KNOW BEFORE YOU OWE
The consumer finance agency is proposing two new forms for evaluation - KNOW BEFORE YOU OWE - they want to clarify certain aspects of a loan. Combining a good faith estimate and a truth in lending form they think will bring clarity to the loan process. Consumers should always know before they owe, no question about it.
The last attempt to "improve" the good faith estimate resulted in going from a one page detailed llist of charges and costs to four pages with many costs lumped together and a legal size fee sheet. These sheets must be revised and re-disclosed multiple times during the process. This results in about at least 30 extra pages in a typical loan file. Not only are we killing trees, this is not good for the environment, but these forms do nothing to clarify any further the funds or interest rate.
I would have to say 100% of the borrowers I work with KNOW before they owe. I am not in the habit of surprising them at closing. The revised good faith estimate we have now is not helpful at all. Because the government is attempting to further revise it, I'm not hopeful that it will end well. The old good faith estimate had all the fees and costs broken out, it was easy to explain. What was not on it was on the truth in lending.
The Know Before You Owe Form option A looks easier to read and understand, but if it is getting added on to the 150 pages we already have consumer poring over, it is time to stop and really thing about how to simplify the process. We don't need to tell consumer twelve different ways whether they have a fixed rate, what their payments are and what their costs are.
Variable rates and consumers being unaware of what product they were getting has been a problem, but not THE problem with the housing collapse. I could get really excited about a hands on direct approach to fixing what caused the problem - an overzealous Wall Street appetite for badly packaged and rated mortgage backed securities.
For what it is worth, you can go to the consumer finance agency's website and vote on one of the two new "know before you owe" forms.
