Elizabeth Warren and the new Consumer Financial Protection Bureau is looking to change the disclosures given to homeowners when they are shopping for a loan.
The stated goal of the CFPB’s document is to make mortgage borrowing more transparent for consumers …. By doing so, it is likely to create better home loan deals for Americans. In addition, it should allow smaller local lenders to compete with major national banks.
“If buyers are better informed and understand the financial commitments they are entering into, they will be better able to make comparisons among lenders and the market will be more competitive,” Alex Pollock, a resident fellow at the American Enterprise Institute, told the news agency.
The document is expected to be about a page or two in length, and should replace roughly 80 percent of the disclosures currently mandated by federal law, the report said. Elizabeth Warren, a law professor appointed by President Barack Obama to oversee the CFPB, has stated in the past that she believes the current documents are too big and can be confusing for consumers.
The problem is that disclosure means little if there is no time or no ability to shop around. A better disclosure is helpful, but is not likely to change the way the market works: at present the originators with better/smarter/tricky/unethical salespeople are likely to outperform originators with better loan terms.
A disclosure should be given early on, and should include a comparison of the loan rate and costs in terms of what others are getting in the same region within the same range of credit score, loan to value and amount of loan. The EnergyGuide done for electrical usage for household appliances comes to mind.