HUD Homes / VA Homes News

A proposal floated yesterday plans to give mortgage hunters better information about their loans and encourages them to shop around for the best terms.

Department of Housing and Urban Development (HUD) officials said that confusion about loan terms and closing costs have contributed to the current subprime mortgage crisis. So now, HUD is pushing for a standard form that lenders would be required to give borrowers before they commit to their loans.

Among other things, this new form would:

1) Disclose all the terms of the loan, including the interest rate and monthly payment; whether the rate or principal balance would increase and by how much; and if the loan has a prepayment penalty or balloon payment.

2) Show all settlement charges prominently, including the fees paid for any outside services. It would also specify which of those charges could change at settlement time, and by how much.

3) Require lenders to reveal the fees that they give to mortgage brokers.

HUD would also now require mortgage settlements to provide a "closing script" to borrowers at the settlement table, and to provide copies to all parties.

The agency is now in the process of gathering public comment on the rule changes until mid-May and hopes to have them in place before President Bush's term ends.