Regulation

CFPB issues final TILA-RESPA rule for mortgage disclosures

cfpbThe CFPB issued on Wednesday its final TILA-RESPA rule, which is designed to improve mortgage disclosures for consumers.

The final rule contains rules and forms for two disclosures consumers receive when obtaining a mortgage: the loan estimate and the closing disclosure, both of which are required under TILA-RESPA. The new forms integrate existing disclosures and implement several new requirements mandated by the 2010 Dodd-Frank Act.

The new, shortened forms, which feature a user-centered design, are intended to simplify financial language and information to help consumers make better informed decisions. The CFPB is currently working with other participants to further reduce the paperwork burden.

To test the effectiveness of the new forms, the CFPB asked participants to answer questions on a written test about a sample mortgage. Individuals who used the new forms provided more correct answers than individuals who viewed the current forms, resulting in a 28.8 percent improvement.

“The testing showed that it’s not just that people could understand the new disclosures; they could talk about them, too,” the CFPB said. “People who used the new forms could explain why they made choices they did and offered more comments about their choices than people who used the existing forms. This suggests the new forms may help people articulate their thoughts more clearly. That could mean better discussions with spouses, financial advisers, realtors, and others who help consumers in the process. It may mean more than just better financial results; it may mean a better shopping experience.”

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