Congressman Al Green Helps Home Buyers by Requiring Mortgage Originators to Provide One-Page Disclosure Form

(Washington, DC)--Today, the House of Representatives Financial Services Committee passed H.R. 3915, "the Mortgage Reform and Anti-Predatory Lending Act of 2007" by a vote of 45 to 19.  This bill would set into law a variety of protections to address problems faced by borrowers in today's mortgage and housing markets.  Included in the bill was the passage of a bipartisan amendment proposed by Congressmen Al Green (TX-09), McHenry (NC-10), and Neugebauer (TX-19) which would amend the Truth in Lending Act statement to include key mortgage loan terms that  would help borrowers better understand their mortgage loan. The amendment would also require that key loan terms be included in a disclosure box at the beginning of the Good Faith Estimate form.  The Green-McHenry-Neugebauer Amendment passed through the Financial Services Committee by voice vote with strong bipartisan support.

The Green-McHenry-Neugebauer Amendment would require that this residential mortgage loan statement be disclosed to the borrower within three days after the date of the loan application is received by the creditor.  It would also require that language be inserted into the bill stating the maximum amount of the regular required payments on the loan based on the maximum interest rate allowed.  It would require that where an escrow account is established for the payment of all applicable taxes, insurance and assessments, that the initial monthly payment and the fully indexed monthly payment be given that includes those amounts deposited for taxes, insurance, and assessments. It would require that the settlement charges and other fees charged to the borrower or paid to the mortgage originator be included. Because these terms would be included in the Truth in Lending Act (TILA) statement, the amendment would provide the borrower with the consumer protections already in the TILA statute, including rescission, damages and fines.

The amendment would also require each Good Faith Estimate (GFE) to include a universal disclosure box at the top of the first page. The universal service box would be similar to the nutrition labels on food. It would include the important loan terms including the loan amount, loan term, estimated interest, estimated settlement charges, and any prepayment penalties or balloon payments.  By providing this information in a clear and concise format, borrowers would be better able to compare different loan terms they are offered by mortgage originators and take the best deal.

"Today’s housing market is into its worst slump in 16 years – weakening the American economy and making American families less secure.  In 2006, 1.2 million foreclosures were filed, a rate of more than one per minute. This problem is even worse in 2007.  In June, the Federal Trade Commission (FTC) released a study on mortgage disclosures, concluding that "current disclosures fail to convey key mortgage costs to many consumers,” and that “both prime and subprime borrowers fail to understand key loan terms.”  We must do everything we can to help homebuyers in understanding key mortgage loan terms before entering into one of the biggest financial decisions in one’s life,” Congressman Al Green said.  "That is why earlier this year, Congressman McHenry and I first discussed creating a simplified one-page disclosure form that mortgage originators could give to borrowers, offering them the important terms of the mortgage loan."

"In order to provide more complete disclosure for borrowers, Congressman McHenry and I joined with Congressman Neugebauer and incorporated language proposed by Mr. Neugebauer into this amendment that placed some of these important loan terms in a universal disclosure box at the top of each Good Faith Estimate.  In a housing market in which the FTC found that about one-third of borrowers can not identify the interest rate, half could not correctly identify the loan amount, and two-thirds did not recognize that they would be charged a prepayment penalty. This amendment will do more to better help borrowers understand up-front the key terms of their loan,” continued Congressman Al Green.  "I thank my colleagues, Congressmen McHenry and Neugebauer for working with me in a bipartisan fashion to help better protect American borrowers in attaining the American dream of homeownership.  It is my sincere hope that this bipartisan spirit will continue for the sake of the American people and take this bill through the full House next week, and pass the Senate, and be signed into law, so that together we can help millions of Americans fulfill the American dream."