The CFPB's new Know Before You Owe mortgage forms and accompanying rules are now in effect. The new forms are intended to help consumers better understand their options. Richard Cordray, director of the CFPB, states, "The new mortgage disclosure rule makes it easier to shop for a mortgage." The undeniable question is, do these new forms really help consumers "know before they owe?"
While the new forms are longer, they do resolve the problem of presenting redundant information, as was the case with the previous versions of the forms that were under two different regulations – the Real Estate Settlement Procedures Act and the Truth in Lending Act, or Regulation Z. The CFPB claims that the merging and streamlining of the previous four forms into two new forms will help consumers better understand their options and avoid costly surprises at the closing table.
I began my career in the mortgage lending industry in 1995, and since that time, the number of closing documents has become extremely overwhelming. During an era of evolving technology that should reduce the amount of paper documents, the amount of paper has instead grown significantly, most recently as a result of the ability to repay/qualified mortgage standards, homeownership counseling rules and even email requirements. Know Before You Owe has combined the Good Faith Estimate and estimated Truth in Lending Disclosure into a new Loan Estimate, and has combined the HUD Settlement Statement and final TIL into the Closing Disclosure. These changes were, according to the CFPB, developed with the consumer in mind, but the information listed on the forms is confusing and difficult to explain.
Are today's consumers on the receiving end of information overload? This is a lot of information to absorb during the process of refinancing or buying a first home. The multitude of forms can leave consumers with a lot of anxiety, as they find themselves wondering what is buried in the mound of papers they just signed. A calculation such as the new TIP percentage is not a number the average lender can calculate, let alone a consumer. The new rules also impose strict waiting periods for when a mortgage closing can take place. The financial crisis of 2008 is the cause of many of these new changes; however, those who issued mortgages with terms unfavorable to borrowers are no longer in business today. The burdens that come with helping consumers have primarily fallen on lenders, real estate professionals and attorneys.
I do not feel the new forms help consumers. Yes, maybe the documents are a little clearer, but they haven't changed the fact that most consumers zone out. They sign documents without properly evaluating the information that is critical to understanding the largest financial transaction of their lives. These new changes could have been implemented just as easily under the old rules without introducing a new set of forms. In 2010, for example, RESPA required the real estate industry to implement and train consumers on new forms. Consumers will not "know before they owe" any more so today than they did yesterday.
Lydia Vazquez Long is assistant vice president, residential lending for Leominster Credit Union. She can be reached at 978-466-7243 or [email protected].
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
