The Consumer Financial Protection Bureau is proposing changes to Reg X (Real Estate Settlement Procedures Act) and Reg Z (Truth in Lending Act). Proposals were published in the Federal Register July 10 and comments are due by Nov. 6, 2012. However, comments are due for two parts of the proposed rules on September 7, 2012: the changes to the calculation of the finance charge and Annual Percentage Rate (APR), and the delay of the effective date for certain disclosures required by the Dodd-Frank Act.
In a project started a year ago called “Know before you owe,” the CFPB is combining the original Truth in Lending disclosure with the Good Faith Estimate in a single three-page document. The two proposals provide guidance to lenders about how to fill out the forms, in addition to providing commentary.
CFPB says the new proposed form is simpler than the older forms. This is supposed to make it easier for consumers to compare mortgage options between competing lenders. The new form in particular highlights basic information such as loan amount, interest rates, monthly payments and closing costs; they are all listed on the front page of the new form. Also, the first page explains how the interest rates, payments, and loan amount might change over the life of the loan, including the highest they can go. The forms also offer more information about taxes, insurance, and other property costs so consumers can better understand the total cost.
The forms also provide warnings about features some consumers may want to avoid, such as adjustable interest rates and payments, prepayment penalties, and loan balances that increase (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, industry and regulators will be able to address compliance questions more easily.