Owner's Title Described as 'Optional,' But Not Other Fees Such as Homeowner's Insurance

In an effort to help title professionals understand various parts of the CFPB's final rule and disclosures, we will post answers to questions we receive. Today, we answer why homeowner's insurance, as well as other charges for surveys and pest inspections, is not listed as optional in the same manner as owner's title insurance on the Loan Estimate and Closing Disclosure.

According to the CFPB's rule, the parenthetical description “(optional)” is required at the end of the label for items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products that are not required by the lender as a condition of the mortgage loan.

Along with Owner’s Title Insurance, other items listed as “(optional)” include credit life insurance, debt suspension coverage, debt cancellation coverage, warranties of home appliances and systems, and similar products. Homeowners insurance is not listed as “(optional)” because the mortgage or deed of trust requires the consumer to obtain and maintain this coverage.

Other items that are not loan related but that the consumer must purchase pursuant to another agreement such as the real estate agent commission, homeowners association fees and fees for inspections would not be listed as “(optional)”. See the yellow-shaded section of page two of the five-page Closing Disclosure for treatment of Owner's Title Insurance.


ALTA has warned the CFPB that telling consumers that owner’s title insurance is "optional" will mean that homebuyers may be dissuaded from purchasing the same protection that lenders receive from a title insurance policy. ALTA will continue to work with the CFPB on this issue. CFPB staff said its testing showed that the use of the word “optional” did not impact consumers’ decision to purchase title insurance.

ALTA will continue to work with the CFPB on this issue. During ALTA’s roundtable, Horn said the use of the word “optional” did not impact consumers’ decision to purchase title insurance. - See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.RQgme9Qi.dpuf
ALTA will continue to work with the CFPB on this issue. During ALTA’s roundtable, Horn said the use of the word “optional” did not impact consumers’ decision to purchase title insurance. - See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.RQgme9Qi.dpuf

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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.


Copy of presentation from webinar titled "A New Era in Closings"

We had more than 1,400 people register for today’s webinar "A New Era in Closings," which addressed the Consumer Financial Protection Bureau's final rule for integrated mortgage disclosures. Our provider, however, has a limit of 1,000 attendees. If you could not access the webinar, please know that is was recorded. After it’s edited, you will be able to watch the prese
ntation on our YouTube channel at www.youtube.com/altavideos or on our blog.

The webinar focused on top-level analysis of the final rule, which is 1,888 pages long. This was only the first of many educational opportunities we will provide about the integrated mortgage disclosures.

Integrated_disclosures_112113 1


CFPB Provides Seven-page Summary of Mortgage Disclosure Rule

201311_cfpb_tila-respa_detailed-summary_Page_1If you don't have time to read all 1,888 pages of the Consumer Financial Protection Bureau's final rule for integrated mortgage disclosures, the Bureau has provided this great summary document, which addresses the scope of the rule, highlights the new Loan Estimate and Closing Disclosure, limits on closing cost increases and proposals not adopted in the final rule.

The CFPB listened to ALTA concerns and gave the industry plenty of time to implement the new forms as the final rule becomes effective Aug. 1, 2015.

You can download a PDF of the summary here.

ALTA CEO Testifies during CFPB Field Hearing on Integrated Mortgage Disclosures

Michelle Korsmo, ALTA’s chief executive officer, testified Wednesday during a field hearing in Boston as the Consumer Financial Protection Bureau addressed its “Know Before You Owe” project and released its final rule for integrated mortgage disclosures. Check out video of her testimony:


Three Things to Prepare Now for New Integrated Mortgage Disclosures

It’s been several months since the comment period to the Consumer Financial Protection Bureau’s proposed rule to integrate mortgage disclosures required under the Real Estate Settlement Procedures Act and the Truth In Lending Act.

The Bureau has proposed a new Loan Estimate and Closing Disclosure that will replace the current Truth in Lending (TIL), Good Faith Estimate (GFE) and HUD-1 Settlement Statement.

The industry is now in a waiting period before the CFPB issues its final rule, which is expected to happen sometime before the end of the year. In the meantime, there are several things can title professionals do now to prepare, according to Leslie Wyatt, director of industry relations for SoftPro.

Wyatt said that it’s not likely much will change from the proposed rule to when the CFPB issues its final rule. Title professionals should start training and educating staff on the proposed regulations and guidelines, as well as the proposed Closing Disclosure. As an aid, starting on page 839 of the 1,099-page rule, the CFPB provides examples of how to fill out the Closing Disclosure for different loan products.

Currently, settlement agents are required to provide the HUD-1, while lenders are required to provide the revised Truth-in-Lending disclosure. The CFPB is proposing two alternatives for who is required to provide consumers with the new Closing Disclosure form:

  1. Under the first option, the lender would be responsible for delivering the Closing Disclosure form to the consumer.
  2. Under the second option, the lender may rely on the settlement agent to provide the Closing Disclosure form. However, under this option, the lender would also remain responsible for the accuracy of the Closing Disclosure form.

