Smart Borrower Blog

New Mortgage Documents Get Borrowers’ Attention

May 18th, 2016 @ 8:04 PM by Amber Nelson

A pair of new federally mandated mortgage loan disclosures are having the intended effects – getting borrowers to review their loan terms before closing, according to a new industry survey.

As of last October, the Consumer Financial Protection Bureau required mortgage lenders to discard the old HUD-1 mortgage disclosure document and instead provide borrowers with two simpler forms: the 5-page Closing Document (which must be presented 3 days before closing) and the Loan Estimate. The CFPB instituted the new policy in hopes of avoiding the kind of widespread borrower ignorance that occurred during the housing boom and helped lead to the mortgage meltdown. With easier-to-understand disclosure the CFPB hoped that mortgage borrowers would be very clear about the terms of their mortgage loans.

And apparently more borrowers are reviewing those documents than before the switch based on data from a survey from the American Land Title Association. Before the new disclosures, 74 percent of borrowers reviewed their loan documents before closing, with 22 percent not even receiving their HUD-1 closing statement until they came to the closing table. Since the new regulation went into effect, 92 percent of borrowers reviewed their loan documents before closing.

“Title and settlement agents went to great lengths to prepare and train staff prior to implementation of the regulation,” said Michelle Korsmo, ALTA’s chief executive officer. “The hard work of these professionals paid off.”

And even with the added 3-day requirement, closings have not seen a major increase in delays as many mortgage lenders feared. Before the new disclosures 77 percent of closings took place on time; the survey revealed that now 74 percent are still occurring on schedule with an additional 5 percent being delayed only until later the same day.

So with minimal delays, it looks like the new regulations are accomplishing the goal of helping consumers “Know Before You Owe.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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