Summary
The CFPB is developing forms and rules to carry out the mandate of the Dodd-Frank Act and is seeking comment from industry professionals and the public to develop its proposal. The draft rules will be published on July 21, 2012.
On June 7, 2012, the American Land Title Association hosted a roundtable discussion with Ben Olson and David Friend of the Consumer Financial Protection Bureau ("CFPB") that drew attendance from across the country. Olson is Managing Counsel for CFPB Regulations, and Friend is an Attorney-Advisor for CFPB Enforcement. The roundtable gave members of the title industry an opportunity to discuss with the CFPB their concerns regarding the rules being promulgated under the Dodd-Frank Act to integrate mortgage disclosures required under RESPA and TILA. The CFPB is currently developing the forms and rules to carry out the Dodd-Frank Act, and is seeking input from industry professionals and the public at large on how to best service both consumers and agents in this matter.
Integrated Model or Uniform Standard Disclosures?
Much of the discussion centered around whether the integrated form produced by the CFPB would be a model form or a uniform standard form. Attendees identified numerous problems that would likely arise if a model form was adopted. Similar to the current unique closing instructions promulgated by individual lenders, a model form system would likely mean that settlement agents would be faced with unique disclosure forms from each lender. This would increase costs in several ways, including the expense of training agents on the requirements of each form, as well as increased software costs associated with developing software capable of creating custom forms. The Dodd-Frank Act, however, requires the CFPB to develop a model form, which may limit the bureau’s ability to require that a standard form be implemented. Therefore, it is imperative for members of the industry to contact both the CFPB and Congress for action on this matter.
Who Will Provide Disclosures?
Attendees also provided input on who should present the disclosures to buyers – lenders, settlement agents or a combination of the two. The consensus was that requiring settlement agents to provide all disclosures would protect the industry from potential business encroachment from lenders. However, attendees voiced concern with regard to the liability risk associated with making TILA disclosures. It was noted that because title agencies specialize in local laws, they are more suited to ensure total compliance. However, additional time spent by settlement agents to provide disclosure at closing will increase closing costs for consumers. Industry members are urged to provide the CFPB detail regarding the additional expenses this will add to the closing process, including costs to come into compliance and long-term ongoing costs.
Additional Modifications to Disclosures?
Test forms that the CFPB has authored in the last few months have suggested that the bureau may reduce the tolerance for fluctuations in figures between certain disclosures made three days before closing and disclosures made the day of closing from ten percent to zero percent. The CFPB stressed that the current exceptions to this tolerance requirement, such as changed circumstances of the buyer, will remain intact in the future. Settlement agents and lender representatives at the meeting described the difficulty in attaining zero percent tolerance in these figures. Industry members are urged to provide information to the CFPB regarding the problems with complying with a zero percent tolerance.
The draft rules will be published on July 21, 2012. The bureau is currently seeking comment to develop its proposal. It emphasized that detailed, specific comments which identify problems and include impact estimates are favored, and stressed content over quantity. To provide the CFPB with comments on this issue, please visit http://www.consumerfinance.gov.
