19 July 2012

Consumer Financial Protection Bureau Clarifying Mortgage Lending

Story first reported from USA Today

The federal Consumer Financial Protection Bureau has proposed simplified forms to shed light on the costs of a mortgage. But consumer testing and further review are needed, and some speculate that lenders might not use such forms until 2014.

Richard Cordray, the director of the CFPB, explained how to avoid getting taken for a ride if you're shopping for a mortgage this summer when rates are at historic lows but long before mortgage forms officially change.

Cordray, who met with me this week before a town hall meeting in Detroit, says consumers need to do their homework and carefully understand offers.

The CFPB continues to be one of the hot-button features of the Dodd-Frank financial overhaul law passed by Congress in 2010.

The bureau is traveling outside the Washington beltway and heard from consumer groups and others about financial mishaps. It also has held town halls in Durham, N.C.; Philadelphia; Minneapolis; Cleveland; Birmingham, Ala.; New York; and Sioux Falls, S.D.

At the town hall Monday in Detroit, the CFPB announced that it would be monitoring credit-reporting agencies and conduct on-site exams.

The agency is seeking to bring more clarity to complex financial services and products. Here's a look at some areas:

Consumers would see on the first page their interest rate, monthly payment, loan amount and closing costs. They'd see how rates or payments might change, if that is part of the package, too.

Cordray says some disclosures on current mortgage forms are already improving as lenders prepare for changes.

Housing counselors think that additional simplification of mortgage forms will help. But they say consumers could take advantage now of some free HUD-approved counseling to review their budget and study existing forms. People don’t know how to use the Good Faith Estimate, says Kathy Conley, housing specialist for GreenPath Debt Solutions, a nationwide, HUD-approved housing counseling agency. New York residents also need to ensure they have the proper New York Home Insurance.

One key part of that form, she says, is a line that tells consumers the date and timetable for how long the interest rate will be available. One can compare the Good Faith Estimate form with other loan offers, too.
Public comment is being sought on the new "Loan Estimate" form and "Closing Disclosure" forms. See www.consumerfinance.gov.

•Student loans. Right now, some grads have no idea what they'll pay each month for college debt.
The student loan market resembles some of the bad features of the mortgage market from five years ago, Cordray says, and loans being made without real attention to the ability to repay.
The CFPB is now working on a new version of a student debt calculator that will be posted on its Web site.

•Credit-reporting companies. The watchdog now will oversee them. Before, no single federal agency could get a complete picture of the activity inside the companies. Oversight also would extend to lesser-known reporting companies that focus on payday loans or checking accounts.

The CFPB starts directly supervising companies, such as Equifax, TransUnion and Experian, on Sept. 30 and wants to make sure information is reliable and accurate.  Experian and others have stressed that credit-reporting agencies are not strangers to regulation. The Fair Credit Reporting Act was enacted in 1970.

Chi Chi Wu, staff attorney for the National Consumer Law Center, says it's important to address complaints, such as mixed-up files where information from people with similar names and similar Social Security numbers ends up in the wrong credit report. Wu says consumers can face a tough time disputing errors, too.

What to do if you have trouble with a financial service:
• Consumers can file complaints and get tips on various issues at the website for the Consumer Financial Protection Bureau at www.consumerfinance.gov. They also can tell their credit report woes at https://help.consumerfinance.gov/app/tellyourstory.

• Long before shopping for a mortgage or any loan, make sure to get a free copy of your credit report at www.annualcreditreport.com. Make sure there are no mistakes on your report. You do not get a free credit score here. Also, make sure you have proper New Jersey Home Insurance.

Mistakes on a credit report can make getting a loan more costly.
The Consumer Financial Protection Bureau notes that to dispute an error on a credit report, you must explain what is wrong and why. Enclose a copy of the relevant portion of your credit report.
Include copies of documents that support your position. Never send original documents. Keep copies of dispute letters and enclosures.

• Go to www.ftc.gov/ if you suspect identity theft on a credit report. An Identity Theft Report can help you get fraudulent information removed from your credit report. You can file a complaint at the FTC website or call the FTC's identity theft hotline at 877-438-4338.

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