Lenders and mortgage brokers will be required to provide U.S. home buyers clearer information about loan terms and closing costs under rules issued Wednesday by the U.S. Department of Housing and Urban Development.
Banks will have to provide consumers a standardized "good-faith estimate" of closing costs beginning in 2010, HUD Secretary Steven Preston said. Banks now have different forms making it difficult to compare offers.
"Millions of Americans go to the closing table each year, and many of them have no idea what is expected of them," Preston said. "I firmly believe that this is a big step forward in restoring trust and transparency."
The rules, which the department said are the first changes of their kind in 30 years, are aimed at addressing record foreclosure rates brought on in part by easy credit and a flood of adjustable-rate mortgages that homeowners have been unable to pay. Delinquencies on subprime adjustable-rate mortgages jumped to 21% in June from 9.9% in December 2004, according to the Mortgage Bankers Assn. in Washington.