New mortgage disclosure forms will aid borrowers in 2015
Starting next year, it’s going to be easier to tell if your lender changes the deal it offers you between the time you apply for a mortgage and the time you sign the loan papers at the closing table.
Two new mortgage disclosure forms launch in August 2015.
You’ll see all the details of the deal your lender is offering in the Loan Estimate disclosure.
You’ll know you’re actually getting that same deal at closing by looking at the Closing Disclosures.
Until then, you’ll still get the three mortgage disclosures these are replacing — the Good Faith Estimate (GFE) and Truth in Lending statement at the beginning of the mortgage process and the HUD-1 Settlement Sheet when you close your loan.
If you’ve ever gotten a mortgage, you know how complicated those forms are and how difficult it can be to compare the deal that appears on the Good Faith and the Truth in Lending forms to the deal that shows up on your HUD-1.
The agency leading the charge on the new disclosures, the Consumer Financial Protection Bureau, devotes itself to consumer financial education and also regulates lenders.
The new forms look deceptively simple, but they’re the result of a nearly 2,000-page regulation that already has lenders scrambling to change their systems and processes by the 2015 deadline.
Liliana Nigrelli, vice president of compliance for Churchill Mortgage in Nashville, says extensive consumer testing the CFPB did before launching the new forms paid off.
Key information that consumers found to be most helpful in decision-making appears on the first page of the disclosure, and things that are less helpful, but still needed, show up on the second page. (Click here to see a side-by-side comparison of the new and old forms.)
The new documents are streamlined, so you only see the information you need to know, she says.
“If you’re taking an adjustable-rate, interest-only or balloon loan, you’ll see best- and worst-case payment examples showing how your rate and payment could adjust during the life of the loan," says Nigrelli.
If you’re applying for a fixed-rate loan, your payment doesn’t adjust, so the lines talking about payment adjustments won’t show up on your form where they might be a distraction.
The Closing Disclosure has the same format as the Loan Estimate form, making it easier to tell if your loan terms change between the time you apply and the time you close.
“It gives consumers a better ability to make good comparisons and be knowledgeable participants in the process,” Nigrelli says. “You can be confident in the information you receive.”
Between now and August, lenders have to keep using the old forms. Nigrelli offers three suggestions for making sure the loan you get is the loan you were offered:
- Review your Good Faith Estimate, paying close attention to the interest rate and fees the lender is charging.
- Ask how much money you’ll need to bring to closing. Currently, fees can increase a bit, although the new rules restrict those increases even more.
- Get your HUD-1 a day before closing. Compare the interest rate and fees to your lender’s original estimate. If anything increased, ask why. If you’re not satisfied, you can refuse to close until the lender gives you the deal you were promised.