Fed Seeks HUD Cooperation on GFE Revision

Federal Reserve Board staff members are urging staffers at the Department of Housing and Urban Development to work with them in revising key disclosures for mortgage applicants so they don't produce duplicative and inconsistent forms that confuse consumers. "We believe the inconsistencies and other differences between HUD's proposed good faith estimate and the Fed's Truth in Lending Act disclosures are likely to confuse consumers and undermine consumers' ability to make informed shopping decisions and avoid unnecessarily high settlement costs," Fed consumer affairs director Sandra Braunstein said. In commenting on HUD's Real Estate Settlement Procedures Act proposal, Ms. Braunstein points out that the Fed and HUD are on different tracks when it comes to the disclosure of mortgage broker compensation. She says consumers are confused about how brokers are compensated and reports that the Fed's consumer testing raises concerns about the terminology HUD uses to describe broker fees. "Board staff is concerned that the language on the revised GFE will contribute to consumer confusion rather than provide further clarity for consumers," the Fed's consumer affairs director says in the June 13 letter.