Mortgage Disclosures

The mandatory disclosure act of was done under the pretense of helping borrower understand the loan process. However the idea has hopelessly gone wrong. The idea was to require lenders to provide one uniform set of price disclosures that are consistent from loan to loan, and from lender to lender. Then consumers can compare prices across loan types and across lenders.

The APR was designed to be a shopping tool, but unfortunately it has serious flaws. While logic dictates that all upfront charges that a borrower would not have in an all-cash transaction should be included in the APR, this is not the case.

In addition, the APR is a number that can be skewed and played with from lender to lender. Some lenders include processing and underwriting fees and some don't. By excluding fees, the APR is lowered making the consumer feel they are getting a better deal.

Loans with PMI or Mortgage Insurance can be misleading when comparing APRs. When you purchase or refinance your mortgage, make sure you look over the TILA (Truth-in-Lending) when signing the disclosures to make sure your closing costs aren't weighing your APR out to be a lot higher than your actual interest rate you pay on your mortgage.

ARM disclosure under the Truth in Lending Act is complex. ARM disclosure occurs at three levels, of which the earliest and most general is provision of a Consumer Handbook on Adjustable Rate Mortgages otherwise known as the CHARM book.

Not only is the Truth in Lending Disclosure form important to pay attention to, but it is also important to look over the Good Faith Estimate of your lenders so that you can compare "apples to apples." By reviewing the Good Faith Estimates you will be able to compare the overall closing costs of the loan in a slightly different manner than through the TIL. Therefore, make sure that you pay attention to both forms to make an accurate estimate of the differences between APR and total closing costs.

During every mortgage loan the borrower is required to receive certain disclosures to ensure that they understand the transaction completely. All costs, fees and interest rates are required to be disclosed to the borrower.

Any time your rate and terms on a loan change, the lender or broker should redisclose the terms of your new loan. Many unscrupulous brokers and lenders avoid disclosing the actual terms of your loan. Be sure to request a copy of all documents and review all disclosures with your mortage professional.

» DISCLAIMER: The information contained in this article on 'Mortgage Disclosures' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.