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Consumer Financial Protection Bureau

Deadline for New HUD-1 Rules Nears; ALTA Asks for Opportunity to Review

February 2, 2012

ALTA and 11 other associations urged the Consumer Financial Protection Bureau (CFPB) to adopt an expanded rulemaking process as it works to develop simplified mortgage disclosure forms, including a new HUD-1.

The CFPB released its third round of new closing disclosure prototypes last week. It expects to conduct one more round of testing in February. The Bureau must publish proposed new forms and regulations by July 21, 2012.

In a letter to Richard Cordray, director of the CFPB, ALTA said the accompanying rules that will govern the use and application of the disclosure forms are as important as the content of the forms.

“The rules will govern the timing and reliability of the forms and provide remedies for misdisclosure,” ALTA said in the letter. “Notwithstanding, no input on these rules has been invited. For this reason and to ensure a more workable proposal, we encourage you to use a similarly open and interactive process to arrive at the accompanying rules.”

ALTA has asked the Bureau to adopt an iterative rulemaking process in advance of the July 21 deadline by publishing an outline of potential underlying rules to accompany the disclosures and seeking written comment from the public on the content of the outline. It should then provide opportunities for input as the outline is revised leading up to the proposed rule.

“Implementation of the new forms will be the biggest hurdle and the industry will need as many opportunities to warn the Bureau of potential troublesome aspects of the regulations before they propose the rule in July,” said Justin Ailes, ALTA’s vice president of government affairs.

Before the rule is proposed, ALTA encouraged the CFPB to test its prototypes or draft disclosure forms on actual closed loans for a full range of loan products and for range of local real estate practices. This would reveal if the forms are achieving their goal of increasing transparency and reducing consumer confusion.

“Early testing of this nature would prevent the possibility that after the rule is final, certain loan products will become unavailable because the forms and rules do not accommodate them or other potentially serious problems that could arise as a result of the diverse settlement practices found around the country,” the letter said.

Each time the CFPB issues a new draft, ALTA sends a Grassroots Alert urging members to comment on the draft forms. ALTA encourages members to focus comments on the impact these changes will have on business and the ability to explain closing costs to consumers. Members also should consider forwarding any cost estimates for implementation (both internal and from software providers) to the Bureau so they can understand the potential costs of different proposed changes to the HUD-1. Some other questions to consider are:

  • Do you like the way these forms deal with line numbers?
  • Do you use line numbers to help explain costs to customers?
  • Do you prefer these forms to the current HUD-1? Why?
  • Will these forms create any problems for you when explaining information to consumers?

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