By: Michelle Patana
The mortgage process can be complex, confusing and time-consuming for buyers, and in some cases, the barrage of forms and documents can lead to delays and mistakes. In response, the Consumer Financial Protection Bureau has instituted new rules that require the simplification of mortgage disclosure forms. While the goal was to make the process easier for consumers to understand, banks are decrying the move and noting that the new disclosure process may only add another layer of confusion to an already tedious process.
The CFPB received almost 2,000 letters from banking professionals explaining that the requirements surrounding the simplified disclosure forms may add more constraints, according to American Banker. Several industry professionals, including bank consultants and executives, said they applaud the logic behind the simplified rules, but argue that the actual provisions surrounding them need more work.
"Overly strict timeframes, lack of tolerances on fees and charges, and the inability to accommodate last minutes changes to avoid re-disclosure create a market environment where consumers will see higher charges for certain services, inflexible and extended timelines to complete the mortgage origination process, and possible restriction of mortgage credit for certain consumers," wrote Ron Haynie, executive vice president for mortgage services with the Independent Community Bankers of America, according to American Banker.
Finding a happy medium
Professionals argued that the CFPB has failed to recognize the potential costs and energy that go into implementing new forms, as well as the confusion that simplified, rather than more in-depth and explicative disclosures may cause consumers. While few industry professionals would say that no changes need to be made, many agreed that the CFPB still has more work to do when setting rules about mortgage disclosures. For example, bankers argue the new "all in" fee charts may lead consumers to think loans are more costly than they are. They also note that it may make banks that have traditionally not been viewed as high-cost lenders to be perceived as such.
November 6 was the deadline for submitting letters to the CFPB regarding the mortgage disclosure forms. It remains to be seen whether the feedback will result in any changes to the proposals. As domestic and global rules surrounding the mortgage market continue to take shape, many financial institutions are bracing themselves for higher costs that may result from the reforms.