OK, so the page will be double-sided. But still, with the possibility of a new simple and straightforward form that can be reviewed and understood quickly, “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?”
The quote comes from Elizabeth Warren, who was appointed as the head of the Consumer Financial Protection Bureau (CFPB) last fall, and who spoke with reporters from CNN and other media outlets yesterday to introduce two prototypes for a simplified mortgage disclosure form. The idea is that instead of having to sift through pages of paperwork with confusing, repetitious legalese about fees and possibly shifting rates, sometime in the near future anyone looking for a mortgage would receive a one-page boiled-down “mortgage shopping sheet,” as Warren calls it, from each possible lender.
The CFPB is calling this initiative “Know Before You Owe,” and consumers can weigh in on the site which one they prefer. Here’s a PDF of option A and this is the link for option B. Both seem solid to me, with key terms like closing costs, monthly payments, and interest rates right upfront. The forms also point out clearly whether a home buyer can expect payments to change. Here, for example, is a snippet from form option A:
After receiving consumer input and several rounds of testing this summer around the country, the agency is expected to decide on a final form (which could be a hybrid of options A and B) by September, though it won’t be formally proposed for approval until mid-2012.
It’s amazing how much time and effort needs to be spent in order to help consumers understand what they’re buying nowadays—to, in essence, undo what reams of lawyers, MBAs, marketing strategists, and corporate executives have concocted over the years to confuse customers and maximize profits. After discovering the average checking account comes with 111 pages of disclosure, for example, the Pew Charitable Trusts group recently proposed a format for a simple box that’d state—clearly, and in one spot—all of the fees and requirements in any given checking account.
That’s not too much to ask for. Neither is a simple document that’s easy to read and easy to use for comparison that lays out the basics of a mortgage.