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Consumer Financial Protection Bureau

Three Things to Prepare Now for New Mortgage Disclosures

July 9, 2013

It’s been several months since the comment period to the Consumer Financial Protection Bureau’s proposed rule to integrate mortgage disclosures required under the Real Estate Settlement Procedures Act and the Truth In Lending Act.

The Bureau has proposed a new Loan Estimate and Closing Disclosure that will replace the current Truth in Lending (TIL), Good Faith Estimate (GFE) and HUD-1 Settlement Statement.

The industry is now in a waiting period before the CFPB issues its final rule, which is expected to happen sometime between September and December 2013. In the meantime, there are several things can title professionals do now to prepare, according to Leslie Wyatt, director of industry relations for SoftPro.

Wyatt said this is the perfect time to start thinking about how to best plan for the upcoming changes.

“Based on the proposed rule, you may be looking at various workflow changes,” Wyatt said. “Look at your internal processes and see what may need to change and how best to implement those changes. You should be as proactive as possible to alleviate scrambling later to try and get things in place.”

Wyatt said that it’s not likely much will change from the proposed rule to when the CFPB issues its final rule. Title professionals should start training and educating staff on the proposed regulations and guidelines, as well as the proposed Closing Disclosure. As an aid, starting on page 839 of the 1,099-page rule, the CFPB provides examples of how to fill out the Closing Disclosure for different loan products.

“You can divide your training plan into two parts: the proposed rule and the closing disclosure forms,” Wyatt said. “Helping your employees understand the new regulations now will only make the transition that much easier when the final rule is published.”

Currently, settlement agents are required to provide the HUD-1, while lenders are required to provide the revised Truth-in-Lending disclosure. The CFPB is proposing two alternatives for who is required to provide consumers with the new Closing Disclosure form:

  1. Under the first option, the lender would be responsible for delivering the Closing Disclosure form to the consumer.
  2. Under the second option, the lender may rely on the settlement agent to provide the Closing Disclosure form. However, under this option, the lender would also remain responsible for the accuracy of the Closing Disclosure form.
Either option will impact a company’s workflow. Assuming settlement agents produce the Closing Disclosure, settlement agents will need to start working with lenders earlier in the process to get final numbers and approvals. If the lender provides the disclosure, settlement agents will need to provide final settlement numbers to lender earlier in the process and alert the lender of changes in those numbers and reasons for them.

In addition to educating staff on the rule and Closing Disclosure, Wyatt encourages title professionals to start talking with software vendors.

“Be sure to stay involved with your software provider by asking the important questions,” she said.

Wyatt said title professionals should be asking their software vendor these questions:
  • How do they plan to handle the proposed changes?
  • How involved are they with the CFPB and industry trade associations?
  • Will there be any costs to your company for any software updates?
  • Will your current operating system be able to accommodate the updated software?
  • Will they be offering any training on the upcoming final rule?
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