ATG Call to Action | October 29, 2012

SAMPLE CFPB LETTER

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  5. Send to Director Cordray via ALTA at respacomments@alta.org before November 6, 2012.

 

Richard Cordray
Director, Consumer Financial Protection Bureau
Washington, D.C.

Dear Director Cordray,

My name is ______, I am an attorney and a title agent in [insert city and state]. I have been in the title business for __ years. We are a small business with ___ employees. In the past year we have conducted _____ real estate and loan closings. I applaud the CFPB for taking steps to increase transparency in the process and for working to ensure additional safeguards for consumers.

I am writing regarding certain portions of the CFPB’s proposal on the new Loan Estimate and Closing Disclosure. These comments focus on who will prepare and provide the proposed forms to consumers, the three-day rule, uniformity of the Closing Disclosure form in relation to the current HUD-1 Settlement Statement, and the timeframe for implementation.

Settlement agents should prepare and deliver the Closing Disclosure.

The rule does not articulate who will prepare and deliver the Closing Disclosure. A Truth in Lending Statement will no longer be provided to the borrower three (3) days before closing. Instead, all information on the TIL will be included in the Closing Disclosure form, which could be prepared and delivered in one of two ways. One option has the lender completing and delivering the entire form to the borrower, and the other has lender allowing the settlement agent to complete one or more sections of the Closing Disclosure form, and either the settlement agent or lender delivering the entire form to the borrower. Under either option, a separate Seller’s Disbursement form would be prepared and delivered by the settlement agent.

The option of having the Closing Disclosure prepared and delivered by an independent settlement agent is in the best interest of consumers and will avoid the creation of disastrous inefficiencies in the home-selling process.

We must remember that the mortgage and housing crisis was not created by settlement service providers and to shift all aspects of loan origination and closing to the lending industry will facilitate a return to consumer abuse. The nationwide network of settlement providers allows for an independent party, often a small business owner, in every corner of the country that can assemble figures and distribute them to consumers efficiently and in a cost effective manner. To upset this network or diminish its importance will result in increased costs to consumers and have disastrous consequences for the title industry, which currently employs more than 150,000 people in the United States and contributes roughly $26 billion to the U.S. economy.

The three-day waiting period should be eliminated or the exceptions should be materially expanded.

The proposed rule requires that the new Closing Disclosure form be delivered to and received by the borrower three (3) business days prior to the “consummation” of the transaction. It also provides for circumstances that could trigger a new three (3) business days waiting period.

As written, this proposal has the potential to cause significant harm to borrowers by causing delays. In some circumstances rate locks will expire and contracts will be breached. If the lender is unable to fulfill its obligations within the three-day time period, the new three-day period could cause a chain reaction requiring multiple closings to fail, harming a line of consumers who have arranged a multitude of move-related activities. In the alternative, many lenders will only commit borrowers to the more expensive longer rate locks, increasing the costs to borrowers significantly.

Exceptions to the three business day requirement are included in the proposed rule to allow a waiver of that requirement. One of the exceptions that will not trigger a new waiting period is a total change of less than $100. Often, reasonable increases of more than $100 may be justified. I suggest that the change allowance be increased to $__________to cover most of the last minute changes that occur prior to closing.

The line-numbering on the new form should be consistent with that of the current form.

Please consider re-numbering pages 2 and 3 of the Closing Disclosure to be more closely aligned with the current HUD-1 Settlement Statement. Uniform use of line numbers in a closing statement for repeat costs such as the Realtor’s commission, lender fees, recording costs, title insurance, and settlement services provides the following significant benefits:

  • Clarity to consumers;
  • Reduced cost in training and preparation; and
  • Efficiency in using figures and information in other documents.

Since it is likely that both the lender and settlement agent will enter figures and information on the Closing Disclosure, making the entry points uniform is essential to avoid errors and provide a clear document to consumers.

Changes should be implemented in a realistic timeframe.

The changes are dramatic and far-reaching. The industry must be given an appropriate amount of time to implement new procedures, train employees, educate parties, create new forms, and develop new software and web applications. We suggest an 18- to 24-month implementation schedule.

Conclusion

Thank you for the opportunity to comment on the new RESPA/TILA combined mortgage disclosures. These new forms represent the result of a laudable effort by the department to increase consumer awareness of the costs associated with home closings and to encourage shopping. However, it must be implemented with the understanding that the settlement services industry plays an important role in the process and is a critical piece of the fragile housing economy. To diminish its role would negatively impact small businesses throughout the country and result in decreased consumer protection. Additionally, our housing economy is finally showing slight signs of improvement. To dramatically alter the methods for delivering settlement services will likely delay, if not destroy the recovery.

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