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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. 

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