Thursday, November 27th, 2014

The Obameter

Create a Homeowner Obligation Made Explicit (HOME) score for mortgage comparisons


"Will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow Americans to easily compare various mortgage products and understand the full cost of the loan. The HOME score would also help borrowers understand their long-term obligations and would be required to include mandatory taxes and insurance."


Updates

New standards included in Dodd-Frank

As a candidate, Barack Obama promised to provide homebuyers with clearer standards for understanding mortgage loans.

In July 2010, Congress passed sweeping financial reform known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law created the Consumer Financial Protection Bureau and directed the bureau to write new disclosure standards for financial products, including mortgages.

The text of the law says the bureau "may prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.”

The end result will be a "single, integrated disclosure for mortgage loan transactions,” the law says.

A spokeswoman for the bureau told us that those standards are being written now. They will combine the disclosures already required in the Truth in Lending Act and the Real Estate Settlement Procedures Act to make the process less confusing. The standards should be finalized by January 2013.

The Dodd-Frank law achieved Obama's promise, and the Consumer Financial Protection Bureau is working to get those new standards in place. We rate this a Promise Kept.

Sources:

Email interview with Michelle Person, Consumer Financial Protection Bureau, May 23, 2012

Consumerfinance.gov, "Consumer Financial Protection Bureau considers rules to simplify mortgage points and fees,” May 9, 2012

Small Business Review Panel for TILA-RESPA Integration Rulemaking, Feb. 21, 2012

Dodd-Frank Wall Street Reform and Consumer Protection Act, see Section 1032

House passes bill to standardize mortgage information

President Obama promised to create new regulations so that people could more easily understand and compare mortgages when it comes time to buy a home.

Legislation pending in Congress would come very close to accomplishing Obama's goal.

A bill approved by the House of Representatives calls for standardized disclosure of the terms of the loan and requires the U.S. Department of Housing and Urban Development and the Federal Reserve to develop regulations for such disclosures.

Lenders would be required to disclose the following in a standardized manner: the principal amount of the loan; the term of the loan; whether the loan is fixed or adjustable; the annual percentage rate of interest at the time of the disclosure; whether the loan can adjust after the disclosure; when an adjustment would or could occur; the maximum annual percentage rate of interest for adjustable loans; the total monthly payment under the loan; the maximum total estimated monthly payment in case of adjustment; the total settlement charges in connection with the loan and the amount of any down payment and cash required at settlement; and whether or not the loan has a prepayment penalty or balloon payment and the terms, timing, and amount of any such penalty or payment.

The bill does not directly require lenders to follow new disclosure rules. Instead, the proposal says that "the Secretary of Housing and Urban Development and the Board of Governors of the Federal Reserve System shall include regulations for the mandatory use of standardized disclosure forms if they jointly determine that it would substantially benefit the consumer."

Finally, the Senate still needs to approve this provision, so it's possible the proposal could change.

Still, the House bill is enough for us to rate this promise In the Works.

Sources:

Thomas, HR 1728, accessed Jan. 11, 2010