“I would just suggest get rid of the word optional.”
That was the message from Congressman Ed Perlmutter (D-CO, and this year’s
recipient of the Protecting the American Dream Award) to Consumer Financial
Protection Bureau Director Richard Cordray at a hearing on Thursday on the
Bureau’s semiannual report to Congress.
Congressman Perlmutter’s statement came after
Congressman Gary Miller (R-CA) and Director Cordray had an exchange on the
topic of calling owners’ title insurance “optional” in the final rule. Here is
MILLER: I enjoyed your opening statement. You talked about
empowering consumers, fair and transparent competitive marketplaces, dealing
with bad actors, which we saw plenty of those before 2007 and you supervise a
program to create larger credit reporting companies. The one thing that’s kind
of glaring to me is you took title insurance and you tagged it as optional for
the buyer. And that’s a real concern for me? Now, anytime a buyer would look at
something and they’d say optional and it cost money, generally they don’t do it
because most people really don’t understand what optional means or they don’t
know what title insurance really means. But your bank regulators and GSEs all
require a title insurance before they’ll make a loan?And if we’re concerned
about empowering consumers, we really should be concerned about their safety.
And why would you take something that I believe is very, very important that
could arise in the future and put optional on it?
CORDRAY: First of all, I take your point. Your point is,
you know, obviously meritorious that, you know, title is often in question with
properties, and different parts of the country more so than others. Title
insurance obviously is meant to address the risks of that. I will be happy to
go back and take a look at the point you’re raising about how we’re
characterizing it on that proposed form.
In addition to the owners’ title insurance questions, Congressman Randy
Hultgren (R-WI) pushed Director Cordray on the implementation timeline for the
rule and the topic of machine-readable forms. Hultgren asked:
HULTGREN: I know you’re working on one more major mortgage
rule- making, the merging of RESPA and TILA mortgage disclosures into one
document. And the proposed rule was over 1,000 pages and will affect everyone
involved in a home purchase: home-buyers, lenders, realtors. As I understand
it, given how much technical work must go into getting everyone’s system
updated and ready, I’d like to think it would be impossible to have this rule
implemented before January 15th. Is that true? Why or why not?
So the (inaudible) rule was one of the—it was a special mortgage rule in the
sense that Congress required us to do it, but didn’t give us a deadline, which
told us that Congress wanted it done, but not quite on the same priority maybe
as some of the other rules. We will now finalize that rule later this year. We
will give an implementation period for that that I think will be sufficient for
industry. And we’re talking and—and listening closely to what they have to say
about that. We recognize that’s going to require a fair amount of systems and
process changes. And that will lag behind the changes that they’re making for
HULTGREN: So there will be a delay in implementation
It’s not even finalized yet, that one, unlike all the others. And when it is
finalized, there will be a period of time to recognize they need to finish
implementing this rule and then have ample time to bring that into effect.
HULTGREN: Getting very specific on this, I know one of the
requirements of the Bureau’s RESPA-TILA proposal is to require all disclosure
forms to be machine-readable record format. I wonder if you could tell me what
that means, what the purpose of machine-readable forms are. While I understand
and appreciate that this will help the Bureau in examination, convergence to these
systems, as you can imagine, will be incredibly costly for small lenders, ESCO
agents and title companies. I wonder what efforts you’re doing—taking to help
minimize the cost burdens on this rule on small businesses.
Yeah, thank you for the question. Just as you’re hearing about that, we’re also
hearing about it. We’re trying to think about exactly what purpose that serves
and—and to what extent those benefits are worth the burdens. Obviously, the
point I—I know is to create some uniformity so that there can be more
comparison, more analysis and more understanding of the market. Whether—whether
that’s all appropriate or needs to be done now is something that we’re looking
HULTGREN: My time is just about done. Just, you know, I hope
you’ll look at cost benefit analysis. That doesn’t happen enough in this. And
it absolutely is having an impact on small businesses.
You can view an archived webcast of the hearing here.
We are grateful to Congressmen Hulgren, Miller and Perlmutter for posing
these important questions to Director Cordray. As we move closer to the release
of the final rule, we will eagerly watch for
how the Bureau resolves these and other issues brought up in ALTA’s comment
letter. We're still hearing sometime in October and will provide a webinar shortly after the release to go over what the CFPB unveils.
If you have any questions about the hearing please contact please
contact ALTA’s vice president for government and regulatory affairs, Justin
Ailes, at email@example.com or 202-261-2937.
You can also view ALTA's advocacy efforts regarding the integrated mortgage disclosures here.