First, some background. In October, the Consumer Financial Protection Bureau, or CFPB, launched its ambitious package of new disclosures and rules governing home-mortgage transactions as part of its “Know Before You Owe” campaign. The Loan Estimate is the upfront piece — lenders must provide it three business days after you apply — and it replaces the traditional Good Faith Estimate and Truth in Lending disclosures.
In three pages, it provides you an in-depth scan of the mortgage you’re considering: It details not only the mechanics of the loan — interest rate, annual percentage rate, monthly principal-and-interest payments, property taxes, insurance and other escrow items — but also the itemized charges you’ll be hit with and the amount of cash you’ll need to close the transaction. Better yet, you can pretty much depend on the cost disclosures as the final ones you’ll pay, because lenders face massive financial penalties if they play games and charge you more at closing. Under the previous system of disclosures, you couldn’t be certain about your final expenses, and the Good Faith Estimate didn’t even tell you how much you’d need for closing.
Under the CFPB’s rules, after you receive your Loan Estimate you have 10 days to shop the competition before agreeing to the deal or ditching it. The bureau recommends that borrowers obtain a Loan Estimate “from three or more lenders” before making a final choice. Sounds sensible, but are buyers actually doing that?