The silliness behind simpler mortgage paperwork
The Consumer Financial Protection Bureau, the watchdog against deceptive and abusive lending practices created in the wake of the recession, officially opens for business today.
And, boy, does it have its work cut out for it.
Elizabeth Warren, who is overseeing creation of the agency, recently asked the Mortgage Bankers Association what it thought about a proposed new disclosure form consumers would get when they apply for a loan.
I’m guessing she wasn’t expecting the reply she got: It’s not going to work because you want us to print on both sides of the paper.
I swear I am not making this up.
This new mortgage disclosure form will replace the Good Faith Estimate and Truth-in-Lending forms you get today when shopping for a loan.
The new form, mandated under the Dodd-Frank financial reform law, is supposed to make it easier for you to learn how much the loan you applied for costs so you can shop around for the best deal and determine if you can afford the payment.
As this document gets hashed out, the Mortgage Bankers Association wrote a letter to Warren saying its computer systems are: "... incapable of providing a double-sided disclosure. Also, we understand many systems are unable to provide different sized and color fonts, shading, vertical dots and shapes including circles and arrows."
An industry that can turn your 30-year, fixed-rate loan into an unbelievably complex security sold globally can’t do two-sided printing.
You know what? It’s true. The average loan officer is sitting at a desk like yours using that same HP laser printer you bought back in 2005 that prints on one side of the paper.
MBA goes on to complain that the bureaucrats didn’t include spaces on the form to discuss some of the things you would definitely want to know about like second loans and temporary buy downs (when you get a reduced interest rate for a limited period of time).
I’m guessing you’re a thoughtful consumer (you’re reading this blog aren’t you?), so you’ll read the disclosures whether there’s gray shading or no shading -- and you’ll remember to look on the back side of the pages.
But plenty of consumers won’t read the disclosures because they’re too focused on getting what they want, whether it’s a particular house or to pull equity from their home.
They’re not going to slow down long enough to read the paperwork no matter what’s included or how many arrows point to the important parts.
Now that's silly.
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