It may take a village to raise a child but in my opinion, it takes a forest to close a mortgage transaction. Anyone that has gone through a transaction recently marvels at the gargantuan pile of paperwork that greets them at the closing table. As lending professionals, we are expected (and required) to cover every lending and financing disclosure from A to Z and it really does add to the number of documents consumers are given during the course of a transaction.
In my opinion, what is truly needed at this time is less paperwork for consumers to read and process. Even the most dedicated readers of documents and legal jargon would be hard-pressed to find real meaning in such a diverse collection of disclosures and forms. I’ve heard it said before that “less is more” and nowhere is that more evident than in the disclosure of mortgage documents. In a perfect world, we would have an application, a disclosure of costs and one page outlining consumer rights and some sort of “buyer beware” verbiage. Imagine how much better informed and confident consumers would be if they (and the industry) had less than ten pages to focus on. We’d all join hands, sing “Kumbaya” and turn cartwheels amidst a field of daisies.
In July of this year, the Consumer Financial Protection Bureau becomes the new top dog of mortgage regulation. No longer will there be several Federal agencies vying to put their stamp on the industry. True, there may be petty bickering behind closed doors and competing agendas, but it should become easier for meaningful reform with less competition amongst Federal agencies. I currently am cautiously optimistic.
The first example of the work of the Bureau is the combining of the Good Faith Estimate and the Truth in Lending disclosure into one document. It hasn’t been implemented yet and the Bureau is actually asking for industry and consumer feedback. As far as I’m concerned, the reduction of paperwork and the request for feedback are both positive signs. If you’d like to see a preview of the new document, click here
We have a long way to go before industry, consumers and regulatory agencies all link hands and start singing hymns together. Too often, we view each other as enemies and do not focus on our common goal of helping consumers to become well-informed and to make educated and thoughtful financial decisions. I keep hoping for the day in which disclosures are limited, truly meaningful and easily understood. I also look forward to the day consumers truly understand and take responsibility for their own choices. As it currently stands, all the information a consumer could want or need is indeed provided but it is absolutely buried amidst a pile of other documents that serve no one but the legal community.
I sincerely hope that our industry and the Consumer Financial Protection Bureau can turn the tide and enact positive and meaningful change over the course of the next few months. I hope that consumer groups and consumers themselves will also take an active role in sponsoring responsible and ethical lending practices.
I’ll practice my cartwheels, just in case. But I’m not so sure you’ll want me to sing.