As the effective date of the Consumer Financial Protection Bureau’s mortgage disclosure rule draws near, the bureau is helping consumers understand how the new rules will benefit them. In its blog post, the CFPB emphasized that the new rules will ease the process of taking out a mortgage, helping consumers save money, and ensuring you “know before you owe.”
What’s changed? When the new rules go into effect on Oct. 3, 2015, the following changes will take place:
- Four overlapping disclosure forms will be streamlined into two forms, the Loan Estimate and the Closing Disclosure.
- Consumers will have more time to review closing documents. Currently, lenders must give consumers their HUD-1 Settlement Statement disclosure 24 hours in advance; after October 3, consumers will receive Closing Disclosure three business days before signing the forms and accepting the terms of the mortgage, no request needed.
Making mortgages understandable. The CFPB has taken several steps to ensure that consumers fully understand the terms of their mortgage over the last four years. The bureau’s “Your Home Loan Toolkit” has worksheets and conversation starters to help consumers at key points in the mortgage process. Buyers will receive the toolkit when applying for a home purchase mortgage. In addition, while these forms make the process of taking out a mortgage easier, the bureau has also created digital resources to help homebuyers use and understand the Loan Estimate and Closing Disclosure. These tools give definitions of terms like “balloon payments” and “points.” They also show where to look, page-by-page, to check that terms and numbers on both documents match up.
For a better understanding of what it takes to get a mortgage, the bureau has also updated its “Owning a Home” site with an overview of the mortgage process. This step-by-step guide to getting a mortgage takes consumers from creating a budget to filing away important closing documents after they accept the terms and sign on the dotted line. “Owning a Home” also has tools and resources to help homebuyers learn more about loan options, make decisions, and prepare for closing.
Housing counselors approved by the Department of Housing and Urban Development are another great resource, noted the bureau. They can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you.
Cordray remarks. The "Owning a Home" website expansion will “help consumers shop for a mortgage and go about buying a home, from the very start of the process all the way to the closing table,” according to CFPB Director Richard Cordray. Speaking at the National Association of Realtors, Cordray said that the site guides consumers through the process of meeting with lenders.
Discussing the Closing Disclosure, Cordray expressed concern over misinformation being spread by false claims “that last-minute changes based on walk-throughs or similar circumstances will cause frequent three-day delays in the closing process.” Saying that sellers’ credits will never require a new Closing Disclosure that delays the closing date, he emphasized that a new Closing Disclosure will only be required by three very limited circumstances relating to changes in the loan terms.
Cordray also offered a defense of the CFPB’S “Ability to Repay” rule, which requires lenders to make sure that borrowers have the ability to repay their loans before extending them a mortgage. He remembered predictions from critics that CFPB rules would cause mortgage prices to rise, cut volume, and harm community banks and credit unions. With the rules in place for almost two years, Cordray asserted, “none of those heated claims has come true.”
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