CFPB Releases Streamlined Disclosure Forms

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WASHINGTON-The Consumer Financial Protection Bureau released two prototypes for a single, streamlined mortgage disclosure form.

The forms, which take similar approaches but have different layouts, are designed to reconcile the requirements established by the Truth in Lending Act and Real Estate Settlement Procedures Act. The forms are a product of the agency's "Know Before You Owe" project, and it plans to test them with focus groups before beginning a formal rulemaking process.

Elizabeth Warren, the bureau's de facto head, said the project aims to provide consumers with easy-to-understand information that helps them compare different mortgage offers.

"The current forms can be complicated and difficult for consumers to use," Warren said in a press release. "They are also redundant and can be costly for lenders to fill out. With a clear, simple form, consumers will be in a better position to answer to basic questions: Can I afford this mortgage and can I get a better deal somewhere else?"

Each form has a slightly different design, but both would break down the mortgage offer to highlight key terms, such as interest rate and monthly payment, and potential concerns, such as increasing loan amounts or balloon payments.

Both also include a section to help consumers compare the offer with other loans, and lays out projected payments over the life of the loan. Both also break down expected closing costs, and use check boxes to indicate whether a loan requires an Escrow account or mortgage insurance.

The Dodd-Frank Act directed the CFPB to merge the TILA and RESPA forms, which are two and three pages long, respectively, and have overlapping information.

The bureau plans to test the prototypes with focus groups before beginning a formal rulemaking process. It said it would conduct five rounds of evaluation and revision through September 2011 to select a single draft disclosure and then refine it. The initial testing will be conducted in Chicago, Los Angeles, Albuquerque, N.M., Birmingham, Ala., Baltimore, Md., and Springfield, Mass., according to a press release.

The bureau also plans to conduct additional analysis and research over the summer, and consider underlying regulatory issues and ways to refine closing-stage mortgage forms, a process that will likely extend into the fall and early next year.

CFPB must issue the proposed forms and regulations for formal notice and comment by July 2012.

The bureau already launched a Web page last week soliciting feedback on the forms, asking consumers to submit their e-mail addresses for a chance to weigh in on the prototype when it's ready.

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