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Consumer Financial Protection Bureau

CFPB Releases Third Round of New Closing Disclosure Prototypes

January 26, 2012

The Consumer Financial Protection Bureau released its third round of new closing disclosure prototypes and is seeking feedback on how these forms work with the Bureau’s current application disclosure prototype.

The CFPB is combining the Truth in Lending disclosure and HUD-1 Settlement Statement to create a new HUD-1. It previously held five rounds of testing prototypes of a new application disclosure and is now testing drafts of a new closing disclosure. In this round, the CFPB is asking for feedback on how the new closing disclosure prototypes work with the current draft of the application disclosure prototype.

The five-page closing disclosure forms in this round are called Butternut and Hemlock. The application prototype can be viewed here.

The CFPB is testing this version of the closing disclosure form in Philadelphia. To provide feedback, the CFPB asks for comments to be made on its blog or sent via email. If you would like to contact ALTA with concerns, send an email to Steve Gottheim, ALTA’s legislative and regulatory counsel. The side-by-side comparison tool is not being used this round.

In reviewing testing from the second round, which compared two settlement disclosures, Mimosa and Sassafras, the majority of responses found the Sassafras form more consumer friendly because closing costs were formatted similar to the application disclosure prototype. However, some told the CFPB it shouldn’t eliminate line numbers because they are helpful to industry software systems that produce HUD-1 settlement statements. ALTA’s RESPA Task Force has 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.

In reviewing the forms, the CFPB would like you to think about these questions:

• Can you easily find key loan terms?
• Are you able to identify changes to the loan terms or costs?
• Do you know who to contact to discuss your loan or changes to your loan?
• Do you have the information you would need to feel comfortable closing on the loan?
• Are the disclosures easy for lenders and settlement agents to use and explain to consumers?

According to the CFPB, these prototypes use a format for closing costs that’s similar to the format on the initial disclosure to enable the two forms to work well together.

“Consumers should be able to see if their final loan terms and costs are different from the numbers they were originally offered,” the CFPB said. “They should have a clear picture before signing on the dotted line both of what they owe and whether it’s what they expected to owe.” The CFPB will release its final round of draft closing disclosures in February. Over the next couple of weeks, the CFPB said it will explain the process of creating the federal rules that go along with the updated disclosures.

Richard Cordray, the Bureau’s director, said during the mortgage disclosures rule must be reviewed by a special panel to determine the cost impact it will have on small businessess, including settlement services providers.