Fed agency plans mortgage market makeover

The Consumer Financial Protection Bureau says it’s planning for some major changes to the home mortgage market in the next six months.
Its main goal: to improve the fairness and clarity for borrowers applying for home mortgages.

The newly created agency has made the mortgage market its top agenda item.

“It’s the market where consumers have the most at risk, and they have the most at stake,” Richard Cordray, the bureau’s director, told The New York Times. “I expect that the mortgage market in the fairly near term will look different in the sense that, first of all, it will be a clearer and more straightforward place for consumers, and second, it will be a more reliable market.”

As its first step, later this summer, the agency says it will propose new rules for lenders in revising “good faith estimate” forms, the forms which home buyers receive prior to closing that lists borrowers’ costs. The agency wants to require the forms to clearly state the interest rate on the loan that borrowers will pay, how this rate potentially could change over the term of the loan, and exactly how much cash is needed at closing.

The agency says the changes will help make these often confusing forms for buyers more understandable and complete.

The agency also has plans to overhaul how mortgage servicers provide services to borrowers facing foreclosure, requiring more clear information and improved service options.

“If we do all of those things, from beginning to end, I think the mortgage process will work better,” Cordray told The New York Times. “And that’s good for the economy.”