Confused By Loan Disclosures? You Are Not Alone

By
Real Estate Broker/Owner with DDR Realty

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.

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Rainer
103,309
Armando Rodriguez
QUEST REALTY SERVICES - Orlando, FL
Orlando Homes 4 Sale, Real Estate Broker-GRI

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!

 

Nov 08, 2007 07:49 AM #7
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Armando - You and I both. And probably every other agent in the business hopes that. Thanks and you take care as well.
Nov 08, 2007 08:07 AM #8
Rainer
104,204
Rosario Lewis
DDR Realty - Newburgh, NY
GRI, SRES - DDR Realty - Orange County, NY
I welcome any effort to make disclosures and other legal documents understandable.
Nov 08, 2007 09:09 AM #9
Rainmaker
405,566
Simon Conway
Orlando Area Real Estate Services - Orlando, FL
They are highly complicated and that certainly does not help an already confusing situation. Thanks for bringing this to our attention derrick.
Nov 08, 2007 01:01 PM #10
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Rosario - I believe that is the general consensus of the professionals in our industry.
Nov 08, 2007 10:26 PM #11
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Simon - I agree the process itself can be confusing, so to simply the documents would be helpful to borrowers.
Nov 08, 2007 10:28 PM #12
Rainer
32,487
Danielle V. Lewis
DDR Realty - Newburgh, NY
DDR Realty
Communication is an important element of anything. Not understanding something can produce disasterous results.
Nov 09, 2007 10:15 PM #13
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Danielle - Very true. A lack of understanding can lead to unpredictable results.
Nov 09, 2007 10:41 PM #14
Rainmaker
250,068
Mike Klijanowicz
Cummings & Co. Realtors - Perry Hall, MD
Associate Broker @ Cummings & Co. Realtors
This mortgage mess happened because THEY GOT GREEDY and now its coming back to bite them and unfortunately us as well!
Nov 11, 2007 10:50 AM #15
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Michael - Greed aong with limited supervision of the industry, at the time, definitely contributed to the mess.
Nov 11, 2007 01:22 PM #16
Ambassador
2,140,365
Todd Clark
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

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.

Nov 12, 2007 05:14 PM #17
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
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 12, 2007 11:06 PM #18
Rainmaker
377,222
Donna Yates
BHGRE - Metro Brokers - Blue Ridge, GA
Blue Ridge Mountains
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 14, 2007 12:28 PM #19
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Donna - Keeping the documents and entire process as simple as possible would benefit the borrowers.
Nov 14, 2007 09:00 PM #20
Rainmaker
224,127
Laurie Mindnich
Centennial, CO
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.
Nov 15, 2007 02:45 AM #21
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
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.
Nov 15, 2007 04:28 AM #22
Rainmaker
224,127
Laurie Mindnich
Centennial, CO
Exactly.  It took that experience to move from the feeling that consumers "should have known" to:  BOTTOM LINE, TOO MANY DIDN'T.
Nov 15, 2007 09:35 AM #23
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Laurie - Unfortunately, you are right. But fortunately now some positive steps are in the planning stage.
Nov 17, 2007 02:03 AM #24
Rainmaker
377,222
Donna Yates
BHGRE - Metro Brokers - Blue Ridge, GA
Blue Ridge Mountains
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.
Dec 26, 2007 10:40 PM #25
Rainmaker
120,370
DDR Realty
DDR Realty - Newburgh, NY
Orange County NY
Donna - The changes will truly be welcomed by many consumers and by many of us as well.
Dec 26, 2007 11:31 PM #26
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