Oops! They did it again.
The new documentation requirements for 2010 mortgage disclosure packages are even more confusing to borrowers than ever before. In an attempt to put more transparency in the mortgage industry the government has, yet again, made things more complex. Loan disclosure packages are now BIGGER, and more COMPLICATED, than ever before. I wonder if the goverment realizes that the more pages you put in front of a borrower the less likely they are to read any of them! In my experience, the more pages you have to sign the less time you are likely to spend look at any one page.
In addition the burden on loan originators to accurately disclose borrowers fees etc perfectly from the start are going to in effect limit the consumers options. For example the originator is required to disclose, perfectly, the attorney costs involved in the transaction. This is easy if the borrower uses the attorney typically used by the loan officer, but if the borrower wishes to use their own attorney, it will be much hard to do. Do you really think loan officers are going to say, oh sure, use your guy! How about rates and terms of loans. Borrowers who use a mortgage broker typically are offered a choice to delay in interest rate locking until a full package is submitted to the lender. This allows the broker to continue to persue the best rate and terms for the borrower. However, this will be an issue now under the new regulations. What do you think most loan officers will do? Lock it and disclose up front, creating longer locks, which cost borrowers more money, more locks will expire, and the terms offered will end up not being as good.
Just to add insult to injury, RESPA and HUD now contradict each other in their disclosure requirements. HUD prefers redisclosure if terms change, RESPA basically says, nope, stick with what you had to begin with. Even which numbers are disclosed where, don't agree between the two.
So lets hear it for goverment oversight! This should work out perfect for borrowers. They can now sign more papers that they won't read, with more complex ways of explaining costs, they can also have less options, and in the end spend more money for loans. While they are at it, everything can take longer to do because there are even more parts of the loan paperwork to be underwritten and QC'ed.
Perfect!
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