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Your Money Adviser

New Forms Aim to Clarify Mortgage Data for Borrowers

New rules and forms aimed at making mortgage information easier for borrowers to understand are scheduled to debut on Aug. 1.

The new forms are aimed at making it simpler for consumers to understand and compare loan terms, and to spot whether final terms are significantly different from a lender’s initial estimate.

The new forms were mandated by the Dodd-Frank financial reform law, which directed the Consumer Financial Protection Bureau to combine older disclosure documents required by two different federal laws, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The newly organized forms will be used for mortgage applications submitted on and after Aug. 1.

“The forms are going to look very different,” said Andrew Pizor, a lawyer with the National Consumer Law Center. “They look a lot nicer and easier to understand.”

Jason van den Brand, chief executive of Lenda, a mortgage refinance website, says he thinks the new forms are an improvement because they have been designed to be complementary, so borrowers can put them side by side for easy reference. “They can easily compare and see if anything has changed,” he said.

Under the new rules, borrowers will receive a newly designed loan estimate three days after submitting an application. The form will include information like the loan amount, interest rate and monthly payment.

Then, at least three days before the scheduled closing, applicants must receive a closing disclosure, so they can have time to review the terms of the loan and ask any questions. The five-page disclosure summarizes the terms of the loan and lists what you will need to pay at closing. Currently, borrowers sometimes don’t receive such information until just before or even at the closing, when they are under pressure to sign documents and complete the loan.

If certain items change after that — such as a significant increase in the annual percentage rate, addition of a prepayment penalty or a switch from a fixed-rate loan to an adjustable-rate loan — borrowers must be given an extra three business days to review the loan terms.

Most “ordinary” changes that occur in the final days before the closing, like a broken refrigerator found at the walkthrough, or typos found in documents at the closing, won’t set off the requirement for another three-day review, although the lender must still provide an updated disclosure, according to the Consumer Financial Protection Bureau.

The bureau finished the new rules in late 2013, but delayed adoption until Aug. 1 of this year to give the mortgage industry time to prepare. Nevertheless, lenders and other industry participants say they are worried that adoption of the new rules and forms may cause delays for borrowers.

Some software vendors are behind in delivering upgrades to computer programs necessary to process applications with the new rules and documents, said Bob Davis, executive vice president of the American Bankers Association. “There’s the potential for a slowdown with applications,” he said, adding that “the process is already too slow for consumers.”

Last month, the bureau’s director, Richard Cordray, said in public remarks that “most market players have put themselves in position to be ready by August, and others are getting ready as well.”

Still, the bankers association and other groups are seeking a grace period for a time after the new rules take effect, since violations can carry hefty penalties and lenders are still getting up to speed. The bureau has indicated only that it will be “sensitive” about enforcement initially, as long as lenders are making a good-faith effort to comply with the new rules.

Consumer advocates suggest the industry concerns are overblown. “They have had a lot of time to get ready,” said Mr. Pizor.

Here are some additional questions about the new disclosure rules:

■ Where can I see what the new forms will look like?

The new forms, and images of the old forms that they are replacing, are available on the Consumer Financial Protection Bureau’s website.

■ Will the new forms be used for all home loans?

The forms will be used for most mortgage loans, but they won’t be used for home equity lines of credit or reverse mortgages, according to the bureau.

■ Where can I get more information about the new rules?

The bureau has created a new homeownership toolkit that incorporates the new forms and rules.

The agency also has a fact sheet about the three-day disclosure review period.

Email: yourmoneyadviser@nytimes.com

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