Know Before You Owe – Image Source: Consumer Financial Protection Bureau
One of my favorites pages on the site (at least that is focused on this rule change) is the comparison page where you can compare the existing disclosure documents and directly compare them to the proposed mortgage disclosure forms. If you take a look, I hope you agree with me that the new disclosures are much easier to read.
The benefits to the proposed changes, per the CFPB are:
- Combines several forms into two – reducing paperwork!
- Uses clear language (vs jargon) and a clean design to make finding information easily.
- Highlights the information believed to be most important: monthly payment, interest rate, and closing costs will all be on page 1.
- Provides more info about the cost of taxes and insurance, and how interest rates and payments may change in the future.
- Warning consumers about features they may want to avoid, like penalties for paying off the loan early.
- Making the cost estimates consumers receive for services required to close a loan more reliable, for example, appraisal or pest inspection fees. The proposed rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by the consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services.
- Requiring that consumers generally receive the final loan terms and costs at least three business days before closing on the loan. Currently, consumers often receive this information at or shortly before closing. This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table.
- Providing new and better measures to help consumers compare the cost of different loans offers, including the costs of the loans over time.
- Improving regulators’ ability to monitor compliance by requiring lenders to retain the new forms electronically
I have to say that, in general, I fully support the changes. My only concern is the 72 hour requirement for final loan terms and costs prior to closing. San Francisco is a highly competitive market, and things often are tight (schedule wise) by the time we get loan docs. I need to look closely at the rule to see if weekends and holidays count, and if the disclosures can be made via email to the consumer or must be emailed. Please don’t get me wrong – I think it is important that buyers absolutely understand the loan they are getting, and consider it a part of my job to make sure they do. But I also know that timelines are always very time sensitive in real estate, and I don’t want to add three days to every escrow if there is a better way to handle it.
The CFPB is taking comments now – be sure to chime in with your thoughts!
What are your thoughts?
