16 posts categorized "Consumer Financial Protection Bureau"

12/11/2014

Register for a RESPA-TILA Integration Forum and Network With Lenders

ALTA and the Mortgage Bankers Association are hosting five RESPA-TILA Integration Forums to help prepare for the Aug. 1, 2015 implementation date of the CFPB's new Loan Estimate and Closing Disclosure. At each Forum, a panel of legal, title, technology and operation experts will review the rule and offer guidance to help prepare you for the implementation deadline.

These one-day sessions will provide up-to-date information on how title and settlement agents, attorneys, lenders and software providers are navigating the new RESPA-TILA requirements.

Join us and network with lenders from across the country.

Register for a Forum Near You

Forums will be held around the country at convenient locations, including:

Several discounts are available to ALTA members. Register two weeks prior to a Forum date and receive a 10 percent discount. Register at least five people for a Forum and receive a 15 percent discount. Register at least 10 people for a Forum and receive a 20 percent discount.

12/09/2014

Conquering the Loan Estimate Part 2: Disclosing Points and Fees

In part one of this blog, we addressed the disclosure of interest rates on the Consumer Financial Protection Bureau’s Loan Estimate, which starting will replace the current GFE and early Truth-in-Lending Disclosure for loan applications received on or after Aug. 1, 2015.

Today in part two, we address disclosure of points and fees. Generally, the creditor decides how it wishes to itemize the origination charges section on the Loan Estimate. However, some charges are required to be itemized, including points and Loan-Level Price Adjustment (LLPA). To the extent the consumer will pay for these charges, they should be disclosed under the Services You Cannot Shop For section. (§ 1026.37(f)(2)).

When disclosing points and fees, creditors should determine whether the charge is associated with origination costs or whether it is a form of interest. If the charge is not intended to reduce the interest rate, then it is not a point and cannot be disclosed as such. This is the case even if the charge is a portion of the loan amount. Only points charged in connection with an interest rate reduction may be disclosed as points on the Loan Estimate. (§ 1026.37(f)(1)(i)). This requirement prohibits creditors from identifying origination fees as points as a means of preserving its tax deductibility for the consumer. Any charges other than points require clear and conspicuous terminology that describes the service. (Comment 37(f)(1)-3). If there are no charges that reduce the interest rate, creditors should leave the points line on the form blank rather than mark the line “N/A”. (Comment 37-1).

When a creditor pays a LLPA to the secondary market purchaser, the creditor may have to disclose the charge in certain situations. If the creditor does not charge the consumer an upfront fee, but rather passes the cost of the LLPA to the consumer through interest, the creditor does not need to disclose this charge as it is not considered a settlement charge under the rule. (See § 1026.37(f)).

However, if the creditor charges an upfront fee for the LLPA, the creditor should disclose the fee based on how it is charged. If the LLPA is charged at closing as a flat origination charge, the charge should be labeled an origination charge. Alternatively, if the creditor includes the cost of the LLPA in the interest rate, and then allows the consumer to pay a point to reduce the interest rate, the charge would be disclosed as a point on the Loan Estimate.

11/25/2014

CFPB Provides Analysis on How to Complete Closing Disclosure

The Consumer Financial Protection Bureau on Nov. 18 hosted its fourth in a series of webinars addressing frequently-asked questions regarding the RESPA-TILA integrated mortgage disclosures. This webinar focused on the details of the Closing Disclosure form, which will take the place of the current HUD-1 and final Truth in Lending disclosure. The rule goes into effect Aug. 1.

Click here to listen to a recording of the webinar and download a copy of the presentation.

This webinar gave a detailed analysis of how to complete the Closing Disclosure form. Here are some points the CFPB discussed that may be particularly pertinent to members of the title insurance and settlement industry.

What date should be listed as the “Closing Date” under the rule?

