A woman visits an open house in San Diego. (Associated Press /Gregory…)
In moves intended to help future homeowners, the Consumer Financial Protection Bureau in Washington is proposing to change the types of forms a borrower receives before signing up for a home loan. The bureau is also proposing to expand the definition of what is considered a “high cost” mortgage.
The bureau said that it’s new “loan estimate” and “closing disclosure” forms will present the costs and risks of getting a home loan to borrowers better than the ones that currently exist.
“When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal,” Richard Cordray, director of the bureau, said in a news release announcing the proposed changes. “Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home.”
The agency is also proposing to expand the definition of what a high-cost mortgage is and in effect ban certain features such as prepayment penalties and balloon payments, which are lump sums due at the end of loans. The changes would also ban fees for modifying loans, cap late fees and restrict the charging of fees when consumers ask for a statement telling borrowers how much is needed to pay off a loan, according to a release. The changes would also require housing counseling for high cost mortgages.
The public has until Nov. 6 to weigh in on the changes to the mortgage forms and can do so here. The public has until Sept. 7 to weigh in on the expansion of the definition for high-cost mortgages and can do so here.
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