CLTA News Express
An Express Article from the California Land Title Association
ALTA Releases Analysis Highlighting Effects of CFPB's 1,100-page Proposed Rule
Bulletin 12/13-9 - July 18, 2012
Michelle Korsmo, CEO for the American Land Title Association, earlier this week released an update to ALTA members on the contents of the Consumer Financial Protection Bureau’s newly proposed rule. The highlights of that analysis are as follows:
- The new Closing Disclosure would replace the current HUD-1 and final Truth in Lending disclosure. The rule (page 748) and Official Interpretations (page 1,000) provides instructions on how to fill out the replacement form. The form looks different due to different line numbers and cost groupings. The Bureau heard our concerns about the costs associated with the line numbering changes and is seeking more detailed estimates.
- Under the proposal, the consumer must receive the Closing Disclosure form at least three business days before the loan closes. Generally, if changes occur between the time the Closing Disclosure form is given to the consumer and the actual closing, the consumer must be provided with a new form and given three additional business days to review that form before closing. However, thanks to the efforts of the RESPA Task Force, the Bureau is proposing a number of exceptions to the three-day requirement for some common changes, including: (1) changes as a result of last-minute negotiations between the buyer and seller, such as results from a property walkthrough; (2) changes that amount to less than $100 total; (3) changes (such as recording fees) that cannot be known until after closing; (4) technical errors; and (5) amounts paid by the lender to cure a tolerance violation. We will be looking for feedback on what other exemptions may be necessary to ensure that this rule doesn’t unnecessarily delay closings.
- The biggest unanswered question revolves around who provides the disclosure. Currently, settlement agents are required to provide the HUD-1, while lenders provide the revised TIL disclosure. The Bureau proposes two alternatives regarding the party that is required to provide consumers with the new Closing Disclosure form. Under the first option, the lender would be responsible for delivering the Closing Disclosure form to the consumer. Under the second option, the lender may rely on the settlement agent to provide the form. However, under the second option, the lender would also remain responsible for the accuracy of the form and the consumer must receive the entire completed form at the same time. The Bureau seeks comment as to which alternative is preferable.
- For the most part the Bureau left in place the tolerance scheme introduced in 2010. However, they are proposing to hold fees paid to lender affiliates or for services in which the lender does not allow the consumer to shop to zero tolerance (they cannot change). In addition, the Bureau is keeping its existing list of changed circumstances (which allow costs to change beyond the tolerance limit).
- The clearest win for the industry is that the form will be standard. The Bureau heeded the warnings of the RESPA Task Force and proposed that a standard form be used in all RESPA transactions. This will save significant costs for the industry.
- Under the new rule, if a lender allows a consumer to shop for a settlement service, the lender will be required to provide the consumer with a written list identifying available providers of that service and clearly stating that the consumer may choose a different provider for that service. The Bureau is proposing standardized forms for the provider list with clear disclaimers about consumers’ ability to shop.
- The Bureau is planning to eliminate the many exemptions to the APR calculation for residential mortgages. Under this plan, the title fees, lender’s premium and closing agent fees would be included in the Annual Percentage Rate while the owner’s premium would still be excluded.
