Since rolling out the TILA-RESPA Integrated Disclosures (TRID) rule, the Consumer Financial Protection Bureau has said the goal of the new mortgage disclosures was to make the process of getting a mortgage is easier and to help consumers understand the key features, costs and risks of a loan.
When the CFPB proposed its amendments to the rule in July, bureau Director Richard Cordray reinforced this message saying the “rules are designed to make sure consumers have the information they need, in a form they can easily understand and use, before making the decision.”
Unfortunately, results of an online consumer survey conducted by ALTA over the summer reveal the CFPB’s mortgage disclosures are not meeting this objective and working as intended. In July, ALTA partnered with Survata, a leading national research firm that works with Fortune 500 companies on obtaining consumer opinions, to collect data on consumer’s experience around shopping for title insurance and the TRID disclosures. Those surveyed included 2,000 current (93 percent) and prospective homeowners (7 percent)—those who planned to purchase a home in the next year. Of the current homeowners who were surveyed, more than 61 percent were owners for more than a decade, while 18 percent were in their home between five and 10 years. Newer homeowners (less than five years) made up 20 percent of those surveyed.
The survey posed 14 questions about preferences for learning about title insurance. During the survey, consumers were shown compliant Closing Disclosures, which displayed title insurance premiums according to the CFPB's rule. Respondents were then informed of the actual cost of title insurance. The survey measured their reactions.
The data showed that a plurality of the people surveyed find the rule confusing and deceptive. After showing the CFPB’s disclosures and presented with the true cost of title insurance, the most popular response from consumers at 31 percent was “I’m confused.” While this confusion is disconcerting, it is not the most troubling finding from the survey. The most disconcerting data point is that 10 percent of consumers felt that they were being taken advantage of by not being told the true cost of title insurance on the disclosure.
“Frankly, this is 10 percent too many,” said Michelle Korsmo, ALTA’s chief executive officer. “The purpose of the CFPB is to protect consumers by ensuring markets are fair, transparent and competitive. However, the bureau’s decision to require the inaccurate disclosure of title premiums is having the opposite effect and is not providing consumers understandable information to help them make responsible decisions about financial transactions.”
Meanwhile, roughly 27 percent of respondents felt that the CFPB disclosure was positive because it was good to know the marginal cost of buying an owner's policy.
ALTA has informed the CFPB that amending the Official Interpretations for §1026.37(f)(2), §1026.37(g)(4) and §1026.38(g)(4) is the best way to correct the rule and allow title insurance fees to be disclosed the same way as every other fee.
The survey also asked consumers to rank the factors they care about when trying to understand their transaction. Topping the results was getting a detailed breakdown of all the costs for a service, followed by the ability to easily compare estimates to final figures and comparing the disclosure to the actual costs. At the bottom of the rankings is providing marginal cost of optional products and seeing bottom-line amounts like cash-to-close.
“These findings show that consumers would find more value in the mortgage disclosures if they showed accurate costs for title insurance instead of the incremental costs,” Korsmo said.
Additionally, survey results reinforced the continued need to educate consumers about the benefits of title insurance earlier in the transaction. More than half of those surveyed indicated they either received information about title insurance at the closing table or didn’t know about the product.
“ALTA members must remain committed to educating consumers about how title insurance provides peace of mind by protecting their property rights,” Korsmo said. “An equal commitment from the Bureau is needed to ensure that confusion over the price of title insurance does not undercut these efforts.”