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Is New Paperwork Better — Or Worse?

by Peter G. Miller
March 24th, 2008

We mentioned the new efforts by HUD to update the disclosure and closing documents used in real estate. I see it as a generally good idea, Barbara offers an alternative view: “I firmly believe RESPA reform is necessary however, adding still more paper to the 60 some odd pages already in use (and unfortunately not read or understood by too many) seems counter productive.”

I read Barbara’s comment and thought, yeah, gee, there’s all that paper. But I also refinanced a loan a few days ago and think the new forms would be a significant improvement. Here’s why:

First, the new good faith estimate is a standardized form which borrowers can use to easily compare loans. The form is essentially a checklist — it raises a huge number of questions which are not raised today.

Second, the proposed form has the benefit of colors and good graphics. It is intuitively easy to understand.

Third, the form shows what fees can increase — and which cannot.

Fourth, the form allows for comparison shopping, a concept which should be encouraged.

The truth is that every player in the lending process wants paperwork to confirm some aspect of their participation. Despite years of claims regarding “paperless” closings, paper still counts and is used in virtually all settlements.

If there’s going to be paper — and there is — isn’t it better to have paperwork that can actually be read and understood?

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