Either option will impact a company’s workflow. Assuming settlement agents produce the Closing Disclosure, settlement agents will need to start working with lenders earlier in the process to get final numbers and approvals. If the lender provides the disclosure, settlement agents will need to provide final settlement numbers to lender earlier in the process and alert the lender of changes in those numbers and reasons for them.

In addition to educating staff on the rule and Closing Disclosure, Wyatt encourages title professionals to start talking with software vendors.

Wyatt said title professionals should be asking their software vendor these questions:

  • How do they plan to handle the proposed changes?
  • How involved are they with the CFPB and industry trade associations?
  • Will there be any costs to your company for any software updates?
  • Will your current operating system be able to accommodate the updated software?
  • Will they be offering any training on the upcoming final rule?

Additional Resources

CFPB to Host Public Hearing on Integrated Mortgage Disclosures

The Consumer Financial Protection Bureau announced it will hold a field hearing at 11 a.m. ET, Wednesday, Nov. 20 to address the Bureau’s “Know Before You Owe” project.

The field hearing will feature remarks from CFPB Director Richard Cordray on the Bureau’s efforts to combine overlapping federal disclosure forms required by the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).

A new Closing Disclosure will replace the HUD-1 and revised TIL disclosure, while a Loan Estimate will replace the GFE and early TIL. Testimony from consumer groups, industry representatives and members of the public also will be featured during the field hearing.

ALTA will provide updates from the hearing, which will be streamed live on the CFPB’s blog. ALTA staff planning to attend include Michelle Korsmo, chief executive officer, and Justin Ailes, vice president of government and regulatory affairs. If interested in attending, email an RSVP to cfpb.events@cfpb.gov with your full name and organizational affiliation (if any).

If you plan on attending, please send an email to ALTA as well, as the association plans on holding a roundtable following the field hearing to discuss concerns with the integrated mortgage disclosure proposal.

For more info, go to www.alta.org/cfpb.


ALTA Unveils Best Practices Assessment Preparation Workbook for Members

ALTA has created a Best Practices Assessment Preparation Workbook that members can use to examine adoption of ALTA’s “Title Insurance and Settlement Company Best Practices” and measure if a company is prepared to undergo an assessment.

ALTA is providing Workbooks for each pillar of the Best Practices. Workbooks for all the pillars, except pillar No. 3 (which will be released next week) can be found here.

You can read more about the Workbooks here.

To help members fill out the Workbook, we've created this tutorial video:

ALTA has created a Best Practices Assessment Preparation Workbook that members can use to examine adoption of ALTA’s “Title Insurance and Settlement Company Best Practices” and measure if a company is prepared to undergo an assessment.

“We are hopeful that ALTA members find the Workbook helpful in preparing for a Best Practices Assessment and also in the day-to-day running of your company,” said Michelle Korsmo, ALTA’s chief executive officer. “You can think of the Workbook as the Cliffs Notes to help title professionals prepare for the Assessment.”

To help simplify the process, ALTA will provide a Workbook for each pillar of the Best Practices. The first Workbook released today (Aug. 22) is for pillar No. 1, which addresses licensing. Workbooks for each pillar—which are provided exclusively to ALTA members— will be released over the coming weeks.
- See more at: http://www.alta.org/news/news.cfm?newsID=22261#sthash.0IE1qT4f.dpuf

Title Action Network Adds New State Partners, Launches New Membership Contest

The Title Action Network (TAN) welcomed the state land title associations of Washington, Arizona, Michigan, and Pennsylvania as official partners last week.

The new states bring TAN’s total number of state land title association partners to 29. If your state would like information on becoming an official state land title association partner, please e-mail Madeleine Nagy at mnagy@alta.org or call 202-261-2949.

TAN’s membership is now at 4,500! To capture some of the TAN excitement heading into ALTA’s Annual Convention, the Title Action Network has launched a new contest today. Any individual that recruits a new TAN member between today and September 30 will be entered to win a FREE Apple iPad! Click here for more information.

It’s simple—just ask anyone you know in the land title industry to join the Title Action Network at www.titleactionnetwork.com and make sure they list your name in the “referred by” line. 

If you have any questions about starting a TAN membership drive in your state or company, please e-mail Wayne Stanley at wstanley@alta.org or call 202-261-2932.

If you'r wondering how TAN can help, check out this video:

Congress Urges Cordray to Drop ‘Optional’ From Owners’ Title Insurance on Forthcoming Mortgage Disclosures

“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 the exchange:

REP. 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?

MR. 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:

REP. 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?

CORDRAY: 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 January...

REP. HULTGREN: So there will be a delay in implementation requirements...

CORDRAY: 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.

REP. 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.

CORDRAY: 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 at.

REP. 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 justin@alta.org or 202-261-2937.

You can also view ALTA's advocacy efforts regarding the integrated mortgage disclosures here.