ATG Call to Action | October 29, 2012

Proposed Changes to RESPA/TILA Disclosures

TIME SENSITIVE: We Need Your Help - Please Submit Comments before November 6, 2012

Dave Huffman photoDear ATG Member,

Earlier this year, we reported that the Consumer Financial Protection Bureau (CFPB) released its proposed Integrated Mortgage Disclosures under Real Estate Settlement Procedures Act (Reg. X) and Truth in Lending Act (Reg. Z) to simplify and improve mortgage disclosure forms. To view that information, see our July 24, 2012, Call to Action or our September 2012 Trusted Adviser. See also Hot Topic, A Closer Look at the CFPB's Closing Disclosure.

ON A RELATED NOTE: Attend the Harold Levine Real Estate Institute, November 14, 2012, our premier legal education event of the year. We'll cover the topics mentioned here, and more. Speakers include ALTA CEO Michelle Korsmo.

The CFPB's 1,099-page proposed rule combining RESPA and TILA has far-reaching implications for our industry. Since its July release, ATG has spent a lot of time digesting the voluminous proposal and working with industry and government leaders in Washington to ensure they understand the implications the proposals could have on small businesses and particularly on title and settlement service agents. The good news is, the CFPB has been listening and seems receptive to many of our ideas. In addition, the staff at CFPB is committed to considering the comments they receive from agents throughout the country.

While we believe certain aspects of having upfront disclosures could be positive, there are a few sections of the proposal that could have significant consequences for lawyers and their clients. We urge you to submit comments on those sections. We have prepared a sample letter for your use, but we encourage you to add specific information that indicates how the proposed changes will impact your day-to-day operations. The CFPB has stated that comments containing real life experiences are most helpful.

The CFPB needs to know that settlement agents should be responsible for disbursing the transaction.

The HUD-1 and Truth in Lending Disclosure will be replaced with the Loan Estimate and the Closing Disclosure. The CFPB proposes two options for completion of the Closing Disclosure form:

  1. The lender prepares the Closing Disclosure form; or
  2. The lender relies on a third-party to complete a portion of the Closing Disclosure form while retaining responsibility for its content.

It is essential that we emphasize with the CFPB that the second option is in the best interest of consumers and other parties, and that an independent third party must be responsible for disbursing the transaction, regardless of who prepares the disclosure. Settlement agents and law firms provide a valuable service to consumers by being the independent third-party disbursing the transaction.

The CFPB needs to know that their timelines for delivery and exceptions are too strict and will result in closing delays, contract breaches, and loss of rate locks.

The proposal requires the Closing Disclosure be delivered to the borrower three (3) business days prior to the settlement date. To comply, the form will either need to be mailed six (6) days prior to the settlement date, or delivered within three business days of closing via a secure electronic medium that provides verification of receipt. Changes resulting in cost increases of more than $100 to the borrower, other than those negotiated between the parties, will result in a new three-day waiting period and a cancelled or delayed closing. As we all know, there are numerous things that can change and a $100 threshold is not high enough to avoid a new three-day waiting period. We must inform the CFPB of the types of things that can change, using specific examples from your closings, and that the $100 threshold is too low to be practical. Borrowers also need the flexibility to waive the three-day waiting period for bona fide financial emergencies so purchase contracts and rate locks don't expire.

The annual percentage rate calculation on the Loan Estimate, which is to be delivered to the borrower within three days of the loan application, will include settlement costs such as the closing fee, lender's title insurance, and recording fees. Lenders will need to know title charges up front in order to get the APR correct to avoid additional three-day waiting periods due to changes to the APR.

The CFPB needs to know that your role as the independent third-party must remain intact for the benefit of the borrower, seller, and lender.

Our message is specific and clear:

  • An independent third party must be responsible for disbursing the transaction, regardless of who prepares the disclosure.
  • Borrowers need the ability to waive their three-day waiting period for reasons of a bona fide financial emergency so their purchase contracts and rate locks don't expire.
  • There should be no limits on itemizations on the Closing Disclosure so everyone knows exactly what is being charged and there is no confusion.
  • These types of dramatic changes take time to implement; we suggest an 18- to 24-month implementation schedule.

The CFPB is required to read every comment. Provide them with specific examples of how the proposed changes will impact consumers, along with suggested changes to improve the rule and the forms. The comment period expires on November 6, 2012. Submit your comments through the American Land Title Association (ALTA) via email at

As always, we thank you for your participation in this very important Call to Action. ATG members have a long history of making their voices heard in times when it matters most. This is one of those times. Please feel free to contact us with any questions or concerns.

David S. Huffman
Senior Vice President - Title Operations
Attorneys' Title Guaranty Fund, Inc.