The federal government on Thursday began testing simplified disclosure forms designed to help borrowers find the mortgage that's right for them.
Consumers and lenders will test two prototypes, but both do the thing - consolidate two federally required disclosure forms into a simpler one.
The forms will be given to consumers who have just applied for a mortgage. They are designed to make the loan's costs and risks clear and let borrowers comparison-shop for the best offer.
The two-page prototypes, developed by the Consumer Financial Protection Bureau, combine the Truth in Lending Act mortgage disclosure and the Real Estate Settlement Procedures Act Good Faith Estimate, given to borrowers within three days of application.
Critics say the current forms, two and three pages long, have overlapping information and complicated terms.
"With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage, and can I get a better deal somewhere else?" said Elizabeth Warren, adviser to the Treasury Department.
Harry Pecci, a loan officer with Prosperity Mortgage in Doylestown, called the proposed change "a step in the right direction and a welcome change within the industry."
"The current forms are too long and cumbersome," he said. "I'd be surprised if any loan officer has actually sat down and read the existing disclosures through."
Philadelphia mortgage broker Fred Glick said that while the proposal would be an improvement, "the individual fees are not broken down. I feel the old form that did that was just fine."
"If we add loan details to that form, that would be more consumer-friendly," he said.
The change was mandated by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Jerome Scarpello of Leo Mortgage in Ambler said other recent changes had clouded rather than clarified the issues.
He called the new HUD-1 settlement statement "a perfect example. . . . It caused the form to go from two pages to four," creating a nightmare.
"Transparency has never been more clouded," Scarpello said.
The forms will be tested in a number of cities. Philadelphia borrowers can view the options and offer feedback here.
The bureau has a 2012 deadline to come up with a form.