Simplified disclosure forms to be provided to all mortgage
borrowers when seeking loans have been put forward by the Consumer
Financial Protection Bureau (CFPB).
The two new forms, which combine and streamline several other
forms currently in use, are designed to ensure that the financial
impacts of a mortgage are presented to borrowers in a clear and
easily understood manner. Among the key elements are a breakdown of
all fees paid, any potential changes in monthly mortgage payments
over time and a disclosure of the total interest costs to be paid
over the life of the loan.
Part of Dodd-Frank reforms
The new forms were mandated by Congress through the 2010
Dodd-Frank Wall Street Reform and Consumer Protection Act, which
also created the CFPB.
The new forms now go through a period of public comment until
Nov. 6, 2012; they will not go into use until they have been
finalized after that date.
3 days to review
One of the major changes the new forms bring is that lenders
will now be required to provide the final disclosure statement
three days before the loan is closed, to give borrowers adequate
time to review it and raise any questions they may have. Presently,
borrowers receive their final disclosure either at closing or
The new forms are intended to replace the current Truth in
Lending disclosure, Good Faith Estimate and Settlement Statement.
Instead, borrowers will receive a 3-page Loan Estimate, detailing
the proposed terms of the loan, and a 5-page Closing Disclosure,
summarizing the final terms.
Comparing major costs
The first page of each document is essentially identical to the
other and lays out major terms of the loan, including the amount to
be borrowed, interest rate, monthly payments, total closing costs
and estimated taxes and insurance. This allows borrowers to readily
see if there have been any changes between the original loan
estimate and final disclosure.
The new forms also lay out the projected costs of the loan over
time, as well as breaking down closing costs to help borrowers more
easily compare competing offers from different lenders. In
addition, the forms list closing fees that borrowers may seek from
other providers, such as for title insurance, land surveys or pest
inspections, rather than going with those suggested by the
The new forms are available for review on the CFPB web site at
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