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Wyatt Bell's Blog

CFPB - Round 4 - New TIL/GFE Form Prototypes
by Wyatt Bell | 2011/09/13 |

The CFPB has issued the 4th round of proposed changes to the TIL/GFE combined format. These may be viewed at CFPB website: Know Before You Owe


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Any thoughts that "itemization" may reappear for title fees and policies have ended in the latest revisions to the proposed GFE forms.



Notice that items A through F have been discontinued in this version of the forms. Items A through F, which appeared in previous versions, would have corresponded with the GFE# numbering system currently in use.

It may be that the CFPB understands the enormous cost of implementing new HUD calculations and forms and is dovetailing into the current HUD 1/1A forms for minimal changes. I would expect the Department of Housing and Urban Development (HUD) to begin entering the picture with new HUD 1/1A forms which will still need revision to fit with the proposed changes.

After all the energy expended in explaining the difficulties with "non-itemization" it appears the "non-itemization" proponents have won!

Keep in mind the forms are the same. The differences are in the loan quote information. The Nandina has the lower "Estimated Cash to Close" while the Jasmine has the lower APR. If one is looking at out-of-pocket they may be tempted towards the higher cost loan which is counter-intuitive. This example has a mere $88.00 difference in "Estimated Cash to Close".

However, in the real world as the "Estimated Cash to Close" vs. the loan terms becomes wider it will be more difficult to choose. Does one pay more at settlement for less payments??

That's the problem with these prototypes. The terms are framed very simply - there's no empirical evidence that these forms will result in prospective borrower(s) choosing the most favorable loan terms! Many other factors are at play, especially since "non-itemization" hides potential advantages!

And it must also be considered that even though the Nandina APR is higher it may, indeed, turn out to be lower! The adjustment begins at the 4th year which means the interest rate could actually be lower from years 4, 5 and 6 whereas the Jasmine is stuck at 3.75% for the full 7 years. Just look at the bond market for the last 30 years - interest rates have been on a downtrend the whole way! And with The Fed stating they are holding rates at or near 0% into 2013 one could arguably go for the higher loan APR.

The APR adjustment is based upon the assumption that the initial rate will increase which is not always the case. How much refi business has been generated over the last 2 decades because rates decrease?




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Only Uninformed Borrowers Need Apply ...

Sadly, it doesn't look like anyone other than us real estate and title dinosaurs want an Informed Borrower. 

The Ultimate Goal:  The individual takes out a loan, either new or refinances, using a "bottom line" figure that those earning a fee or commission on the loan can "sell" to the individual.  Keeps the mortgage loan economy going and fee churning for the lenders and mortgage brokers.

Unintended (or Intended) Consequence:  Us dinosaurs can no longer compare line items to line items to complain or negotiate individual line item costs on our prospective new loan.  Example:, Lender A charges me X for this specific cost and these "extra" costs. Question to Lender B, "Why are your costs different?  Are you willing to reduce this line item cost to be more in line with Lender A's quote?" Let us not make clear to the consumer that appraisals, title searches, title insurance, recording fees, "document processing" and settlement/attorney fees vary (sometimes by alot): show one total for all and internally manipulate vendor costs and Lender Fee Income without the consumer having a clue what is being done.

I would blame the bankers, but I believe the elected officials today are doing this to churn out more residential refinances for The Great Campaign Statement that, "we improved the economy, the American Consumer is spending again," leaving out that it was done by increasing individual debt in order to increase consumer consumption spending.


by Bobbi Shorthouse, Notary Public | 2011/09/13 | log in or register to post a reply
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