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Proposed New 1-Page Mortgage Disclosure Forms

The Consumer Financial Protection Bureau [3] released [4] two drafts of a proposed mortgage disclosure form that would make understanding your mortgage a lot easier. You can take a look at these forms [5] for yourself.

This is long overdue. I’m all for simplifying using charts and graphs in a standardized way, not whatever way the mortgage lender felt like showing it. It also makes for a more informed and educated consumer. You can’t look at this form and not understand that, should you get an ARM, your payments could jump in the adjusting year (and each year afterwards). It also gives you a better understanding of the other costs, like taxes and insurance, which the mortgage lender may neglect to show you (though I doubt they ever do).

I don’t, however, think this is a panacea nor would it have prevented the “mortgage meltdown” that started a five years ago. I’ve always seen the home buying process as one of the most significant financial things you can do as an adult. If you’re going to be spending all that money, you should be taking the time to understand your mortgage even if it means wading through pages of documents. When we bought our house and signed ourselves to a liability of $230,000, I made sure to every last sentence of every document until it made sense. You are either a customer who does that or one who doesn’t. If you’re in the second group, this standardized form is a nice way to make sure everyone understands the basics but it won’t necessarily solve the root problem.

The two forms aren’t very different, just a reordering of information, but I have a slight preference for Form A (Ficus Bank).

What do you think of these forms?