Posts from May 2011

Let’s say you want to buy a home or refinance your mortgage.

You might be in the market to buy today, or you might be planning to do so down the road. You think about the neighborhoods you might like, the features you want, and what it will be like when you get the keys and take your first step through the front door.

For most Americans, this means taking out a loan. A mortgage loan is the biggest financial commitment most Americans will make in their lifetimes. With something so important, you ought to be able to get up-front, easy-to-understand information that lets you compare different loan offers and find the one that’s best for you. But if you’ve actually applied for a mortgage recently, what you probably remember most are lots of technical terms and long lists of fees.

We want to help fix that, and we’d like to have your help. Today, we’re announcing the Know Before You Owe project – sign up now, and we’ll tell you when it launches. Know Before You Owe is an effort to combine the Truth in Lending disclosure and the Good Faith Estimate into a single, simpler form.

Wait – the what?

If you’ve ever applied for a mortgage loan, you’ve received two forms required by federal law: A two-page Truth in Lending form and a three-page Good Faith Estimate. They are meant to give you the basic facts about home loans that you apply for and to help you pick the mortgage product that’s best for you. But these forms have overlapping information and complicated terms and are just plain difficult to understand.

These disclosures don’t work if they give you too much information or if the information they provide isn’t what you need. They don’t work if they drown you in detail or leave out crucial information, like warnings about hidden risks. Can the cost of your loan go up? When, and why? Complicated disclosures can make it hard to answer or even ask the right questions, and many consumers don’t know what to ask until it’s too late.

Over the coming months, we will design and test new draft disclosure forms and seek one-on-one input from consumers, lenders, and brokers as we refine the forms. But this disclosure affects everyone. That’s why we will also put them online, while they’re still in the design phase, and ask you to weigh in. We will deliver your input to our testers and designers and factor it into our design process.

Sign up now, and we’ll email you when it’s time to have your say.

Mothers Day provides another opportunity to highlight the importance of financial education for women. Financial insecurity affects all Americans, but women may be in a particularly uncertain position.

A White House Council on Women and Girls interagency report shows that working mothers provide an increasing share of American families’ earnings. Still, a significant pay gap persists. Even after accounting for factors like education or time spent away from work to be primary caregivers, studies demonstrate women still earn less than men for comparable work. This means women make smaller contributions to Social Security. As a result, they may receive lower Social Security payments after retirement.

Changes in private retirement plans are giving all workers greater responsibility for their financial futures in retirement, which makes individual savings decisions very important. Since women have lower earnings on average, it is harder for them to put as much money into these self-directed savings for retirement.

Together, these factors reduce women’s retirement income. The U.S. Government Accountability Office reports that, as a result, women face significant challenges in ensuring financial security in retirement.

Beyond retirement planning, giving women the resources to understand their financial situations can help all of us. Women control the majority of consumer spending. Still, 67 percent of them say they have little knowledge of financial products and services. This makes them potential targets for bad actors in the consumer financial services arena.

The passage of the Dodd-Frank Act last year was an important step to help ensure a fair, transparent, and competitive market for financial products and services, and to help protect consumers from unfair, deceptive, and abusive practices and from discrimination.

Part of the Act created the Consumer Financial Protection Bureau, and one of our core missions is to promote opportunities for effective financial education for American consumers. We recognize that the more consumers understand about financial products and services, the easier it will be for them to make informed financial choices for themselves and their families.

MyMoney.gov has resources to help women and families think through financial choices and take charge of their financial futures. For information specific to the CFPB and for links to advice for consumers on money matters, continue to visit us here at www.consumerfinance.gov.