- Kara JohnsonApril 19, 2011 - MortgageLoan.com
Monday, Apr 18, 2011
Consumers and lenders will get their first look at a new, simplified mortgage disclosure form next month, the acting head of the Consumer Financial Protection Bureau (CFPB) said today.
The one-page form is intended to offer a straightforward explanation of the major terms of a loan, including the interest rates, fees, monthly payments, duration and other critical information. Such simplified loan disclosures have been a major goal of acting CFPB head Elizabeth Warren, who made the disclosure at a banker’s meeting in Louisville today.
Warren said the bureau will release prototypes of the form for evaluation and consumer testing before a formal rulemaking begins. The bureau cannot officially propose a rule mandating a new disclosure form until the CFPB is legally established on July 21.
The form would take the place of two multipage disclosure forms currently in use, which many consumers find confusing. Warren has been highly critical of the way the terms of mortgages, credit cards and other consumer loans are presented to borrowers, saying lengthy legal explanations and extensive fine print tend to obscure the terms of a loan, rather than explain them.
Warren has argued that clarifying loan terms is necessary for consumers to be able to evaluate competing loan offers and make informed choices, saying that free markets cannot function properly unless consumers know what they’re buying.
The new agency is required to develop new mortgage disclosure regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which also authorized the agency’s creation.
Warren, a Harvard professor who was a major advocate for the creation of the CFPB, was chosen by President Obama to oversee its creation. Extremely popular among consumer advocates, she is also considered a leading candidate to be named the bureau’s first director, despite opposition by Senate conservatives who see her as too unsympathetic to business.