  • The term “closing date” can refer to different times in the transaction for different regions. The bureau declared that “Closing Date” for the purpose of the rule refers to the date of consummation, meaning “the time that a consumer becomes contractually obligated on a credit transaction.” (§ 1026.2(a)(13))
  • The bureau’s Official Interpretation to the definition of “Closing Date” recognizes that “[w]hen a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; Regulation Z does not make this determination.” (§ 1026.2(a)(13)-1)
  • When completing the Closing Disclosure form, use the  consummation date where the forms request the Closing Date

CD page 1

When should an item be disclosed as “Services Borrower Did Shop For” vs. “Services Borrower Did Not Shop For” on the Closing Disclosure form?

  • The Bureau stated that an item that was disclosed as “Services You Can Shop For” on the Loan Estimate (§ 1026.37(f)(3)) will move into the “Services You Cannot Did Not Shop For” category on the Closing Disclosure form when the consumer chooses a provider on the written list provided by the creditor with the Loan Estimate for that item. (1026.38(f)(2))
  • Alternatively, if an item is disclosed as “Services You Can Shop For” on the Loan Estimate was not on the written list provided by the creditor with the Loan Estimate for that item, such item will be disclosed as “Services Borrower Did Shop For” on the Closing Disclosure form. (§ 1026.38(f)(3))

CD page 2

How should recording fees and transfer taxes be disclosed on the Closing Disclosure?

  • The Bureau recognized that in some states, there will be several transfer taxes that will be part of the real estate transaction and the loan transaction
  • Transfer taxes should be itemized on the Closing Disclosure instead of aggregated together as required for the Loan Estimate. (Review §1026.37(g)(1) and its subparts for the Loan Estimate requirements and § 1026.38(g)(1) and its subparts for the Closing Disclosure Requirements)
    • Itemization is for each tax and for each governmental entity
    • Name of government entity should be disclosed on Closing Disclosure form
  • Similarly to the Loan Estimate, the Closing Disclosure form requires recording fees to be disclosed as one item. (§ 1026.37(g)(1)(i) and § 1026.38(g)(1)(i))
  • However, the Closing Disclosure also requires that the amount paid to record the deed and mortgage be itemized separately.
    • The itemized recording fees for the deed and the mortgage only need to include the amounts needed to record each of these documents
    • Recording fees for other documents, except for the deed and the mortgage, are just included as part of the total recording fees and do not need to be itemized
  • Creditors should disclose the name of the entity assessing the transfer tax, even if that entity is different from the payee of the check cut by the settlement agent. (§ 1026.38(g)(1)(ii))

CD item 3

Are creditors permitted to include additional forms if the information required to be disclosed does not fit in the space allotted on the form?

  • The answer to this question depends on the provision of the rule under which the creditor wishes to use such additional disclosure forms
  • Creditors must look to each provision of § 1026.38 to determine whether the use of addendums are permitted by the rule
  • The rule does permit the use of additional pages “for the purpose of including customary recitals and information used locally in real estate settlements.” (§ 1026.38(t)(5)(ix)) As examples of when an additional page may be used to disclose customary recitals and information used locally in real estate settlements, the Bureau listed “a breakdown of payoff figures, a breakdown of the consumer's total monthly mortgage payments, check disbursements, a statement indicating receipt of funds, applicable special stipulations between buyer and seller, and the date funds are transferred.” (§ 1026.38(t)(5)(ix)-1)
  • The Bureau has not created a model form or sample of an addendum. The Bureau has only indicated that the additional forms should be formatted similarly to the disclosure form itself and that creditors not use any more additional pages than are necessary. Any additional pages that may be included should “not affect the substance, clarity, or meaningful sequence of the disclosure.” (§ 1026.38(t)(5)-1)

09/26/2014

What Do You Think About Wells Fargo's Plan to Produce and Deliver Closing Disclosure?

Since the Consumer Financial Protection Bureau released its final rule for the new integrated mortgage disclosures, which go into effect Aug. 1, 2015, many title professionals have asked:

  • Who will prepare the Closing Disclosure?
  • Who will deliver the Closing Disclosure?
  • How will processes change to enable delivery of the Closing Disclosure to the customer for  receipt at least three business days prior to closing?

