By Reid Smeda, Sr.
Everyone will be challenged to comply with the new CFPB forms and rules, but there is a way to win out.
The Consumer Financial Protection Bureau (CFPB) has recently issued proposed rules which are a key focus of and area of concern for the financial services industry. The 1,100 page document proposes two new disclosures: the Loan Estimate and the Closing Disclosure. These disclosures will be a direct result of the combination of the Early Truth-in-Lending Disclosure and Good Faith Estimate (Loan Estimate) as well as the combination of the Final Truth-in-Lending Disclosure with the HUD-1 (Closing Disclosure).
The proposed changes stem, in part, from (i) the often difficult (for borrowers) to understand information contained in the various opening and closing disclosures and (ii) from the complexities faced by lenders in ensuring compliance with the underlying requirements for the disclosures. A result of these issues has been that not only are the disclosures confusing for customers, but also lenders have found them burdensome and time consuming to explain.
In an effort to make the disclosures easier for the customer to understand and to use for comparison shopping, the CFPB has proposed forms with clearer language and well-thought through and focus group tested design. The result is shaping up to be a set of disclosures that more clearly highlights key information, such as total interest paid, loan features, loan costs, etc. in a way that is much more intuitively clear and that better equips customers and lenders with information necessary to decide whether the customer can afford the loan. In addition to specifying the combined disclosure data, the proposed rule also provides a detailed explanation of how disclosures are to be filled out and used, as an earnest measure to avoid the level of industry confusion and frustration with the RESPA changes in 2010.
While the goal of the new rules is to alleviate confusion and errors on the consumers’ end of the mortgage process, the initial effect on lenders will likely not be so beneficial. The same timing provisions that allow consumers ample and consistent amounts of time to review the documents will put added pressure on lenders in the production and release of the documents.
Read the full article: Stay Ahead of the CFPB