ALTA Urges CFPB to Make Changes to Mortgage Shopping Toolkit

April 2, 2015

The Consumer Financial Protection Bureau on April 1 released a “Your Home Loan Toolkit” that guides consumers through the process of shopping for a mortgage and buying a house.

Developed as part of the CFPB’s “Know Before You Owe” mortgage initiative, the toolkit explains the new Loan Estimate and Closing Disclosure forms that the industry must begin using Aug. 1 for most closed-end consumer mortgage loans. Effective Aug. 1, 2015, the CFPB said the toolkit will replace the Settlement Cost Booklet.

According to the CFPB, the toolkit provides a step-by-step guide to help consumers understand the nature and costs of real estate settlement services, define what affordable means to them and find their best mortgage. The toolkit features interactive worksheets and checklists, conversation starters for discussions between consumers and lenders, and research tips to help consumers seek out and find important information.

“This toolkit is a great resource for consumers navigating the home-buying process, and will help consumers make well-informed decisions about the biggest financial transaction of their life,” said CFPB Director Richard Cordray. “The new mortgage disclosure forms coming in August will help consumers comparison shop for mortgages and avoid surprises at the closing table.”

ALTA said the new consumer toolkit is a good resource and provides valuable information for consumers in an understandable manner, but continues to misinform consumers by calling owner’s title insurance “optional.”

In the toolkit, the CFPB tells consumers that most lenders require a lender’s title insurance policy. The bureau goes on to say “You may want to buy an Owner’s Title Insurance policy, which protects your financial investment in the home. The Loan Estimate you receive lists the Owner’s Title Insurance policy as optional if your lender does not require the policy.”

“The bureau should not discourage any homeowner from purchasing an owner’s title insurance policy that financially protects one of the largest investments of their lives,” said Michelle Korsmo, ALTA’s chief executive officer. “The CFPB should provide an accurate description of the peace of mind an owner’s title insurance policy provides and allow the homebuyer to make their own decision about purchasing this protection for their home.”

The toolkit also attempts to explain to homebuyers that they may receive a final list of fees at the closing table that is different from the fees included on the Loan Estimate and Closing Disclosure.

According to the CFPB, “Depending on the state where you are buying your home, your title insurance

company may give you an itemized list of fees at closing. This itemized list may be required under state law and may be different from what you see on your Loan Estimate or Closing Disclosure. That does not mean you are being charged more. If you add up all the title-related costs your title insurance company gives you, it should match the totals of all the title-related costs you see on your Loan Estimate or Closing Disclosure. When comparing costs for title insurance, make sure to compare the bottom line total.”

In nearly half of the United States, consumers will pay for title insurance rates that are different than how the CFPB requires ALTA members to inaccurately disclose these fees on the new forms. ALTA and its members have requested that the bureau to correct the forms and the accompanying language in the new toolkit, before the Aug. 1 implementation date.

Additionally, ALTA suggested that the CFPB include information in the toolkit about the additional costs of owning a home, such as utility fees.

“As a homebuyer considers the financial impact of homeownership they should be presented with all of the possible costs they might encounter to maintain their home,” Korsmo said.

The CFPB also provides an electronic version with fillable text fields and interactive check boxes so consumers can save and print their progress as they work through the toolkit. The electronic version meets federal accessibility standards to ensure that all consumers, including those with disabilities, can use the resource. 

Contact ALTA at 202-296-3671 or [email protected].