ALTA Says New CFPB Integrated Mortgage Forms Disclose Inaccurate Title Policy Fees

February 5, 2015

While ALTA and its members support the Consumer Financial Protection Bureau’s efforts to help consumers better understand the mortgage process, the association remains concerned with the bureau’s new Closing Disclosure, which goes into effect Aug. 1, 2015, and replaces the current HUD-1 Settlement Statement.

During a speech Jan. 13 at the Brookings Institution, CFPB Director Richard Cordray said the new integrated mortgage disclosures will help consumers become better and more informed shoppers.

ALTA believes, however, that the Closing Disclosure misleads consumers about the actual price they will pay for title insurance. ALTA urges the CFPB to take swift action to ensure consumers receive the most accurate information about their mortgage costs, including title insurance premiums and settlement services.

“Unfortunately, the current Know Before You Owe forms will create confusion at the closing table for many consumers,” said Michelle Korsmo, ALTA’s chief executive officer. “In nearly half of the country, title companies are required by state law to charge title insurance premiums and discounts in a manner different than the Bureau would have them disclose those fees to the consumer. The bureau must take steps to disclose accurate costs of title insurance premiums and settlement services to meet their goal of educating consumers of the true costs of owning a home.”

Through regulation or rate filing, title companies in about half the states offer discounts on the loan policy when an owner’s policy is simultaneously purchased. Despite the common practice, the rule prohibits settlement agents or lenders from disclosing the discounted simultaneous issue price for the lender’s title insurance policy on the Loan Estimate and Closing Disclosure forms.

ALTA believes that the rule’s requirement that the Closing Disclosure provide inaccurate charges for title insurance premiums is inconsistent with state law or regulation in 21 states: Alabama, Alaska, Arizona, California, Colorado, Florida, Idaho, Kansas, Michigan, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, Ohio, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. Additionally, the bureau’s method for disclosure of title fees will also cause confusion in the 31 states where the seller pays or is likely to pay for owner’s title insurance on behalf of the consumer.

In addition to causing confusion, this disclosure requirement will also cause consumers to think they need more cash to close, which will result in money being refunded. Title and settlement agents will have to provide additional disclosure forms to consumers at closing to show the actual title insurance costs and to prove compliance with state law governing industry-filed rates. ALTA supports a cleaner real estate transaction but not at the expense of consumers understanding of their actual mortgage costs.

“We agree with Director Cordray that an educated consumer is a more confident and empowered consumer,” Korsmo said. “Our economy can speed up its recovery if we provide more stability, growth and affordability in the mortgage market. We will continue to work with the CFPB and our industry partners toward commonsense solutions that decrease consumer uncertainty and bring demand back into housing market.”

Contact ALTA at 202-296-3671 or