Comment Period Ends November 6
The Consumer Finance Protection Bureau (CFPB) has published their proposed rule for the new Loan Estimate and Closing Disclosure that will replace the current Truth in Lending (TIL), Good Faith Estimate (GFE) and the HUD-1 disclosures. The CFPB is actively seeking comments from the title industry that will be taken into consideration before a final rule is adopted. The CFPB wants to know how these proposed rules will impact the way you do business, to be sure that the practical application of these rules is what they intended. The final rule will profoundly affect every member group in our association. This is your opportunity to voice what you believe to be the most viable practices for our industry. Comments can be directed to ALTA at www.alta.org
under Advocacy - CFPB. Click here
to be directed automatically.
The five main topics being discussed are shown below with questions to consider when making your comments.
Topic: THE THREE-BUSINESS DAY RULE
The new Closing Disclosure form must be delivered to “and received by” the borrower 3 business days prior to the consummation of the transaction (the 3-day Waiting Period) This form replaces the HUD-1 Settlement Statement and the Final Truth-In-Lending (TIL) Statement.
Unless the Closing Disclosure is delivered in person (with written confirmation of delivery), an additional three days is tacked on (the 3-day Delivery Period) for a possible combined total of six business days. Transmissions of the Closing Disclosure by mail, non-confirmed fax, non-confirmed email or express delivery will be deemed delivered after the full 3-day Delivery Period. Confirmation that delivery has occurred may serve to shorten the 3-day Delivery Period. “Business Days” under this proposed rule exclude Sundays and federal holidays. Saturday is a Business Day.
Consumers may waive the waiting period and close immediately upon receiving the disclosure if they declare that they have a bona fide personal financial emergency; the Bureau does not clearly define what constitutes and emergency, but uses imminent foreclosure as an example.
- How will the waiting and delivery period impact the workflow of closings in your area?
- If settlement agents are tasked with preparing and delivering the Closing Disclosure, are there extra costs the consumer will incur?
- Changes to the amount the borrower must deposit at closing disclosed on the initial Closing Disclosure may require a new Closing Disclosure to be prepared (with additional waiting periods) unless the increase falls into certain exceptions. What types of events might occur within a 3-6 day period that might impact the accurate disclosure of costs to the consumer within that period.
- Are there any state law, regulation or practice issues that would interfere with the waiting or delivery periods mentioned above?
Topic: WHO PREPARES THE NEW CLOSING DISCLOSURE FORM?
CFPB has not determined who will prepare and deliver the Closing Disclosure
Option One: The lender would complete and deliver the entire form to the borrower, gathering information from the settlement agent to complete those portions of the combined form. In a purchase transaction, the settlement agent is still required to prepare a Seller’s Closing Disclosure Form. Except for any contractual understanding between lender and settlement agent, the lender is solely responsible for preparation and delivery of the Closing Disclosure to the borrower.
Option Two: The lender may allow the settlement agent to complete one or more sections of the Closing Disclosure, with either the settlement agent or lender transmitting/receiving information for consolidation with other lender sections into a single, consolidated form. As in option one, the settlement agent is responsible to prepare (in the new format) a Seller’s Closing Disclosure form. The agent is responsible for those portions of the form that it prepares; the lender is solely responsible for the portion it prepares and is also responsible for the material prepared by the settlement agent.
- Which of the options above do you think will work most effectively in your office?
- Are there other options for preparation and delivery of a consolidated Closing Disclosure form to the borrower other than these two options?
- It has been suggested that the Closing Disclosure be split into two sections: One part with lender data and one part with settlement agent data, with the form collated into single form for delivery to the borrower. Do you think this would be a better solution to preparation and delivery of a consolidated Closing Disclosure? If so, why?
- Given your experience with the information exchange presently done by lender and settlement agent for data on page 3 of the current HUD-1 form, how would the information exchange required for the Closing Disclosure be different?
Topic: NEW SYSTEMS AND RECODKEEPING REQUIREMENTS
Meeting the requirements of the proposed rule will most likely mean upgrading your current systmes and possibly integrating new technology. The rule requires settlement agents to prepare the Closing Disclosure for the seller in a specific format. It also requires lenders to store information contained on both the Loan Estimate and Closing Disclosure forms in a “machine readable format”. This requires data able to be read by a database program, and does NOT include a “PDF” or other picture image format.
- Do you envision any challenges in maintaining two systems/workflows for handling transactions?
- What is the anticipated cost to upgrade your current programs?
Topic: NEW PROTOCOLS FOR TITLE-RELATED FEES AND CHARGES
The Proposed Rule prescribes at least three new form preparation rules for title-related fees:
- “Title-” designations: The Rule requires that any fee or charge for a service related to either title insurance or closing services be preceded by “Title-“; however, it is not clear which services should be included, or explain the reasoning for the designation.
- “Optional” Owner’s Title Insurance: In all cases where the borrower will be paying, in whole or in part, the premium for an Owner’s Title Policy, the Proposed Rule requires that such charge be listed on the Loan Estimate form followed by the parenthetical “(Optional)”. The “optional” designation is not required on the Closing Disclosure.
- Owners Title Premium Limited to Basic Coverage Only: the Proposed Rule allows the estimate of the Owner’s Title premium on the Loan Estimate only for standard coverage. No enhancements are permitted.
- Do you have any concerns with the number of charges that will require the “Title” designation?
- If you work in an area where Owner’s Title Insurance is not universal, what impacts on consumer use or understanding would result from the “Optional” reference?
Topic: NEW PROTOCOLS FOR DISCLOSING TITLE PREMIUM CHARGES
Determination of Premiums in Simultaneous Issue situations may be problematic. The Proposed Rule requires the pricing of transactions where Owners’ and Lenders coverage is purchased as follows:
a. The Loan Policy is estimated on the Loan Estimate form as a stand-alone, standard coverage Loan Policy, without any applicable discount provided for simultaneous issue.
b. The Owners Policy would be priced by the following formula in simultaneous issue transactions:
||Owner’s Title (standard coverage rate)
||Lender’s Title (standard coverage rate)
||Lender’s Title (simultaneous issue rate)
||Owner’s Title Rate for Loan Estimate
The Proposed Rule seems to prescribe these rate protocols for the Closing Disclosure, even when actual rate charges might be different.
- Do other statues or regulations in your area require the accurate disclosure of premiums on settlement and/or other documents?
- How would this portion of the Proposed Rule impact the accuracy of the “Cash to Close” section of the Loan Estimate and/or the Closing Disclosure?
Comments can be directed to ALTA at www.alta.org under Advocacy - CFPB. Click here to be directed automatically.