Written Disclosure To The Borrower: Trust, Transparency and the Truth

Having a tough time dealing with your lender? Having that sinking feeling that your borrower is leading you up the garden path with his arsenal of fancy-sounding technical terms and their winding explanations that sounds dubious, to say the least? If this is the situation, don't worry. Demand a written disclosure from your lender. He is liable to give you one.
 
A written disclosure is an account of all the fees and costs, pertaining of course to the mortgage transactions, that you are required to pay to your lender. And it is also worth knowing that this disclosure is to be provided to you within a stipulated time and should be in a recommended format.
 
The Primary Contents Of The Written Disclosure
 
The written disclosure provided by the creditor should contain the following information:

• The actual mortgage sum.
• The total size of each advance made on the principal and the exact timing of each advance.
• The time period of the mortgage and the term of amortization, if applicable.
• The cumulative value of the payments.
• The annual interest rate and the instances under which it will be compounded.
• The exact time after which the interest is going to be charged and also the time period or conditions under which the interest will not be charged.
• The fees, if the services of any other mortgage broker are employed during this particular transaction.
• The details of the property that will act as the security interest.

The written disclosure will also contain sundry other information, but you should be always on the lookout that it definitely contains the above-mentioned details.
 
Some Other Details That The Written Disclosure Should Contain
 
Insist on sheer transparency as regards the written disclosure that your lender gives to you. There will be nothing in the likes of reading between lines in this context. Therefore, if you find your lender being sloppy about the written disclosure, remind him that the document has to clarify:

• The kind and size of any charge other than the interest rate that the mortgage comes with. And if the exact amount is not fathomable right at the outset, the lender still has to provide a formula to calculate this amount.
• The ilk and size of any default charges that are going to be levied upon the borrower.
• Every conceivable form of information regarding the optional services provided by the lender. To elaborate, the written disclosure should contain details about the nature and the costs of the optional services provided and the conditions under which the borrower can choose to do away with these services.

The Preliminary Things To Know About This Written Disclosure
 
Details about its format and contents apart, there are a few things that you must know about the written disclosure that your creditor is going to provide to you. They are:

• The timing of providing the disclosure is of utmost importance. The preliminary disclosure should be provided two working days prior to the formal loan agreement between the borrower and the lender. However, the borrower may also agree to a verbal disclosure on the day of the loan agreement, which is the procedure in case of non-mortgage loans.
• This written disclosure gives the borrower the right to call off optional services like an insurance scheme, payment of the loan for fixed amounts (except for mortgages) in advance and default expenses. And when he does so, the written disclosure also entitles the borrower to a refund or return of the unused fees.
• The written disclosure from the lender should state in clear terms if the borrower doesn't intend to claim payment on a fixed loan but would continue to charge an interest rate during the entire payment period.
• Demand a different written disclosure from your lender for all the different kinds of loans and mortgages that you have received from him. Law states that fixed interest loans, variable interest loans, credit card applications, mortgage renewals and the like have different disclosure requirements.
• There is a charge levied upon the discharge of a security interest.
• In the event of the borrower missing out on a monthly payment and the outstanding mortgage balance rising or a default charge being levied as a consequence, the lender is required to issue a disclosure statement within 30 days of the date of the missed payment.

The law requires that the written disclosure should be in a clear and concise language that is easily comprehensible. Beware of lenders who intend to confound you in language labyrinth and if you have doubts regarding particular details or terms used in the document, feel free to consult other financial advisors.
 
Written Disclosure According To Federal Housing Administration (FHA) Standards
 
As you can fathom there is a general structure to written disclosures. But there are variations in written disclosures regarding the details that are provided in them.
 
According to FHA, the written disclosure from the lender should also contain the personal details of the borrower like his race, sex, nationality and even his marital status. In case of married borrowers, FHA requires that the written disclosure also contain the names of the spouses.
 
A written disclosure to the borrower from the lender is the borrower's passport to ensuring that there is lucidity and honesty in the mortgage transactions and that he is not taken for a ride and made to part with his money and assets as a final blow.

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