Know Before You Owe: Where Did the Online Participants Come From?

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We received thousands of comments in response to the first phase of our Know Before You Owe project, which asked the public for input on a single, simpler mortgage disclosure. Right now, someone who applies for a mortgage gets two disclosure forms, the Truth In Lending disclosure and the Good Faith Estimate. Congress tasked the CFPB with creating a single integrated mortgage disclosure form.

It’s going to take us time to digest the feedback we got, but we wanted to start sharing what we’re learning. (If you did not participate in this round of Know Before You Owe don’t worry. Over the coming months, we’ll ask for input several more times. Sign up here to receive notifications.)

One of the first questions we’ve looked at is: Where are the people who weighed in?

To answer this, we looked the zip code information that most users provided. (Users did not have to enter their zip codes to give us feedback, but 1,514 did so.) One thing we are proud of is that we received feedback from far beyond Washington, DC. People from all over the United States weighed in through Know Before You Owe.

This question – where are the people who took part in this project? – fascinated us, so we dove a bit deeper into the numbers. Here’s what we found:

Weighing in on Know Before You Owe involved a series of steps. Users could stop at any of these points:

  1. Choose between this form and this form.
  2. Review one of the forms to say what worked or did not.
  3. Decide whether to review the other form.
  4. Tell us a bit about yourself, including your zip code.

Locations with 15+ Know Before
You Owe Zip Code Submissions

Location Submitted
Washington, DC 36
Columbus, OH 18
Minneapolis, MN 18
Chicago, IL 18
Austin, TX 18
Orange County, CA 17
Portland, OR 17
Downtown Manhattan, NY 16
East S.F. Bay, CA 16
Plano, TX 15
Beaverton, OR 15

To the right is a list of the most common locations based on the number of people who submitted zip codes. Only people who completed all four steps above reached this point.

Not surprisingly, the number who came to the page in the first place was much larger than the number who completed that last step. Overall, Know Before You Owe received more than 78,845 visits from 35,168 unique visitors. (In web-speak, a “unique visit” counts each user once no matter how many times they visit.)

We decided to take a closer look at the unique visitor count to learn more. The greatest number came from Washington, D.C., where many consumer groups, industry groups, regulators, and journalists are based. Generally, the next highest numbers came from some of the nation’s largest cities.

However, when we scaled visit counts by city size, the picture looked a little different, as you can see in the list below. The cities do not show an obvious pattern. They range from suburbs to hub cities, from dense to sprawling. Their populations range from just over 100,000 to more than 800,000.

Unique Visits Per 1,000 Residents

Washington, DC 9.10
Richmond, VA 6.48
Columbia, SC 4.60
Billings, MT 4.52
Cambridge, MA 3.07
Wilmington, NC 3.00
Minneapolis, MN 2.98
San Francisco, CA 2.96
Overland Park, KS 2.71
Portland, OR 2.68

*minimum 100,000 residents

The differences between the cities emphasize that people who are interested in mortgage disclosure come from different regions. (Even more to this point, nearly half our comments came from places other than cities with more than 100,000 residents.) The team that is developing the new form has planned to test the forms with people from different areas and backgrounds. These data serve as an illustration of why that testing plan is so important. (Read more about our testing program.)

Stay tuned for more!

  • Michael_oconnor43

    Elizabeth:
    Please remember when considering how to document the mortgage process, tax reform (if properly done to eliminate loopholes) may change the way borrowers feel about rates points and fees.  While transparency is always a positive move forward the uncertainty factor is having a heavy impact on our economy and the markets too.
    Michael O’Connor

  • Anonymous

    I am concerned that the process is missing the forest for the trees.  First of all, the two forms have largely identical information — just formatted differently.  While I agree that presentation and clarity ARE very important, so is content.  For example, many mortgagors are under water today.  That is, they owe more than the house is worth.  This not only leads to increased defaults but also other burdens.  If someone were thinking of relocating — say for job,  since the sales price of their house wouldn’t pay off the mortgage, they would need to come up with cash to move.  This is a serious problem.  But the form does not make is clear at all what the LTV on the mortgage is and how that could change in the future (either because principal amount changes or, more likely, home price).  I realize it is hard to decide how to do that sensibly, but that isn’t a reason to ignore the issue.

    I have more to say but I can’t see what I am typing so I’ll  continue on a second comment.

  • Anonymous

    by the way, this and the previous post are by Jonathan Reiss (aka jreiss).

    Another issue not apparent on the form is how the mortgage broker is being compensated.  Another tricky issue but wouldn’t you like to know if the bank is paying the broker substantially more for this loan than for another one? 

    Perhaps that should be a separate form that people could be prompted to ask for.
    So, I think this comment process is looking too narrowly at the question of what a borrower really should know before borrowing a very large sum of money.

    Jonathan Reiss

    • Ben Vogler

      The forms should be so simple that it doesn’t matter what the banker or broker is getting paid.  It only confuses the issue with the consumer.   The form should be so simple that the consumer can easily compare one offer against another, regardless of how much profit someone is making.   

      • Anonymous

        If the reporting were perfect, I would agree with you.  But consider this case:  one of the forms has a nice “Comparisons” corner specifically for the purpose you suggest.  But it focuses on the first five years.  Unscrupulous lenders will start to design mortgages with payments that increase in years 6-10.  The form may make those mortgages LOOK deceptively cheap.

