ATG Call to Action | July 24, 2012

CFPB Releases Closing Disclosure Form

Dave Huffman photoComments Due No Later than November 6, 2012

Dear ATG Member,

Last week the Consumer Financial Protection Bureau (CFPB) released the Integrated Mortgage Disclosures under Real Estate Settlement Procedures Act (Reg X) and Truth-in-Lending Act (Reg Z) to simplify and improve mortgage disclosure forms. The Proposed Rule is 1,099 pages in length and will require extensive review.

Of significance to our members is the new Closing Disclosure form, which will replace the HUD-1 and the Truth-in-Lending disclosure. The CFPB has proposed the following for completion and delivery of the form:

The lender must give consumers this Closing Disclosure form at least three business days before the consumer closes on the loan. Generally, if changes occur between the time of the Closing Disclosure form is given and the closing, the consumer must be provided a new form. When that happens, the consumer must be given three additional business days to review that form before closing.

However, the proposed rule contains an exception from the three-day requirement for some common changes. These include changes resulting from negotiations between the buyer and seller after the final walk-through. There also is an exception for minor changes that result in less than $100 in increased costs.

The CFPB seeks comment on whether to permit additional changes without requiring a new three-day period before closing.

Currently, settlement agents are required to provide the HUD-1, while lenders are required to provide the revised Truth-in-Lending disclosure. The CFPB is proposing two alternatives for who is required to provide consumers with the new Closing Disclosure form:

  1. Under the first option, the lender would be responsible for delivering the Closing Disclosure form to the consumer.
  2. Under the second option, the lender may rely on the settlement agent to provide the Closing Disclosure form. However, under the second option, the lender would also remain responsible for the accuracy of the Closing Disclosure form.

The CFPB seeks comment as to which alternative is preferable.

Option #1 poses a serious threat to the way we conduct business. We are concerned that, if adopted, Option #1 will require lenders to prepare and deliver the Closing Disclosure form, opening the door for lenders to conduct the closing—displacing title insurance agents from our traditional role in real estate transactions.

Option #2 also poses a threat by giving lenders the option to prepare Closing Disclosure form or rely on a third party to prepare it. Under both options the lender is responsible for the numbers in the Closing Disclosure form. This option also opens the door for the lender to conduct the closing—potentially displacing title insurance agents from our traditional role in real estate transactions.

ATG agrees with the American Land Title Association (ALTA) that lenders should be responsible and liable for preparing the part of the Closing Disclosure form related to loan costs, while settlement agents should continue to be responsible and liable for preparing the part of the Closing Disclosure form related to settlement costs. ALTA CEO Michelle Korsmo stated: “We should remember title insurance and settlement companies didn’t cause the housing crisis and didn’t take advantage of consumers and investors. Consumers deserve an independent, third party at the settlement table, and this rule should ensure this role remains in the real estate transaction.”

ATG encourages members to oppose both options, but especially option #1, and encourage the CFPB to instead continue to allow independent settlement agents to both prepare the settlement cost portion of the Closing Disclosure and conduct the closing as the best protection for consumers. See instructions below for sending your comments to ATG. We will submit them to the CFPB on behalf of the membership.

ATG Members: Submit Comments via Email

I recently attended a meeting with dozens of ALTA members and representatives of the CFPB in Washington, D.C. CFPB representatives suggested that comments with specific examples demonstrating how the proposed regulation would harm the consumer were much more valuable and likely to be considered than general complaints. We encourage you to submit your comments and specific examples of the importance of independent title agents preparing the settlement statement and conducting the closing as well as any concerns over the form itself:

Send your comments to ATG; we will submit them to the CFPB on behalf of the membership:

You have until November 6, 2012, to review and provide comments on most of the proposal.

We also encourage you to review the new Closing Disclosure form and view the complete Proposed Rule, including instructions and forms.

As always, we appreciate your support on this important issue. Continue to watch your email and check for updates. Please feel free to contact me if you have additional questions.

David S. Huffman
Senior Vice President - Title Operations
Attorneys' Title Guaranty Fund, Inc.