Q3_wells_fargo_Page_1

In its quarterly newsletter to settlement agents, Wells Fargo answered how it plans to handle the Closing Disclosure. The lender said that due to creditor liability of the Closing Disclosure it plans to produce and deliver the Closing Disclosure to the borrower.

Wells also stated that it values its local business partners and plans to continue collaborating with settlement agents to schedule and conduct closings. Wells Fargo is asking settlement agents to provide feedback on the information contained it is newsletter. Click here to take the survey.

Dan Mennenoh, chair of the Research Committee and president of Illinois-based H. B. Wilkinson Title Co., said Wells Fargo reached out to ALTA’s Research Committee to get feedback on which entity will prepare and deliver the Closing Disclosure. The lender also wants feedback on how processes will need to change in order to meet regulatory requirements that the borrower receive the form at least three days prior to closing.

ALTA appreciates Fargo’s initiative to get feedback from title and settlement agents and learn how the new Closing Disclosure will impact the closing process.

In its letter, Wells also stated that it values its local business partners and plans to continue collaborating with settlement agents to schedule and conduct closings. Wells Fargo is asking settlement agents to provide feedback on the information contained it is newsletter. Click here to take the survey. 

What are your thoughts on Wells' decision to handle production and delivery of the Closing Disclosure? Have you heard from other lenders on how they will handle the Closing Disclosure? 

 

05/29/2014

Listen to Recorded Webinar on CFPB's Integrated Mortgage Disclosures

More than 600 title professionals attended ALTA's webinar on May 20 titled "New Era In Closings: Prepare Now for the CFPB’s Integrated Mortgage Disclosures."

Speakers included Cynthia Blair of Rogers Townsend & Thomas, Ben Olson of Buckley Sandler, Mary Schuster of op2 and Dan Wold of Old Republic National Title Insurance Co.

The Webinar addressed some of the biggest workflow and process challenges title and settlement agents will face as they transition from today’s HUD-1 and GFE to the Closing Disclosure and Loan Estimate, which become effective Aug. 1, 2015. Who fills out and provides the Closing Disclosure to the homebuyer, the three-day rule, redisclosure, calculating title premiums when policies issued simultaneously, labeling and listing of title fees, are some of the issues the speakers discussed.

In Case You Missed It: ALTA's President Testifies Before Congress

On May 21, ALTA President Rob Chapman testified at the hearing titled “Legislative Proposals to Improve Transparency and Accountability at the Consumer Financial Protection Bureau (CFPB).” The hearing was held before the House Financial Services subcommittee on Financial Institutions and Consumer Credit.

The hearing focused on legislative ideas to improve how the CFPB regulates providers of financial services. One such proposal is H.R. 4383, which would create a small business advisory board at the CFPB. ALTA members asked members of Congress to co-sponsor the bill during the Federal Conference & Lobby Day earlier this month.

“When the Bureau operates in a transparent, open, and iterative manner, the results are generally positive,” Rob told the subcommittee. “However, when the Bureau makes unilateral decisions, rolls out initiatives, rules or processes in a more closed deliberation, the results are far more likely to be problematic.”

In addition, you can read his spoken testimony or check out the longer written testimony.

Rob represented the industry well, walking the committee through our interactions with the Bureau and how more transparent processes led to better outcomes for both our industry and consumers. Specifically, Rob focused on the uncertainty caused by the April 2012 service provider bulletin saying that the lack of outreach left many companies “shooting in the dark as they attempt to invest in systems and processes to protect consumers.” He continued: “Many of our members see different requirements, vetting procedures and are concerned that they will no longer be allowed to compete for business when a mortgage is financed by certain lenders.”

In contrast, “had the Bureau consulted with mortgage originators and the real estate settlement industry, we would all have a better understanding of what is expected from the person conducting the settlement of real estate transactions, and the response to the CFPB bulletin would be less disruptive, more consistent and efficient,” Rob told the committee.

