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Consumer Financial Protection Bureau

A New HUD-1 is Coming . . . Will You Be Ready?

March 27, 2012

During the second portion of the General Session on Monday at ALTA’s Business Strategies Conference, three members of ALTA’s RESPA Implementation Task Force discussed the Consumer Financial Protection Bureau’s (CFPB) plans to create new mortgage disclosures, which will replace the current GFE and HUD-1.

Mary Schuster of RamQuest Software Inc., Alison Gareffa of Old Republic National Title Insurance Co. and Celia Flowers of East Texas Title Co. discussed what the Task Force is doing to engage the CFPB to ensure the forms benefit both industry and consumers. In addition to sharing their top concerns and recommendations, the panelists urged attendees to submit comments to the CFPB on how the proposed forms will impact their business.

Click here to view a portion of this panel discussion.

“There is so much happening right now and this is a critical time for us to bring our voice to this issue,” said Schuster. “ALTA’s RESPA Task Force has some strategic efforts in mind, but it’s time for us to come together and talk about how these changes will impact our business and impact consumers. The time to do that is absolutely now.”

Gareffa provided an overview in where the CFPB is at in the process of completing the final disclosures and outlined the important dates on the horizon that ALTA members should be aware of. Industry comments must be submitted to the CFPB by April 15 at knowbeforeyouowe@cfpb.gov. The CFPB convened a Small Business Review Panel, which Flowers participated on, to solicit feedback from small businesses that make mortgage loans and conduct mortgage closings. The review panel must provide its report in early May. The Bureau is required by law to publish the rule by July 21. She believes there will be a 90-day comment period to follow in the fall.

“If I had a crystal ball, I believe they will want to roll these out the new disclosures in 2014,” she said. “As I think of this being an election year, and the importance President Obama has placed on these regulations, I would guess sometime in 2014 we will be using new forms.

One of the Task Force’s main tenets is that the settlement agent continued role of the settlement agent. Because lenders provide data for the TIL disclosures and settlement agents complete the HUD-1, the integration presents logistical hurdles and liability issues that may force lenders to either take over the closing or only work with national providers. The panelists told attendees the CFPB is considering proposing two alternative approaches for assigning responsibility for providing the integrated Settlement Disclosure to the consumer.

"We need to ensure our roles in the settlement process continue and we need you to explain to policymakers that our fundamental role as the guardian for the consumer as a settlement and disbursement agent is not put in jeopardy by these forms," Schuster said.

The CFPB’s first alternative would make the lender solely responsible for delivering the Settlement Disclosure to the consumer. Option two would make the lender responsible for preparing the TILA-required information on the Settlement Disclosure. The settlement agent would be responsible for preparing the RESPA-required information. However, the lender and settlement agent would be jointly responsible for providing the consumer with an integrated Settlement Disclosure three days before closing, according to the CFPB.

ALTA’s RESPA Task Force has suggested the Bureau bifurcate the Settlement Disclosure to delineate responsibilities between settlement agents and lenders. This would allow lenders to be responsible and liable for providing the consumers with the loan information only, while settlement agents would be responsible for the settlement costs.

The panelists also addressed the CFPB’s proposal to provide the Settlement Disclosure three days before closing. Settlement agents are generally supportive of getting loan instructions and other documents earlier in the transaction,

"However, because of the variety of costs that change in the three days prior to closing, there are concerns that a rigid rule that required a re-disclosure and a new three-day waiting period for each change in a settlement cost would harm consumers and potentially lead to fewer deals closing," Gareffa said.

There was also concern that having the settlement agent provide the entire settlement disclosure would require them to duplicate efforts and costs preparing the form.

“Think in your mind you are in a closing and the closings you are going to have three days later, those folks just received the disclosure settlement statement and have questions," Flowers said. "They are going to call their Realtor, who is going to call you. We are suddenly faced with how we are going to accommodate the consumer and answer their questions. Will we have to implement pre-closing closings? How will we schedule that in your day?

According to industry estimates, the CFPB's draft forms and regulatory outline will increase costs to small settlement providers by as much as $800 per employee in upfront implementation and training costs; $2,360 to train lenders, Realtors and other customers; a 20 percent increase in their yearly software maintenance fee; and a 20 percent decrease in annual revenue due to decreased productivity.

“I’ve tried to diagram what closings will look like with these draft forms,” Flowers said. “It will require training staff to comply with rule. It will add more time to close deals and result in fewer transactions being closed on a daily basis.”

In addition to providing feedback to the CFPB, Schuster suggested attendees start talking about the proposed forms with Realtors and lenders and to use it as a marketing tool to capture market share.

“We must be engaged in the dialogue,” she said. “If you can go out and take these forms with you, it’s a great conversation. Ask them about how the forms will impact them.”

Click here for the latest updates and information on what ALTA and its RESPA Task Force is doing to advocate on your behalf to ensure the new forms benefit consumers and industry.





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