The goal of "Know Before you Owe" project is to develop a form -- combining the Truth in Lending Act mortgage disclosure and the Real Estate Settlement Procedures Act Good Faith Estimate -- that makes the costs and risks of the home loan clear and allows consumers to comparison shop for the best offer, the Treasury Department said in a release.
The bureau, created last year in the financial services overhaul bill, will begin testing two alternative prototypes Thursday with consumers who have just applied for a mortgage, the department said. The months-long testing, along with interviews with consumers, lenders, and brokers will help the Consumer Financial Protection Bureau during the formal rule-making process.
"The 'Know Before You Owe' project is about giving consumers upfront, easy-to-understand information that helps them compare different mortgage offers and find the one that's best for them," said presidential assistant Elizabeth Warren, special adviser to Treasury Secretary Timothy Geithner on the CFPB. "The current forms can be complicated and difficult for consumers to use. They are also redundant and can be costly for lenders to fill out. With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage and can I get a better deal somewhere else?"
The bureau expects to conduct five rounds of evaluation and revision through September to select a single draft disclosure and then refine it, the Treasury Department said. The forms are expected to be implemented in 2012.