Jason B. Lingerfelt, Attorney at Law – North Georgia Real Estate Closing Attorney – "A Realtor's Friend"
Consumer Financial Protection Bureau Disclosure Forms
The Consumer Financial Protection Bureau is getting a lot of headlines in the last few weeks. A quick summary of the CFPB (directly from their website http://www.consumerfinance.gov/the-bureau/):
“The consumer bureau will work to make sure that consumers have the information they need to understand the terms of their agreements with financial companies. It will also work to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own.
Congress established the CFPB to protect consumers by carrying out Federal consumer financial laws. Among other things, the consumer bureau will:
- Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws
- Restrict unfair, deceptive, or abusive acts or practices
- Create a center to take consumer complaints
- Promote financial education
- Research consumer behavior
- Monitor financial markets for new risks to consumers
- Enforce laws that outlaw discrimination and other unfair treatment in consumer finance
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the consumer bureau. Many of the pieces of the Dodd-Frank Act relating to the CFPB will go into effect on July 21, 2011. The Secretary of the Treasury is responsible for setting up the consumer bureau and, on September 17, 2010, President Obama and Treasury Secretary Geithner named Elizabeth Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB.”
As part of making the process easier they have just released a disclosure form, for review and public comment. This form will combine aspects of the Good Faith Estimate (GFE) and the Truth in Lending (TIL) forms, which Lenders and Mortgage Brokers are required to give to potential clients. The new form does show some interesting information like: How much you will have paid your principal down in 5 years, how much you will have actually paid, and your Annual Percentage Rate (APR).
The proposed disclosure form is for Lenders and Mortgage Brokers, to give to potential clients when they are shopping for a loan. This form is supposedly easier to use and understand than the current Good Faith Estimate (GFE) that Lenders give to potential clients at the present time. If you call, going from three pages on the current GFE to two pages on the disclosure forms that the CFPB is proposing, and removing a lot of the descriptive language describing what each column and row of numbers mean, then yes this form is easier to use and understand. While this form is easier for people to look at and read, because of the simplicity of the document, it takes away the descriptions and meaning of the information provided, which may hinder the consumer to make a more informed decision.
Also based on this new form, it looks like the only charges that are regulated are the “Origination Fee”, which cannot change, and the “Required Services you cannot shop for”, which can still increase by 10%. Unlike, the current GFE where the “Title Services” and “Items you can shop for” can only increase by 10%, now they can now change more than 10%. Why? Is it because the Lender/Mortgage Broker does not always know what the “Title Services” will cost or is it because Title Companies and Attorneys did not like to be limited to what they could charge based on a quote by a third party? Either way, on the proposed disclosure the charges seem to be allowed to change.
The current GFE is working, why change it? Does the proposed disclosure make it easier to shop for a loan? The disclosure forms are open to comments until May 27th at: http://www.consumerfinance.gov/knowbeforeyouowe/
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