Magazine article Mortgage Banking

FTC: Current Mortgage Disclosures Inadequate

Magazine article Mortgage Banking

FTC: Current Mortgage Disclosures Inadequate

Article excerpt

Current mortgage disclosure forms fail to convey key mortgage costs and terms to many consumers, but better disclosures can be created to help consumers understand the costs and terms of mortgages so they can make informed decisions about loan products, concluded a Bureau of Economics report released by the Federal Trade Commission (FTC).

The FTC report, Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms, noted that despite a long history of mortgage cost disclosure requirements and many legislative and regulatory proposals, little empirical evidence exists to document the effect of the current disclosures on consumer understanding of mortgage costs, consumer mortgage shopping or consumer mortgage choice.

"Mortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today's mortgage products," said FTC Chairman Deborah Platt Majoras.

"Although mortgage disclosures alone will not prevent deceptive lending practices, consumers who understand mortgage terms and choices are less likely to fall victim to these practices," she said.

The key findings were:

* Prototype disclosures developed for the study significantly improved consumer recognition of mortgage costs, demonstrating that better disclosures are feasible. …

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