The Know Before You Owe rule will improve the way you’ll receive information about mortgage loans, both when applying for a loan and when you’re getting ready to close.
Mortgages are complex transactions that may include risky features, so the Consumer Financial Protection Bureau issued a rule that will simplify and improve disclosure forms for mortgage transactions. Consumers currently receive different, but overlapping federal disclosure forms with the terms and costs of mortgage loans. Because these forms are confusing for many people, Congress directed the Bureau to create new forms.
The effective date for the Know Before You Owe mortgage disclosure rule is October 3, 2015.
The new rules help alleviate four major issues consumers identified about their existing mortgage process:
Not enough time to review documents. Consumers often don’t get the paperwork until they arrive at the closing table, where there is pressure to rush through and sign your name over and over – with not enough time to ensure that you understand what you are signing.
Overwhelming stack of paperwork. Consumers reported that there are just too many pieces of paper in the stack, making the process of closing on a home daunting and overwhelming. The result is that many of you leave the closing table with a nagging feeling that something hidden in the stack might have long lasting effects on your financial well-being.
Documents are hard to understand. Consumers said that closing documents are full of legalese and technical jargon, and that you often have little help from others in the closing room to gain understanding.
Errors in the documents. Consumers informed the Bureau that errors in closing documents can often lead to delays. Even common and seemingly minor errors, such as a misspelled names or forgetting to include your spouse, require closing agents to redo the entire closing package.
One of the important requirements of the rule means that you’ll receive your new, easier-to-use closing document, the Closing Disclosure, three business days before closing. This will give you more time to understand your mortgage terms and costs, so that you know before you owe.
You can check out more information about the project that got us here and what the Know Before You Owe rule means for consumers like you.