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Confused By Loan Disclosures? You Are Not Alone

The FTC discovered that confusion over details of a loan or refinance is abounding for borrowers across the nation. The agency conducted a study of 800 recent mortgage customers and found the loan disclosure was confusing and ineffective in explaining the costs, terms, and risk of a mortgage or refinance. This was especially true for complicated loan products like the adjustable rate mortgages.

FTC Chair Deborah Platt Majoras said, "Mortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today's mortgage products." Two other federal agencies, The Federal Reserve and the US Department of Housing and Urban Development, have reviewed the FTC report and both agree loan disclosures were too complex.

It is unfortunate that this study was not done prior to the recent subprime mortgage fiasco that allowed many borrowers to get in over their heads. Hopefully, solutions to simplify the loan disclosure process are under consideration. Borrowers need loan disclosure documents written in language that is easily understood.

Posted by DDR Realty, Orange County NY on 11/07/2007 08:29 PM

Comments (26)

loan disclosures

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26 Comments on Confused By Loan Disclosures? You Are Not Alone

NOV

2007

It's not going to get any better...when I do an FHA loan my disclosure package is over 50 pages!! After the government gets done, it will probably be over 100...

I thought the reason for all the paperwork WAS to keep us confused......oops-

NOV

2007

Derrick - If this type of disclosure had be simplified years ago more consumers would have known what they were getting into and millions of dollars could have been saved. There are many processes round that could also use some simplification.

John - I sure hope you are wrong about that because more disclosure is not a true indication of being better.

Barbara-Jo & Bill - It seems that it is doing just that. Apparently, you thoughts are correct....lol

Jennifer - Hopefully steps will now be taken to address simplifying this process and others in our industry.

I agree, most are confused and don't understand any of it! except for maybe, "Sign Here!"

I hope this mortgage mess doesn't happen again!

Take care Derrick!

Armando - You and I both. And probably every other agent in the business hopes that. Thanks and you take care as well.

I welcome any effort to make disclosures and other legal documents understandable.

They are highly complicated and that certainly does not help an already confusing situation. Thanks for bringing this to our attention derrick.

NOV

2007

Rosario - I believe that is the general consensus of the professionals in our industry.

Simon - I agree the process itself can be confusing, so to simply the documents would be helpful to borrowers.

NOV

2007

Communication is an important element of anything. Not understanding something can produce disasterous results.

Danielle - Very true. A lack of understanding can lead to unpredictable results.

NOV

2007

This mortgage mess happened because THEY GOT GREEDY and now its coming back to bite them and unfortunately us as well!

Michael - Greed aong with limited supervision of the industry, at the time, definitely contributed to the mess.

NOV

2007

When you hear title officers and loan officers tell borrowers that, I know what this says and it looks scary, but this is what it really means. Then you know we have a problem and it should be broken down in to simple English.

Todd - Absolutely, if the documents were written using "Simple English" there would be less of a need for the borrowers to have them interpreted.

NOV

2007

I am all for making loan disclousures friendlier and the entire loan process for that matter. Just keep it simple, why is that so darn hard!?! Thanks for a great post.

NOV

2007

Donna - Keeping the documents and entire process as simple as possible would benefit the borrowers.

Isn't THAT the truth. We recently spoke with a woman, who in broken english, explained that her payment had jumped from 2100/mo to 4100/mo. She's losing her house; I find it difficult to imagine that the possibility of a payment of $4000 plus per month was understood clearly by all parties.

Laurie - The average working person cannot afford a $2,000.00 per month mortgage payment increase. Had she known this was a possibility, I doubt she would have accepted the terms of the loan.

Exactly. It took that experience to move from the feeling that consumers "should have known" to: BOTTOM LINE, TOO MANY DIDN'T.

NOV

2007

Laurie - Unfortunately, you are right. But fortunately now some positive steps are in the planning stage.

DEC

2007

These changes can't come fast enough. Long overdue and it shouldn't have been any surprise to the government... As usual they do not seem to be in touch. Consumers have been saying the entire buying process is like signing their life away and even the most educated have had trouble with the disclosures. We'll see how long it actually takes to make changes that are truly effective and will work.

Donna - The changes will truly be welcomed by many consumers and by many of us as well.

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