CFPB finalizes “Know Before You Owe” mortgage forms

The Consumer Financial Protection Bureau (CFPB) issued a rule requiring easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The new “Know Before You Owe” mortgage forms will replace the existing federal disclosures and help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.

“Taking out a mortgage is one of the biggest financial decisions a consumer will ever make. Our new ‘Know Before You Owe’ mortgage forms improve consumer understanding, aid comparison shopping, and help prevent closing table surprises for consumers,” said CFPB director Richard Cordray. “Today’s rule is an important step toward the consumer having greater control over the mortgage loan process.”

For more than 30 years, federal law has generally required that within three business days after receiving a mortgage application, mortgage lenders must deliver two different, overlapping disclosures to consumers. At the closing stage, federal law again generally requires two forms. All of these forms contain duplicative and sometimes confusing information. The Dodd-Frank Wall Street Reform and Consumer Protection Act recognized the need to simplify and streamline this information for consumers and transferred responsibility for the forms to the CFPB.

Today’s final rule requires that lenders use the CFPB’s new disclosures, puts in place rules about when the new forms are given to the consumer, and limits how the final deal can change from the original loan estimate. The forms are available in English and Spanish.

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