For most families, buying a home is the biggest financial decision they will ever make, with the term of a mortgage commonly spanning 30 years. After the long process of house hunting has ended and a family finally chooses the home where they will put down roots, they’re confronted with a mountain of complex paperwork to complete in an extremely short period of time.
These home buying-related problems are highlighted in the latest report from the Consumer Financial Protection Bureau (CFPB). The bureau found that homebuyers were often faced with a bewildering array of documents printed in complex legalese. They were expected to complete them quickly—often in less than one day—before their mortgage could be finalized.
Homebuyers reported not having enough time to look over mortgage documents on their own, and often received little help in understanding complex and unfamiliar legal terms. Because owning a mortgage involves paperwork from multiple levels of government and the lenders themselves, the report found that borrowers were often overwhelmed by the high volume of documents involved in the process. This is one place where housing counseling during the home buying process can make a powerful difference for new borrowers.
Since 1997, the NCLR Homeownership Network (NHN), a group of HUD-certified 501(c)3 organizations, has connected Latino families to a wealth of housing counseling services with proven benefits such as preventing foreclosure and increasing homeowner education. These NHN organizations provide experienced, bilingual, culturally competent services to the Latino community, and have a proven track record in helping Latino families successfully navigate the complex home buying process.
Solving the mortgage closing problems uncovered by the CFPB is critically important for the Latino community, as Latinos increasingly make up a larger share of the housing market. In fact, by 2020, half of all new homebuyers will be Latino, many of whom will speak English as a second language. The mortgage industry must adapt to the changing mortgage market and help first-time homebuyers avoid frustrations and confusion about the mortgage process.
For the stability of our national housing market and to support all families who comprise it, these problems should be promptly resolved through practical solutions, including several that are already being pursued by the CFPB. Instead of having a single day to sign crucial closing documents, the CFPB has proposed that borrowers receive their closing disclosure form three business days before closing. However, since the CFPB only has jurisdiction over some of the myriad closing documents, more must be done to streamline the whole process.
The clearer the entire process is, the better equipped new homebuyers will be to manage their financial commitments and avoid problems in dealing with their mortgage product. New homeowners need time to understand the financial obligations they are taking on and the right to know what they are signing.