“Know Before You Owe” Rule
If you have gone through the process of buying a home, then you can attest to the mind-numbing process of signing the closing documents. It is nearly impossible to review these documents thoroughly while sitting in front of a notary who is waiting for you to pen your signature. The lending institution sends you a package of disclosure documents prior to the day of your closing, but let’s be honest, they are long, wordy and complicated, making it likely that you will never review them in depth. For more information about the documents required to finance a home, read our article, "Stacks: Documents Required for Financing Your Home"
The recent subprime mortgage crisis may be attributed, in part, to the fact that many homeowners did not review their closing documents and were unaware of their total loan amount, interest rate, monthly principal and interest payment, prepayment penalties or balloon payments.
As a result, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law onJuly 21, 2010. This new law required the Consumer Financial Protection Bureau (CFPB) to combine the Truth in Lending and Real Estate Settlement Procedures Act disclosures provided to consumers.
Since 2010, a team from the CFPB has worked together with consumers and industry participants to develop and test various prototypes of Loan Estimates and Closing Disclosure documents.
On July 9, 2012, the CFPB released a Notice of Proposed Rulemaking for the “Know Before You Owe” rule and now they would like consumer feedback on this proposed rule.
You now have the opportunity to review the proposed documents, side-by-side, with the existing ones to see how they have simplified and improved them. Visit the CFPB’s “Disclosure Comparison” and click on the link at the bottom of the page to share your thoughts and feedback on the usability and practicality of the proposed documents beforeNovember 6, 2012.
Next to finanacing your next stack of documents will be at closing. Click below to become familiar with closing documents.