The hearing also allowed us to encourage Congress to pass H.R. 4383, bipartisan legislation sponsored by Rep. Robert Pittenger (R-NC) and Rep. Denny Heck (D-WA) that would create a small business advisory panel at the CFPB. When asked by Rep. Pittenger if ALTA had a good relationship with the CFPB, Chapman said yes, but that it could be “better with the creation of a small business panel.” During one part of the hearing, Rep. Carolyn Maloney (D-NY) showed her support for the bill saying “everyone should have an advisory committee.”

Rob also encouraged the subcommittee to authorize the CFPB to issue advisory opinions. “The Bureau takes its enforcement role seriously and should take its ability to promote good practices just as seriously,” he said. “An advisory opinion provides certainty to those of us who comply with federal consumer financial law in real-life situations. Consumers will see better outcomes if the Bureau spends more time advising people in the industry how to best follow the law.” Finally, Rob suggested that the CFPB encourage public feedback on policy statements, bulletins and other guidance documents. He said public comments ensure documents are useful and understandable to industry and provide a safety valve to reduce unintended consequences.

Please join me in congratulating Rob on a job well done by tweeting to @titlerob. If you have any questions please contact please contact ALTA’s vice president of government and regulatory affairs, Justin Ailes, at justin@alta.org or 202-261-2937.

04/25/2014

ALTA CEO Participates in Forum Addressing Mortgage Closing Process

ALTA CEO Michelle Korsmo participated in a public forum held by the Consumer Financial Protection Bureau on Wednesday, April 23 to discuss efforts to improve the mortgage closing process.

Check out Michelle's remarks and answers to a few questions:

 

The event kicked off with featured remarks by Director Richard Cordray. Housing and Urban Development Secretary Shaun Donovan concluded the event with additional comments.

Along with the forum, the CFPB released a report that finds many consumers are frustrated by the short amount of time they have to review a large stack of complex closing documents when finalizing a mortgage. As part of that research, in January 2014, the Bureau published a Request for Information about the challenges consumers face when closing on a home.

The request asked for input from market participants, consumers, and other stakeholders on ways to encourage the development of a more streamlined, efficient, and educational closing process that would be beneficial to consumers.

The Bureau heard about three major pain points for consumers during the closing process:

  • Not enough time to review: Many consumers are frustrated by the short amount of time they have to look over the closing documents. Often, they do not see the paperwork until they arrive at the closing table. Consumers reported feeling pressure to rush through the paperwork and sign—even when they did not understand the terms.
  • Overwhelming stack of paperwork: When consumers close on a home, they often face stacks of paperwork. Some of the forms are intended to help consumers better understand the costs and risks of their mortgages. Other forms are included by lenders as a result of their legal risk assessments. Remaining forms may fulfill federal, state, and local government requirements. The volume of paperwork varies from lender to lender.
  • Complexity of documents and errors: Most closing documents are full of legalese and technical jargon. The terms and acronyms are unknown to most consumers. In addition to having little time to read through and understand a large stack of paperwork, consumers often complained that they had little help from the others in the room. Consumers also mentioned that they found errors in their closing documents. Those errors often led to delays as closing agents had to redo the entire closing package.

In its report, the CFPB provided this interesting graphic that shows two sample closing packages and which parties were responsible for the documents.

Docs controlled by each party small

 

E-closings Pilot Project

The CFPB identified electronic closings as one solution to address the pain points outlines in its report. E-closings are already happening in the market today, but adoption is low. There is a lot of misinformation about the legality and feasibility of e-closings.

In addition to its pain points report, the CFPB released guidelines for a pilot project to study e-closings. The pilot project, which will launch later this year, is designed to enable the CFPB to better understand the role that e-closings can play in addressing consumers’ pain points.

Details on how to apply to be a participant in the e-closing pilot project are available in the Broad Agency Announcement.

