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Consumer Financial Protection Bureau

ALTA Letter to CFPB Highlights Concerns of Latest Draft Closing Disclosure

January 3, 2012

ALTA’s RESPA Task Force sent a letter Dec. 23 to the Consumer Financial Protection Bureau sharing concerns about the Bureau’s second round of its draft replacement for the HUD-1 Settlement Statement.

On Dec. 13, 2011, the CFPB released two updated versions of a new closing statement called Mimosa and Sassafras. Each of the forms are five pages long. While concerned with both draft forms, the Task Force preferred the Mimosa form because it includes line numbers on the settlement portion of the form. This makes it easier for consumers to identify and locate key settlement items.

“Line numbers serve as a reference point, allowing closing agents to easily direct consumers, lenders, realtors and others to different costs when reviewing documentation of the settlement,” the letter said.

However, the Mimosa form presents considerable programming challenges due to the renumbering or elimination of lines and sections on the statement portion of the form. This will greatly increase the development time and costs incurred for closing system development consistent with the new forms.

“By changing the line or section numbers, the Bureau will increase the cost of software development exponentially, requiring programmers to rebuild the connections between the Settlement Disclosure Form and other documents prepared or served by the system,” the Task Force said.

The Task Force encouraged the Bureau to maintain the current section and line numbering on the HUD-1 to the greatest extent possible to allow for faster and less costly software development and implementation.

The Task Force also suggested the CFPB:

  • Remove the settlement fee and settlement cost headings: The new concept of segregating closing costs into “Settlement Fees” and “Settlement Costs” will be confusing for consumers because there is not explanation for the distinction between these categories. Further, without definitive guidance, software developers and closing agents will not know in which category to place certain costs. The Task Force suggests removing these distinctions.
  • Remove the paid outside of settlement column: The new POC column is confusing for both industry and consumers as it the consumers are not likely to understand the abbreviations used to complete the column, and the information about when a fee was paid and whether the vendor is an affiliate may not be known to the closing agent. The Task Force suggests returning to the current method of disclosing POC.
  • Include a section for miscellaneous disbursements: Neither draft contains a section for miscellaneous disbursements similar (or preferably identical) to the 1300 series on the current HUD-1. This section is necessary to capture disbursements such as credit card payments, home warranty premiums and similar items paid by either buyer or seller. The Task Force suggests including a miscellaneous disbursements section.
  • Segregate the responsibility for completing the combined form
  • Fix the unintended consequences of tolerances, changed circumstances and provider lists
  • Reduce the volume of summaries and disclosures on the form
ALTA expects the next round of forms to come out toward the end of January. The CFPB expects to have its draft rule finished by July 2012. The industry must be actively engaged in this process throughout in order to ensure that the outcome is not harmful to consumers and industry.

Comments can be sent directly to the CFPB at Knowbeforeyouowe@treasury.gov. If you would like to contact ALTA with concerns, send an email to Steve Gottheim.



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