Mortgage disclosures getting another revamp

The true cost of a mortgage should soon be easier to understand.

A federal consumer watchdog agency unveiled two versions of a sample disclosure form Wednesday as part of its effort to simplify the paperwork borrowers get when applying for a mortgage.

The Consumer Financial Protection Bureau is asking for the public's feedback on which of the two versions is easier to understand. It's also welcoming suggestions on how to further clarify the expenses associated with a mortgage.

The cost of a mortgage is affected by several factors such as interest rates, taxes, underwriting and settlement fees. Critics say improved disclosures could have helped prevent many of the past problems surrounding subprime mortgages.

To review the sample forms and suggest feedback, consumers can go to www.consumerfinance.gov/knowbeforeyouowe. The bureau says the forms will be tested over the summer in one-on-one interviews with consumers, lenders and brokers. Interviews will be conducted in Albuquerque, N.M.; Baltimore; Birmingham, Ala.; Chicago; Los Angeles; and Springfield, Mass.

The bureau said it will make revisions through September before a single form is selected and refined. The bureau will issue a proposed form by July 2012.

By law, borrowers currently get two forms within three days after applying for a mortgage — a three-page Good Faith Estimate and a two-page Truth In Lending form. The forms are intended to summarize the terms of the loan and help borrowers comparison shop. But the forms have overlapping information and can be difficult to understand.

The Consumer Financial Protection Bureau was created as part of the federal financial overhaul last year to police loan products marketed to consumers. One of its first mandates was to revamp the paperwork mortgage applicants are given.