Mortgage Reform - One Tooth Removed

Mortgage regulation was set to have teeth when first proposed. Among the changes was a proposal to requre the closing agent to read a script to the buyer, including the payment terms, the type of mortgage, etc. The exercise would slow down closings and, in theory, force the buyer to focus on the relevant terms and hear them in plain English. The mortgage industry's lobbyists recently announced that HUD had backed off the script requirement. The mortgage lending industry didn't like the scripts because, well, they would slow down closings. Apparently, even in a down RE market, time is still money.

Perhaps a cleaner loan summary sheet would do equally well to convey the terms to a buyer. In my mind, though, this already exists in the form a HUD-1. While not "clear" in the "apple product packaging" sense, the HUD-1 is one legal-sized page that lays out exactly what you are borrowing, what type of mortgage you are taking on, and what your monthly payment will be. It could be edited to include more detail on the date of adjustable rate resets and to cut out many of the other items that clutter the page, but it is not all that complex. That said, I understand that I am - to my chagrin - considered a sophisticated buyer.

It is for that last reason that I thought a script would be a bold change. I admit that a purchase as large as a house requires a certain level of sophistication and, thus, permits a certain level of "caveat emptor;" however, realpolitik requires that we admit to ourselves that all types of people buy homes and that they don't have the sophistication or attention to read through their loan documents. Their inability to understand the terms is now hurting all of us, and if you are going to hurt me, I support regulation that protects us all from you (including yourself.) That is an instance in which regulation lowers the overall cost to society, regardless of the increased closing costs incurred by realtors and title companies. If they charge us another $1000, that still only represents at most about .5-.7% the price of the property. Consider it the cost of insuring against living through this again.

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