        So, it is important to have redundant checks.  Any system can be gamed.  And once it is in place, it will be.

        Jonathan Reiss

  • Bobbie2

    Never trust anyone who controls a lot of money.

  • Roderickgorby

    I managed to mortgage a condo back in 2001.  I was 23 years old, single and was definitely sub-prime.  I know that the team that was assembled to get my mortgage to go through worked hard to conceal my sub-prime-ness.  Though, it remains a point of pride for me, buying a home was a bit scary, and since I was sub-prime, the very idea of shopping for other banks was inconceivable.  I got out from under my mortgage rather neatly, but am not convinced that a ‘house is a home’ nor that it is a better piggy bank than the hollow spot beneath my mattress.  How will the CFPB encourage consumers or how will it be easy to ‘shop’ for a mortgage by comparing these sheets?  It seems to me that built into the process of buying a house, especially as a sub-prime borrower, is some kind of dependency on the real estate agent to direct you to the ‘one bank’ who will approve your loan.  Regardless of the verity behind claims such as these, will there be a way to mandate mortgage shopping?  Or will that depend on the consumers vigilance as a shopper and to educate themselves?

  • http://pulse.yahoo.com/_JXWS2IJI4G4NNMNAYMESOER7MQ Tim

    There are many issues with these two new sample disclosures. Here are some initial observations:
    1. Neither sample identifies or describes the terms of the loan being offered?
     
    2. Ficus Bank example says loan adjusts yearly starting some time in year 3 but does not define when (what month).  Pecan Bank also does not identify first adjustment period stating that the loan adjusts yearly starting in year 3 which would be sometime between the 25th and 36th month and most common ARM’s today would adjust at the 37th , 60th, 84th , or 120th payment.  Either way it should state the month, not the year to be clear.  Also either this form or the ARM disclosure should show a year by year worst case example.  It should not be lumped into a year 3-8 maximum that does not disclose the maximum first adjustment.
     
    3. Expires: What expires is not defined? Is it a rate offer, closing cost offer or something else entirely.
     
    4. Loan type description is invalid as this is some form of hybrid ARM with a fixed period of 2-3 years.
     
    5. There is no clear disclosure of the first adjustment date on the ARM. It tells us that it adjusts in year 3. (This provides for 12 potential first adjustment dates)
     
    6. Monthly Mortgage Insurance Premium is not disclosed
     
    7. Monthly Property Tax Estimate is not disclosed.
     
    8. Monthly Hazard Insurance Premium estimate is not disclosed.
    REGARDING items 6,7&8 less is not better. Breakdown of this payment is critical to comparing offers from different lenders since MI rates can vary and they may want to compare to a VA, USDA or FHA loan as well.  Vague disclosure here hides the cost of insuring the loan from the consumer and makes comparison shopping impossible because you do not know what to compare.
     
    9. I am sure you have a reason for it but the 5 year metric on principal reduction and total of payments is not relevant unless it is being used to compare to loan with a shorter or longer amortization term, a pay option ARM, or interest only product.
     
    10. The cautions section of the Pecan Bank sample is better than the Ficus sample but terms are still vague on ARM.
     
    11.  I thought the purpose of revising these documents was to provide clarity to the consumer but by lumping fees together in categories and not breaking them down last year’s RESPA changes increased fees to consumers across the board.  In fact each new regulation enacted over the last 4 years has increased the cost of lending to the consumer.
    Requiring lenders to guarantee costs has also resulted in higher consumer cost, not lower.
    If you need me to explain that you would not understand the reasoning to begin with.
    12. Language on page two of both forms mislead the consumer about what they will pay at closing.
    The form clearly states “Estimated amount you will pay at closing” followed by a figure that represents only closing and escrows, not down payment and Yes I know what page one says but the statement about the amount you will pay at closing is on page 2.  This will confuse even some borrowers who are not morons.
     
    I understand that down payment does not include closing costs but not every consumer does.  Trust me on that one…Ficus says + but Pecan does not.  I now have just noticed that Pecan has a total somewhere that is so far away from the calculations that it is useless in my opinion under projected payments.
     
    13.  The important dates statement should be on page 1 underneath the date and time
     
    14.  Adjustable Interest Rate Information
     
    Contradicts page one where it states that the adjusts yearly starting in year 3.  I understand the meaning but the 95 out of 100 consumers will not.
     
    I am also not sure why you created an example on a fictitious loan program that would be ineligible for Mortgage Insurance yet requires it.  MI will not insure an ARM with an annual rate cap over 2.00%.
     
    My honest opinion is that if possible this may be worse than what we have today which is provided to consumers but not actually used in explaining the loan.  Since the implementation of the 2010 GFE we have as a practice printed out details on the old format so that it can be explained to the consumer.  What we need is a simple line item by line item GFE that adds, shows credits and provides a full break down of charges and either the current or previous TIL.  I can accept either of those.
     
    I think combining the two forms is a terrible idea and only serves to make the disclosure too confusing for anyone to follow. These documents are vague, provide limited disclosure of where the money is going and will further muddy the waters.
     
    There is no disclosure of late charges, assumability, presence or absence of a demand feature, or if the lender is selling/quoting insurance.
     
    My vote would be to scrap these and start over.  Clarity does not come from vague and incomplete disclosure.

  • http://www.arhelectric.com electrical contractor

    The form should be very simple.

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