RESPA Rules Changes Designed To Help Consumers
Let’s face it, unless you have taken a couple of years to attend law school or getting your degree in accounting, fully understanding the RESPA paperwork is out of reach for most home buyers. We have to trust our lending institutions and mortgage professionals to provide what they describe in laymen’s terms.
New simplified RESPA forms have been announced to try to cut through the legalese and bureaucratic mind numbing language. The main component is a 3 page Good Faith Estimate that will disclose the mortgages key characteristics so that consumers can compare apples to apples.
Now I am not knocking lending institutions, if they make the terminology too simple, evil talented lawyers tend to create huge messes for them. However one needs to look at the big picture. The combination of an easier Good Faith Estimate combined with the formal documents and heavy penalties if the loan documents fail to comply with the Good Faith Estimate would be a win win for the consumer.
Among other things, the new rules, debated for years, are supposed to help consumers compare terms on loans offered by different lenders and limit the ability of lenders to offer final terms that are far different from initial estimates given to potential borrowers.
Many Americans now in default on their mortgages say they didn’t fully understand the terms of loans they were encouraged to take during the housing boom. One big problem is that legally mandated disclosures are so voluminous that almost no one ever reads them before signing.
There is general agreement on a need for simpler forms of disclosure. “In today’s market, people shop more effectively for a new flat screen TV than they do for a mortgage,” the Mortgage Bankers Association, a trade group, told Congress in testimony earlier this year. But the association said HUD’s planned rules failed to simplify the process. via WSJ.com
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