Articles Posted in Real Estate Transactions and Finance

Our readers should be aware that the financial crisis has spawned at least one new government agency. In this post, we address the Consumer Financial Protection Bureau (“CFPB”), whose central mission is “to make markets for consumer financial products and services work for Americans– whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” With respect to mortgages, the CFPB has recently promulgated proposed regulations pertaining to mortgage disclosure.

Many people believe that the financial crisis and resulting recession were caused by borrowers entering mortgages that they did not understand and becoming financially overwhelmed as a result. The CFPB has recently proposed regulations intended to prevent this problem in the future. Revisions to the Good Faith Estimate document and the preliminary Truth-in-Lending Disclosure form figure prominently in the new regulations, so that borrowers understand the loan terms and the actual cost. For instance, the new document that combines the purposes served by the Good Faith Estimate and the preliminary Truth-in-Lending Disclosure form, now entitled the Loan Estimate, is to be presented within three business days of the mortgage application and purports to be easier to understand than similar documents presented in the past.

Further, another document, entitled the Closing Disclosure, to be presented to the borrower three business days before closing, is intended to replace the form known as the HUD-1 and the revised Truth-in-Lending Disclosure form. The Closing Disclosure is meant to prevent a borrower from being surprised by unexpected closing costs and the amount of cash needed to close. While most consumer mortgages are covered by the regulations proposed by the CFPB, common mortgage transactions such as home-equity lines of credit and reverse mortgages are excluded.

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