Newly appointed Assistant to the President Elizabeth Warren and Treasury Secretary Tim Geithner hosted a forum earlier this week to allow concerned parties to provide input on combining and simplifying two overlapping mortgage disclosure forms. 

Consumer advocacy groups, housing counselors, financial literacy experts, mortgage companies, and other stakeholders met to discuss forms that the Truth in Lending Act (TILA) of 1968 and the Real Estate Settlement Procedures Act (RESPA) of 1974 require that lenders provide to mortgage applicants.  Despite more than a decade of attempts to combine them, the two forms continue to overlap but remain separate. They have also remained highly technical and difficult for borrowers to understand.

Warren, who conceived of and will be setting up the new Consumer Financial Protection Bureau (CFPB) established by the Dodd-Frank Financial Reform Bill, said, "Fine print obscures the cost of credit and makes it impossible for families to compare products.  Too often, families come to understand the legalese only when they get bitten by it.  Streamlined disclosures can level the playing field and give families better tools to make better choices.  This is particularly true in the mortgage market, where borrowers receive stacks of incomprehensible paperwork when they're looking for a loan."

According to the Treasury Department, the Dodd-Frank Act also included a number of provisions that allow the CFPB and other federal regulators to regulate the type of mortgage lending practices that proved unsustainable and damaged the overall economy earlier in the decade.  For example, the Act requires mortgage lenders to verify a borrower's income or assets; prohibits incentives that encourage lenders to steer borrowers into higher-cost loans; and requires firms that buy mortgages and package them into securities to retain a financial interest in certain securities.  

The feedback and ideas put forward at the forum and at meetings planed with other stakeholders will be used to expedite the design and testing of new draft mortgage disclosure forms for consumers.  The CFPB implementation team will coordinate with the Federal Reserve on their new disclosure requirements under TILA and other new financial disclosures under the financial reform legislation.  The implementation team hopes to propose a consolidated form well ahead of its statutory July 2012 deadline.