December 5, 2023

Bucks: A Plan to Cut Mortgage Paperwork

Elizabeth Warren, assistant to the President on the Consumer Financial Protection Bureau(Harry Hamburg/Associated Press)Elizabeth Warren, the acting head of the Consumer Financial Protection Bureau

Anyone who has applied for a mortgage knows it can involve a daunting amount of paperwork. The new Consumer Financial Protection Bureau is taking a step toward reducing at least some of the pages required by federal law.

The bureau is trying to combine two federally required disclosure forms, which now total five pages, into a single form that makes clear the costs and risks of the loan.

The two forms are the Truth in Lending Act disclosure and the Real Estate Settlement Procedures Act’s Good Faith Estimate of settlement service charges, which all borrowers must receive within three days of filing a loan application. (I have particularly bad memories of the good faith estimate form causing debate during the closing of our first home years ago.) The two forms are meant to convey basic facts about home loans to help consumers compare different loan options and interest rates, but they’re often redundant and difficult to understand.

So as part of its “Know Before You Owe” project, the new agency is testing two form prototypes, with the goal of proposing a new, combined form next year. “With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage and can I get a better deal somewhere else?” Elizabeth Warren, the acting director of the new bureau, said in a news release.

The testing will include in-person interviews with borrowers in English and Spanish, in six cities: Albuquerque; Baltimore; Birmingham, Ala.; Chicago; Los Angeles; and Springfield, Mass. There will be five rounds of testing and revision through September. The agency will then further refine the draft form into a final proposed version by next summer.

The agency is also interested in feedback from consumers and advocacy groups. Both of the proposed documents are two pages long. You can view the first proposed form here, and the second one here.

Or, you can go here to view the two versions together and submit comments.

What do you think of the forms? Does anything stand out that could be made simpler?

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