New Mortgage Disclosure Forms Will Allow Better Understanding For Consumers

Filed under: Market Comentary

know before you oweMany homebuyers in the past have had a difficult time understanding the jargon and information included in mortgage disclosure forms.

However, that will hopefully soon end due to the Consumer Financial Protection Bureau’s new “Know Before You Owe” mortgage forms that will go into full effect in August of 2015.

According to a recent article by James Limbach of ConsumerAffairs, the CFPB’s new forms will replace the existing federal disclosures and are designed to help consumers understand their options, be able to choose the deal that is best for them, and avoid costly surprises at the closing table.

In Limbach’s article, he quoted CFPB Director Richard Corday as saying, “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. The rule is an important step toward the consumer having greater control over the mortgage loan process.”

In the past 30 years, according to the article, federal law has usually required that mortgage lenders must deliver two different, overlapping disclosures to the consumer within three business days after receiving a mortgage application.

And, at the closing stage, federal law usually requires two forms again. These forms contain duplicative and even confusing information. This was recognized by the Dodd-Frank Wall Street Reform and the Consumer Protection Act and they decided the forms needed to be simplified and streamlined for the consumer, and it is has now been transferred to the CFPB.

Another rule says that lenders are now required to use the CFPB’s new disclosures, which 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.

According to the article, the Mortgage Bankers Association (MBA) has applauded the CFPB’s goal of creating mortgage regulations that protect consumers and actually strengthen the real estate finance system.

MBA President and CEO David Stevens was quoted as saying, “We are pleased that they recognized the enormity of change being implemented in the mortgage systems. The August 2015 deadline is a clear recognition by the CFPB of how significant the change is and the time needed to implement the new rule. MBA continues to support clear disclosure forms for consumers that allows them time to review their loan and comparison shop.”

Next week, we will go into more depth on the exact information on the forms and how it improves consumer understanding.

If you have any questions about the home buying process, please give me a call, and we can discuss all of your concerns.


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