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07/19/2016

Cordray: Fixing Title Premium Disclosure Improbable

Responding to a letter from 74 members of Congress, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray indicated the bureau will not address the portion of the TRID rule that requires consumers to receive incorrect fees for title insurance premiums on their mortgage disclosures.

In a July 14 letter, Corday said the CFPB will focus on clarifying amendments based on the outreach, webinars and other regulatory implementation efforts when it opens the new rulemaking period for TRID.

"As reflected in the Know Before Your Owe mortgage disclosure rule, the Bureau believes that the application of any simultaneous issuance discount to the owner's title policy, as mandated by some states, is the most transparent method of disclosing the costs of the required lender's title policy and the optional owner's policy," Cordray wrote.

Cordray believes the CFPB’s disclosure method encourages the sale of owner’s policies and recognizes the products benefit by writing "Purchasing an owner's policy can protect homeowners' property rights for as long as they own their home."

ALTA contends the CFPB's calculation method to disclose title premiums leads to consumer confusion and is inconsistent with the bureau's mission to inform consumers about the true costs of their real estate transaction. 

Because Cordray's letter signals that the bureau is unlikely to propose changing this portion of the rule, it’s important for the industry to provide data and anecdotal stories to highlight the confusion it’s causing for consumers.

Title professionals are encouraged to become members of the Title Action Network (TAN) so the industry can have a stronger voice to tell the CFPB to fix the disclosure of title premiums under TRID. TAN is currently holding a contest for the person who can recruit the most new members. The winner will receive a three-night Caribbean cruise.

Here’s an abbreviated example of the types of consumer confusion stories that should be shared with the CFPB:

Despite the two separate disclosures the our company provided to the consumer at closing that explained the differences in the way title insurance must be disclosed, we recently had a very unhappy and extremely irate consumer regarding this confusing issue. 

Prior to closing, the consumer called our office asking about the difference in cost for title insurance between the Loan Estimate and ALTA Settlement Statement. He asked us to waive the owner’s policy because of the “added expense.” The processor tried to explain the importance of the owner’s title insurance policy and that for a very small fee additional fee—the simultaneous issue fee of $50—they could obtain coverage. The owner agreed to keep the owner’s policy.

At the closing table, we provided the consumer with company’s “Title Insurance Premium Disclosure” form. We explained the differences between how federal and Tennessee law requires the disclosure of title insurance premiums.

After closing, the consumer called our company again insisting that we had overcharged him for title insurance.  Both the processor and closing attorney did their best to explain the disclosures.  The second time he called, the consumer suggested that my employees and I should all be “in federal prison with the rest of the criminals,” comparing us to Bernie Madoff.

 In response to a follow-up complaint about us to our relocation customer, we sent a written letter to the consumer again explaining the difference in the disclosure and included copies of the same forms he signed at closing explaining the situation.

Unfortunately, the written letter didn’t do the trick, because we subsequently found a nasty complaint about our company on social media stating “the charges were deceitful and unethical at best. They [the title company] told me they would reduce my charge but what they didn’t’ tell me was that what I had to pay for my lender’s title insurance went up by the exact amount that they reduced mine so the overall cost was the same.” 

 After the social media post, we then received notice of a complaint filed by our underwriter with the Tennessee Department of Insurance.

In each situation, we did our best to help explain the situation, but it’s clear that consumers are confused and highly skeptical as to the way title insurance must be disclosed under TRID.   

If you have anecdotes to share, email trid@alta.org.

If you have any questions about Cordray’s letter, contact Justin Ailes, ALTA's vice president of government and regulatory affairs, at justin@alta.org. If you have any questions about the upcoming TRID rulemaking, contact Steve Gottheim, ALTA's senior counsel, at steve@alta.org.

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