The CFPB said e-closings can lead to a more knowledgeable consumer experiencing a better, more efficient process. However, e-closings may also present risks to consumers. For example, switching to an electronic process could reduce the amount of time consumers spend reading the closing documents and actively engaging in the process:

Here's graphic that the CFPB included in its report on mortgage closings that depicts an example of a potential end-to-end e-closing process

Sample eclosing process

ALTA members strongly support efforts to identify and alleviate the pain points consumers have experienced during the home closing process. While we are focused on technology and the ability to receive, sign and return, and retain electronic documents, it's important to not lose sight of the importance of personal interaction during the closing process.

"At the end of the day, consumers are not buying a home from a computer,” Korsmo said during the panel discussion.  “Improving the closing the process through technology by providing electronic documents to the homebuyer will help give the consumer more to time to digest the information about their purchase prior to the closing. We agree with the CFPB that any implementation of new technology in the home closing process should not reduce opportunities for consumers to ask information or replace the ceremony of the closing process which indicates the importance of the transaction. Based on our members’ unique vantage point working with all the parties at the closing table, the Bureau should not only focus on technological innovations but also on improving consumer education about the closing process. The new integrated mortgage disclosure forms that the CFPB developed and will be implemented in August 2015 will help ensure the personal interaction and explanation remains part of the closing experience for consumers.”

ALTA looks forward to continuing to work on this important initiative with Director Cordray and staff at the CFPB on this important consumer initiative.

Because e-losings offers both benefits and risks, the CFPB’s pilot project will evaluate whether electronic closings can increase efficiency, consumer understanding, and minimize surprises at the closing table. The guidelines list the minimum functionalities required of potential participants and highlight some advanced features the CFPB will be looking to test in the pilot. Pilot participants must submit proposals as a partnership between a technology vendor providing an e-closing solution and a lender that has contracted to close loans with that solution. 

The CFPB will work with participants to test many e-closing features, including those that may:

  • Enable consumer understanding: The CFPB plans to test whether educational materials like document summaries, term definitions, or process explanations that can be reviewed prior to the closing table help improve the process for consumers. The Bureau also plans to evaluate whether the order of the documents changes the consumer experience. 
  • Incentivize early document review: The CFPB plans to study the various technologies that would let consumers see the entire package of closing documents ahead of time. Within this pilot, the Bureau would like consumers to have at least three business days prior to closing to review the stack of documents. The Bureau wants to evaluate how early review of the documents may impact the closing process.
  • Facilitate error detection: The CFPB wants to test tools that will help both industry members and consumers spot errors and discrepancies in the closing documents. Such a tool could help consumers easily find the differences between their original estimate and their closing disclosures, preventing last minute surprises.

If interested in appying to be a participant in the e-closing pilot project, check out the Broad Agency Announcement.

12/05/2013

May a Borrower Waive His/Her Right to View Closing Disclosure 3 Days Before the Loan Closes

According to the Consumer Financial Protection Bureau's final rule, the creditor must give the Closing Disclosure to the consumer at least three business days before the loan closes. As an example, if settlement is scheduled for Thursday then the consumer must receive the disclosures by Monday.

Generally, if changes occur between the time 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.

The CFPB listened to ALTA concerns here and limited the instances that would require issuance of a new Closing Disclosure. Limiting the instances of delays in real estate transactions will help to ensure a positive experience for the consumer at the closing table.

Changes that require creditors to provide a new Closing Disclosure and an additional three-business-day waiting period after receipt include:

  • changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)
  • changes the loan product
  • addition of a prepayment penalty to the loan

In addition, consumers may waive their right to receive the Closing Disclosure three days prior to consummation only if they have a bona-fide personal financial emergency.

Bona-fide personal financial emergencies are extremely rare. Determining whether one exists is fact intensive. The only example provided by the Bureau is the imminent sale of the consumers home through foreclosure where the proceeds of the new mortgage can save the home from foreclosure.

Remember, follow our blog for more analysis of the CFPB's final rule for integrated mortgage disclosures.

