’s too late. Our job is to change that. That’s where we need your help.
Starting with our first two prototypes, we will test different designs and content for a new closing disclosure over the next few months. We want to provide consumers all the information they need in a clear and simple format: Are you closing on the loan you want, for example, a fixed as opposed to an adjustable rate? Do you know how much money you will need at closing and what you are paying for? Are the conditions and requirements for your loan clear? And we want to provide lenders and settlement agents with a document that is easy to use and reduces unneeded regulatory burden. In the end, we want a closing disclosure that meets the needs of both consumers and industry.
Read the blog posts we've written about this process.
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