The CFPB was created in 2010 by the Dodd-Frank Act. The agency was given authority over the Truth In Lending Act) and RESPA) with a mandate to combine the consumer disclosures required by the two existing acts.
CFPB has responded to the mandate by drafting a proposed rule that includes a new Loan Estimate document and a new Loan Disclosure document. These two documents are intended to replace the current Truth-In-Lending (TIL), Good Faith Estimate (GFE) and HUD-1 Settlement Statement. The proposed rule was published July 9, 2012. The 1,099 page proposed rule includes examples of the proposed forms and explanations on their use. CFPB is accepting comments on the proposed rule until November 6, 2012. Links to the proposed rule, forms and comment area may be found on FundNet at www.TheFund.com under the Publications and Resources tab. The final rule may be promulgated in 2013. Due to the extensive changes in forms and settlement procedures required by the proposed rule, implementation of the rule is projected to be in 2014.
Loan Estimate. This form will replace the early TIL and GFE documents. The Loan Estimate must be delivered within three days of the mortgage application. Importantly for title insurance agents the form describes Owners Title Insurance as "Optional". The current requirement for lenders to identify settlement agents and other settlement service providers in a separate writing will transfer from the GFE to the Loan Estimate.
Closing Disclosure. The new five page Closing Disclosure replaces the HUD-1 and certain TIL disclosures. The proposed rule anticipates significant changes to forms as well as current closing practices and procedures. The form includes information on loan costs which must be obtained from the lender and on settlement costs which must be obtained from the settlement/title agent.
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Delivery. The Closing Disclosure must be delivered three business days prior to closing. The proposed rule seeks comment on whether the form must be prepared and delivered by the lender or by the settlement agent. In either event the lender will be responsible for the accuracy of all of the information.
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Changes. If it is necessary to make any changes to the Closing Disclosure after delivery to the borrower a new document must be delivered triggering a new three day review period. Through the efforts of the ALTA Task Force, CFPB has identified certain limited exceptions to the requirement for a new three day review period. The exceptions include changes resulting from the pre-closing property walk through and changes of under $100. Title agents are encouraged to identify additional needed exceptions by comment to the CFPB.
The proposed rule suggests significant changes for independent title agents, including attorney agents.
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The Closing Disclosure document requires greater coordination between the lender and settlement agent than the current version. The proposed rule specifically provides that the lender will be responsible for all of the information on the Closing Disclosure, even if the document is prepared and delivered by the settlement agent. There is some discussion that lenders will limit the number of settlement agents they will allow to close their loans in order to maintain oversight.
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Software and training. The proposed Closing Disclosure is a complete departure from the current HUD-1 and HUD-1A forms. Settlement/title insurance agents should plan for extensive training on new procedures and forms.
In a separate but related issue, the CFPB issued a bulletin on April 13, 2012 describing CFPB's expectations regarding lenders' oversight of third party providers. A copy of the bulletin is available on the FundNet page dedicated to CFPB actions. Even though the bulletin does not require third party vetting some lenders have elected to respond to the CFPB bulletin by requiring independent title insurance agents submit to third pary examination. Some title agents have contacted lenders and successfully challenged the need for such certification. Old Republic has also recently communicated to lenders the high standards Old Republic agents must meet.
Throughout this regulatory process and forms transition The Fund will make additional information available to members. Owing to the urgency and time sensitive nature most of our communications on this topic will be distributed to members through FundNews and FundAlert emails. Please make sure your office FundNet administrator has activated your individual email address to receive these important notices.
The Fund has established a page in FundNet dedicated to CFPB activity including the proposed rule and the forms described above. Current information may be obtained at www.TheFund.com under the Publications and Resources tab.
To provide you with the most current information regarding the proposed rule, Old Republic Title is hosting a webinar presented by Anne Anastasi, past President of the American Land Title Association. This one-hour session highlights the changes that have the greatest impact on the title agent and outlines the steps to respond accordingly.
We are offering the webinar on two days to accommodate your schedule. To register, please visit the appropriate link for one of the two days listed below:
Friday, October 5 at 2:00 PM EST
Tuesday, October 9 at 11:00 AM EST
Members are encouraged to comment directly to CFPB through the link provided on The Fund's website page. CFPB invites comments directed to the impact and effect of the proposed rules.
Comments and questions may be directed to
Fund Special Counsel, R. Norwood Gay, III at RNGay@TheFund.com and
Fund General Counsel W. Theodore Conner at TConner@TheFund.com.