Mortgage Disclosure Documents

Disclosing Loan Details

When you apply for a mortgage loan, a home equity loan or a mortgage refinance loan, the loan officer or loan broker is required by law to give you a series of disclosure documents that disclose the details of the mortgage loan you are considering. This is true regardless of the type of loan for which you apply. The documents are designed to clearly list what you would be paying to initiate your loan and the costs you would incur to fully pay off the loan. The documents are not difficult to understand, but there are so many disclosures that they can get confusing.

Once you have decided on your loan, the lender will provide you with additional disclosures and documents that reflect the actual details of the specific loan you select.

Types of Mortgage Disclosure Documents

When applying for a mortgage loan, you will receive disclosures at several points of the process starting with the loan application and not ending until after your loan is funded.

During Loan Application

Within three days after submitting your loan application your loan officer or loan broker will give you:

• A Truth-In-Lending Disclosure Statement – This disclosure shows:
  • Annual percentage rate (APR) of the mortgage loan
  • Total amount financed
  • Total of all payments
  • Amount of the monthly payment
  • Total finance charge
  • Prepayment penalties
  • Late payment charges
  • Any assumability restrictions
  • Insurance requirements
• Settlement Costs and Information – This is a booklet from the Federal Department of Housing and Urban Development
• A Good Faith Estimate of settlement costs including:
  • Loan origination fees
  • Appraisal fees
  • Credit report fees
  • Loan points
  • Document preparation fees
  • Title search fees and title insurance premiums
  • Prorated interest
  • Mortgage insurance and homeowner's insurance premiums
• An Initial Escrow Account disclosure showing:
  • Cash requirements at closing
  • Escrow account requirements

If you initially submit your loan application to a mortgage broker you may receive another set of mortgage disclosures from the lender. The two sets of disclosures may not be the same if the type of loan you are applying for is different than the type of loan you originally discussed with the mortgage broker. There may be additional disclosures that you did not receive when you applied for the loan. For example, your lender will provide you with a HUD-1 Settlement Statement that corresponds by line number with the Good Faith Estimate you originally received from the loan officer or loan broker.

At Loan Closing

When your loan processing is completed you will receive another set of disclosure documents to review and sign. Be sure to compare all documents against the documents you have already received. If there are any differences between the two sets of documents you should notify your lender before you sign the documents.

After Loan Closure

You will probably receive a package of loan disclosure documents from your lender for your files. This package will have many of the same documents you signed at your loan closing. You should compare these documents against what you already signed at closing and ask your lender any questions. Documents in this package will include:

• Final Truth in Lending Disclosure Statement – This disclosure shows:
  • Annual percentage rate (APR) of the mortgage loan
  • Total amount financed
  • Total of all payments
  • Total finance charge
  • The demand feature
  • Late payment fee and prepayment penalty information
• Final Good Faith Estimate of Settlement Costs – This disclosure shows:
  • Final closing expenses
  • Final settlement charges and fees
• Appraisal Notice – This document informs you that you have a right to have a copy of the appraisal report.
• Private Mortgage Insurance Disclosure – This disclosure explains the benefits of private mortgage insurance.
• Transfer of Servicing Disclosure Statement – This statement explains that your lender may have the right to transfer the servicing of your loan to another lender.

Disclosures Are Being Redesigned

The Federal Trade Commission released the results of a consumer survey in 2007 that reported current mortgage disclosure documents do not provide enough information to the consumer about the costs and terms of a mortgage.

New formats for disclosure documents continued to be developed and tested during 2008. One style that was tested is a one-page summary with two pages of details about the loan. These new formats have been well-received by consumers who participated in the research testing. No date has been published for the release of these new document formats.