New Mortgage Loan Disclosures Help Borrower Understand Loan Specifics

: Chris Lee Law Firm

  Filed under: Mortgage

Applying for a home mortgage loan can be a daunting task. There are many forms to complete, none of which are written in a way that is easily understood. It has become apparent that most people have no idea what the specifics behind their mortgage loan entail. The Consumer Financial Protection Bureau has begun an initiative to rewrite mortgage loan disclosures in a way that helps the borrower understand the loan details and conditions.

The Problem

In the past, mortgage loan applicants received two documents describing fundamental loan information. The, Truth in Lending Act disclosure and Real Estate Settlement Procedures Act Good Faith Estimate, forms were intended to assist borrowers in understanding the basics about their mortgage loan and specifics about their payments. These forms are anything but simple. After the significant rise in foreclosures, Congress was pressured to review ways to help consumers.  They determined that these disclosure forms did not adequately explain mortgage loan specifics, especially unconventional mortgages like adjustable rate mortgage (ARM) loans. These forms failed to provide tools for consumers to estimate their monthly payments, especially when changes to interest rates were to be implemented over the course of the loan.

Become an Informed Consumer

The Consumer Financial Protection Bureau announced they were testing two different types of disclosure forms to remedy the problem by providing better information to the consumer.  “This is about empowering consumers,’’ says Elizabeth Warren, one of the informed professionals selected by President Obama to manage the bureau. These forms are meant to  include information about projected payments, how interest rates affect payments over the life of the loan, differences in loan types and information about unconventional loan, such as the ARM loan.

The bureau is testing these prototypes, in both English and Spanish, and invites consumers to provide feedback.  You can find the old forms at , and review the “Truth in Lending form” and the “Good Faith Estimate.” Then go to the “Know Before You Owe” page and click on “Continue to Consumer Tool.” Here, you will find the two new forms that are being tested by the bureau.  The Consumer Financial Protection Bureau welcomes feedback about the whether these forms are helpful in understanding mortgage loans.


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