It’s not very often that the federal government makes a decision that could make life easier on consumers, but that’s exactly what happened when the Consumer Financial Protection Bureau (CFPB) announced that lenders have more time to implement a new batch of mortgage disclosures.
What’s going on and what does it all mean for borrowers? After the subprime lending industry died a violent death around 2008, a lot of mortgage defaults and foreclosures hit the nation. There were those that said a major problem was that a lot of consumers didn’t know what they were getting into when they took out mortgages. There’s certainly some evidence of that view, as a lot of consumers were stunned to see their mortgage payments go up by hundreds of dollars per month after the terms of their adjustable rate mortgages went into effect.
That view suggesting consumers needed to be better informed took hold in Congress, and the result was the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Of course, Dodd-Frank covers considerably more than disclosures, but we’ll concern ourselves with the information that the act states must be given to people taking out mortgages at this time.
So, Dodd-Frank directed the CFPB to integrate certain disclosures from the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act of 1968. The act also required lenders to disclose some additional information to consumers. Forms have been around for decades that disclose what’s required under those earlier acts, but the CFPB found they were more than a bit complex — overlapping and often confusing.
Anyone who has taken out a mortgage in the past 40 years or so is familiar with those disclosures. Consumers are informed of how much they’ll pay in both principal and interest. They are told about any fees associated with the mortgage and how much money goes where. The intent is to let consumers know exactly what they’re getting into before they close their loans.
Dodd-Frank also required lenders to disclose more information to consumers. Some of the new information includes what a borrower’s obligations will be in case of a foreclosure, the lender’s policy on partial payments and other matters the CFPB felt weren’t clear to borrowers.
However, there was a problem. The committee initially set Jan. 21 as the date for lenders to implement forms addressing the new disclosures and then later put in place the forms addressing the required information under the 1968 and 1974 acts.
In an attempt to make sure both the old and new disclosures are implemented at the same time, the Jan. 21 date has been suspended and lenders will be required to use the new forms once everything is in place. When is that date?
Like a lot of things coming from the federal government these days, the answer to that question isn’t clear. The CFPB, in a news release, said the forms for the 1968 and 1974 disclosures will be finalized after some more public content and consumer testing and everything will be ready at that time.
If the CFPB is successful in its mention, we’ll see a lot less paperwork in the future and information presented in a way that is easier for consumers to understand. That’s good news.
Home Sweet Home is distributed by the Mortgage Bankers Association of Arkansas. Visit the association online at mbaar.org.More from columnist Ethan Nobles