Sunday, August 7, 2011

Regulation:  Mortgage Loan Documents Getting an Overhaul

If you've ever shopped for a home mortgage, you probably recognize — perhaps with a knot of fear in your gut — these two federally mandated pieces of paperwork: the two-page Truth in Lending disclosure, and the three-page Good Faith Estimate form. They are, despite their sweet-sounding names, daunting loan documents for consumers about to make the largest financial commitment of their lives.

The government has long required banks to present these papers to potential home buyers to help them grasp the full consequences of loans and all the sneaky fees that go with them. Over the years, the forms have been studied and fought over and adjusted, rarely to the satisfaction of consumer advocates.

The bureau has asked consumers to weigh in on a pair of designs for a revamped two-page form that would combine the Truth in Lending and Good Faith Estimate documents.
The public process the Consumer Financial Protection Bureau is using to now design that information represents a significant break in how government typically shapes such regulation.

The first thing they always do is talk to the industry lawyers, and that tends to warp their thinking, Mierzwinski said. They worry about compliance, not clarity. They worry about bank concerns rather than consumer concerns. And because they're in rooms with lawyers every day of their lives, they don't think like consumers.

This campaign suggests, Mierzwinski said, that the bureau has new ideas — and the new ideas don't just extend to fixing forms, they extend to fixing government.

For more, see Mortgage Loan Documents Getting an Overhaul by Emily Badger, June 7, 2011 at Miller-McCune.

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