Treasury Moves to Revise RESPA Forms and Simplify TILA Disclosures

Newly appointed Assistant to thernPresident Elizabeth Warren and Treasury Secretary Tim Geithner hosted a forum</aearlier this week to allow concerned parties to provide input on combining and simplifyingrntwo overlapping mortgage disclosure forms. rn</p

Consumer advocacy groups, housingrncounselors, financialrnliteracy experts, mortgage companies, and other stakeholders metrnto discuss forms that the Truth in Lending Act (TILA) of 1968 and the RealrnEstate Settlement Procedures Act (RESPA) of 1974 require that lenders providernto mortgage applicants.  Despite morernthan a decade of attempts to combine them, the two forms continue to overlap butrnremain separate. They have also remained highly technical and difficult forrnborrowers to understand. </p

Warren, who conceived of and will be setting up the new Consumer FinancialrnProtection Bureau (CFPB) established by the Dodd-Frank Financial Reform Bill,rnsaid, “Fine print obscures the cost of credit and makes it impossible forrnfamilies to compare products.  Too often, families come to understand thernlegalese only when they get bitten by it.  Streamlined disclosures can level the playingrnfield and give families better tools to make better choices.  This isrnparticularly true in the mortgage market, where borrowers receive stacks ofrnincomprehensible paperwork when they’re looking for a loan.”</p

According to the Treasury Department, the Dodd-Frank Act also included arnnumber of provisions that allow the CFPB and other federal regulators tornregulate the type of mortgage lending practices that proved unsustainable andrndamaged the overall economy earlier in the decade.  For example, the Actrnrequires mortgage lenders to verify a borrower’srnincome or assets; prohibits incentives that encourage lenders to steerrnborrowers into higher-cost loans; and requires firms that buy mortgages andrnpackage them into securities to retain a financial interest in certainrnsecurities.  </p

The feedback and ideas put forward at the forum and at meetings planed withrnother stakeholders will be used to expedite the design and testing of new draftrnmortgage disclosure forms for consumers.  The CFPB implementation teamrnwill coordinate with the Federal Reserve on their new disclosure requirements underrnTILA and other new financial disclosures under the financial reformrnlegislation.  The implementation teamrnhopes to propose a consolidated form well ahead of its statutory July 2012rndeadline.

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