McHenry Introduces Mortgage Disclosure Simplification Act
Legislation Creates a Commonsense Solution to Confusing Mortgage Paperwork
Washington,
Oct 3, 2007 -
WASHINGTON – Patrick McHenry (R-NC) and Al Green (D-TX), members of the House Committee on Financial Services, today introduced the Mortgage Disclosure Simplification Act of 2007. This legislation will require mortgage lenders to give every borrower a one-page summary of important information regarding their loan.
“Understanding key loan terms that are a mystery to so many homebuyers is necessary when entering into one of the biggest financial decisions in one’s life,” stated Congressman Al Green. “We must help ensure that borrowers who take on mortgages are familiar with some of their most basic features. That is why Congressman McHenry and I have introduced H.R. 3725, the Mortgage Disclosure Simplification Act, which requires that every mortgage borrower receive a clear and simple one-page form outlining critical terms of a home loan.”
“The sub-prime and foreclosure crisis has left many American families’ dream of homeownership unfulfilled. Mortgage originators would be required to provide borrowers with a one-page form outlining the key loan terms no later than three days after the application. This disclosure form would contain loan terms such as the total loan amount, the initial “teaser” interest rate and fully-indexed rate, mortgage originator fees, prepayment penalties, and balloon payments,” continued Congressman Green. “I am honored to work on this legislation with my colleague, Congressman McHenry. Though this is not a cure-all solution it is an important step in the right direction to better protecting consumers and helping to prevent another crisis in the mortgage lending industry. Although there is much more to be done, we don’t want to avoid doing what we can.”
Complex and cumbersome mortgage disclosure forms are often incomprehensible to homebuyers. The Green-McHenry bill provides a simple, common sense solution to the confusing mortgage disclosure process by explaining key terms and conditions of loans to borrowers.
“In the wake of the sub-prime lending crisis, it is clear that borrowers need to have a better understanding of their mortgage obligations,” said Congressman McHenry. “I am pleased to work with Congressman Green on legislation that makes the borrowing process significantly simpler and more transparent.”
“As a former realtor, I know firsthand how burdensome the mountain of mortgage paperwork can be for borrowers, and this legislation will help them cut through the confusing legal jargon so they can make sound financial decisions for their families,” added McHenry.
In June, the Federal Trade Commission (FTC) released a study on mortgage disclosures, which concluded that “current disclosures fail to convey key mortgage costs to many consumers,” and that, “both prime and sub-prime borrowers fail to understand key loan terms.”
The FTC study also found that:
• “About a third could not identify the interest rate.”
• “Half could not correctly identify the loan amount.”
• “Two-thirds did not recognize that they would be charged a prepayment penalty.”
• “Nearly nine-tenths could not identify the total amount of up-front charges.”
The FTC’s full report on improving consumer mortgage disclosures can be found at: http://www.ftc.gov/opa/2007/06/mortgage.shtm.
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