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Consumer Financial Protection Bureau

ALTA Comments on Last Draft of New HUD-1; New Forms Will Be Proposed in July

April 17, 2012

ALTA submitted two comment letters to the Consumer Financial Protection Bureau as Monday (April 16) was the deadline to submit feedback regarding the draft mortgage disclosures.

The Bureau is in the process of creating new mortgage disclosures, which will replace the current GFE and HUD-1, by integrating forms required under the Truth in Lending Act (TILA) and Real Estate Settlement and Procedures Act (RESPA). The Bureau is expected to publish its proposed regulations by July 21.

In the first letter, ALTA provided comments about the Bureau’s final iteration of the proposed new HUD-1, which the Bureau will call the Settlement Disclosure. ALTA supports efforts to reduce the number of disclosures provided at closing and believes that a well designed set of forms and regulations can improve not only consumers understanding of their transactions, but also the operations of ALTA members who provide these disclosures at closing.

The letter addresses the need to reorder pages and information in the Settlement Disclosure. This will allow appropriate parties who currently are responsible for disclosing pieces of information to the consumers to do so without undue cost or expense. Currently, the lender provides loan information on the TIL disclosure, while settlement agents provide transaction information on the HUD-1. With the letter, ALTA provided an example of a reordered Settlement Disclosure.

As it stands now, ALTA believes the proposed new HUD-1 will require title and settlement companies to spend $800 per employee to upgrade systems and increase annual maintenance fee by roughly 20 percent. Also, because of the complexity of the new form, it is expected companies will be able to settle two less transactions per day.

In the second letter, ALTA joined eight other trade associations urging CFPB to take the necessary time to crafts legislation accompanying the Know Before You Owe mortgage loan initiative that is balanced and efficient.

This letter begins by setting out general comments on the Know Before You Owe initiative, including the need to coordinate it with related rulemakings for it to be successful, and highlighting the major items of concern mentioned in the Bureau’s “Outline of Proposals Under Consideration and Alternatives Considered.” The second section of the letter provides more specific comments on the revisions to mortgage disclosures and rules described in the Outline. In the third section, the letter recommends disclosure timing requirements, with particular attention to resolving the current problem of frequently revised Good Faith Estimates (GFEs) and minimizing unnecessary waiting periods for consumers needing to close their loans in a timely manner.

Additionally, the letter states that settlement agents should continue to deliver the Settlement Disclosure. One of CFPB’s proposals under consideration is to have the lender provide the Settlement Statement to consumers.

“Respectfully, we do not believe that the rules need to be revised to require that lenders themselves provide consumers with settlement disclosures. This requirement would be unduly burdensome, and would create unnecessary waiting periods for consumers needing to close their loans on a timely basis,” the letter stated.

In regards to the CFPB’s proposed requirement of delivering the Settlement Disclosure three business days before closing to the consumer, the letter suggests lenders provide a third Loan Estimate at least three days before closing.

“Requiring a final Settlement Disclosure three days before closing would lead to negative unforeseen consequences. It would require the lender to assure, three days prior to scheduled closing, that the financing has been secured as described in the closing documents. This, in effect means that the transaction becomes ‘wet’ in advance of the settlement date,” the letter stated.

Click here to review ALTA advocacy efforts regarding the creation of a mortgage disclosures.

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