Simplified Mortgage Disclosures is Warren's Goal

By:
Kirk Haverkamp | September 22, 2010

Simplifying mortgage disclosure forms so that borrowers get a clearer picture of the costs and obligations involved will be a primary goal of the new Consumer Financial Protection Bureau and Elizabeth Warren, the consumer advocate appointed to oversee its creation. 

Warren, a Harvard law professor appointed by President Obama, has been a vocal critic of what she calls “tricks and traps” in mortgage contracts and other credit agreements that bury the essential details of a loan or credit card agreement in mountains of text.
 

Obscured by fine print

 
"Fine print obscures the cost of credit and makes it impossible for families to compare products,” Warren said, opening a forum on simplifying mortgage forms. “Too often, families come to understand the legalese only when they get bitten by it. Streamlined disclosure can level the playing field and give families better tools to make better choices.”
 
Warren said this was particularly true with mortgages, where “borrowers receive stacks of incomprehensible paperwork when they're looking for a loan."
 
The forum, held Tuesday in Washington, D.C., was designed to seek imput on how mortgage disclosure forms might be simplified. Participants included consumer advocacy groups, housing counselors, financial literacy experts, mortgage companies, and other stakeholders. Future stakeholder meetings are planned to help refine the document design.
 

Combining two mortgage disclosures into one

 
The new agency has been charged with combining and simplifying two overlapping mortgage disclosure forms mandated by two different laws and issued by two separate agencies. The HUD-1 Settlement Statement, often called the RESPA form, is a Department of Housing and Urban Development form mandated by the Real Estate Settlement Procedures Act of 1974, while the Truth in Lending Act form is a Federal Reserve document mandated by that 1968 law.
 
Both must currently be provided to borrowers obtaining mortgages. Warren and her team plan to have a new consolidated form ready well in advance of the July 2012 deadline set by the new Dodd-Frank Wall Street Reform and Consumer Protection Act that created the agency.
 
Also participating in Tuesday’s forum was Secretary of the Treasury Timothy Geitner. Warren’s official titles in overseeing the development of the new agency are Assistant to the President and Special Advisor to the Secretary of the Treasury, so she reports to both men. The arrangement allows Warren to begin work immediately to set up the agency while avoiding the delays involved in obtaining Senate confirmation as the new bureau’s director, while sidestepping Senate opponents who might block her nomination.

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