 

Disclaimer: This information is for your reference only and not a not a substitute for legal, financial or business advice or binding interpretation of any law or regulation. Users should consult legal counsel and subject-matter experts to obtain advice with respect to any particular issue or problem. Use of and access to the information contained on this page or any of the email links contained within the site do not create an attorney-client relationship between American Land Title Association or any of the individual authoers and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of that authors firm or any individual attorney.

According to the regulations, the creditor must give the Closing Disclosure to the consumer at least three business days before the loan closes. As an example, if settlement is scheduled for Thursday then the consumer must receive the disclosures by Monday.

Generally, if changes occur between the time 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.

The CFPB listened to ALTA concerns here as well and limited the instances that would require a new Closing Disclosure to be issued. Limiting the instances of delays in real estate transactions will help to ensure a positive experience for the consumer at the closing table, Korsmo said.

Changes that require creditors to provide a new Closing Disclosure and an additional three-business-day waiting period after receipt include:
  • changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)
  • changes the loan product
  • addition of a prepayment penalty to the loan
- See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.UnetWyO6.dpuf

Do the CFPB's Integrated Mortgage Disclosures Apply to Cash Transactions?

While the Consumer Financial Protection Bureau’s new integrated mortgage disclosures, which the industry must start using Aug. 1, 2015, only apply to most consumer mortgages, we've received questions about whether the HUD-1 will remain applicable for cash transactions.

The CFPB's final rule combines the disclosures required under the Truth in Lending and Real Estate Settlement Procedures acts. Both of these laws apply only to mortgage or credit transactions. Federal law does not require the use of the HUD-1 or the new Closing Disclosure in all cash transactions.

While some states have laws requiring the use of a state promulgated form in cash transactions, in general the HUD-1, the Closing Disclosure or any other settlement statement can be used in cash transactions.

Additionally, the final rule for integated mortgage disclosures, does not apply to these transactions:

  • Commercial
  • Home-equity lines of credit
  • Reverse mortgages
  • Mortgages secured by a mobile home or dwelling not attached to land

Keep following ALTA's blog for answers to other questions about the CFPB's integrated mortgage disclosures. Please share this information your own social media outlets.

 

Disclaimer: This information is for your reference only and not a not a substitute for legal, financial or business advice or binding interpretation of any law or regulation. Users should consult legal counsel and subject-matter experts to obtain advice with respect to any particular issue or problem. Use of and access to the information contained on this page or any of the email links contained within the site do not create an attorney-client relationship between American Land Title Association or any of the individual authoers and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of that authors firm or any individual attorney.

11/22/2013

Watch Recording of Webinar on CFPB's New Mortgage Disclosures

We had a huge turnout of 1,000 attendees for Thursday's webinar "A New Era in Closings," which addressed the Consumer Financial Protection Bureau's final rule for integrated mortgage diclosures. Since we exceeded our attendee limit, many could not attend the webinar. Below is a recording, so please share with others. We plan to hold many more webinars over the next year to help members implement the new disclosures and educate customers and consumers.

Participating on the call were:

  • Michelle Korsmo, ALTA
  • Steve Gottheim, ALTA
  • Ben Olson, BuckleySandler
  • Ruth Dillingham, First American Title Insurance Co.
  • Mary Schuster, op2 and RamQuest
  • Leslie Wyatt, SoftPro
The webinar touched on why the CFPB created new integrated mortgage disclosures, the goals of the CFPB's "Know Before You Owe Project," basics of the final rule, the forms, impact the rule will have on the industry and next steps. The panelists answered attendee questions for about 20 minutes and discussed who provides the Closing Disclosure to the consumer and role of the settlement agent, the three-day rule, the need for clear guidance and the use of the word "optional" to describe Owner's Title Insurance on the forms.

A new Loan estimate will replace the current Good Faith Estimate and early Truth-in-Lending (TIL) disclosure, while a new Closing Disclosure will replace the HUD-1 Settlement Statement and the final TIL disclosure. The new forms go into effect Aug. 1, 2015.

You can also download a copy of the presentation.