The Consumer Financial Protection Bureau, or CFPB, has announced the Know Before You Owe project, an effort to combine two federally required mortgage disclosures into a single, simpler form that makes the costs and risks of the loan clear and allows consumers to comparison shop for the best offer.
The CFPB has begun testing two alternate prototype forms that are designed to be given to consumers who have just applied for a mortgage loan. This testing – which will take place over the next several months and involve one-on-one interviews with consumers, lenders, and brokers – will precede and inform the CFPB’s formal rulemaking process. The CFPB also has posted the prototypes on its website with an interactive tool to gather public input about the designs.
Current federal law requires that mortgage loan applicants receive two documents – the federal Truth in Lending Act (TILA) mortgage disclosure and the Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate – within three days of application. The current forms are two pages and three pages long, respectively. While they are intended to convey basic facts about home loans to help consumers comparison shop, the CFPB believes these forms have overlapping information and complicated terms that can be difficult to understand. Congress and federal regulators have considered merging the two documents in the past, and the Dodd-Frank Act directed the CFPB to propose new integrated disclosures.
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