FTC calls for disclosure document revisions

According to the FTC, nine out of ten people reviewing the forms currently used couldn't identify the total upfront cost of their loan. Half of those questioned couldn't correctly tell the loan amount, and two thirds didn't know if there was a prepayment penalty attached to the mortgage.

While evaluating the current documents, the FTC also tested prototype documents designed to bring greater clarity. And while the revised forms faired better than those currently used, there was clearly still room for improvement.

The mortgage industry has taken a verbal beating in recent months. Legislatures and borrowers have criticized the lack of clarity in loan disclosure documents, and claimed it is the core cause of the current subprime mortgage downturn. The report authors concluded that changes must be made to help protect consumers and restore faith in the wider mortgage industry.

The introduction of new, clearer documents is inevitable. But regardless of which disclosure forms are used, borrowers should take their time while previewing their mortgage, and not be afraid to ask questions.