ALTA Informs CFPB of Confusion Caused by Know Before You Owe

December 3, 2015

In a Nov. 23 letter to the Consumer Financial Protection Bureau (CFPB), ALTA outlined three areas of the Know Before You Owe regulation that’s causing confusion in the marketplace.

ALTA indicated that the confusion with the regulation’s liability provision has spurred some lenders to modify their closing instructions in an attempt to shift liability to settlement agents for all compliance issues, including lender compliance with federal consumer laws.

“These instructions are in contrast to the clear public policy underpinning this rule, as well as language in the rule stating that lenders bear ultimate liability for errors on the Closing Disclosure form,” Michelle Korsmo, ALTA’s chief executive officer wrote in the letter.

According to the rule: The creditor shall ensure that [the Closing Disclosure and any revisions] are provided in accordance with all requirements [pertaining to final disclosures for mortgage loans secured by real property].” 12 CFR § 1026.19(f)(1)(v).

ALTA provided several examples of modified closing instructions.

ALTA also informed the CFPB that there’s uncertainty on how to handle the disclosure of an owner’s title insurance policy when the bureau’s calculation method results in a negative number on the Closing Disclosure.

“There is uncertainty about whether the rule permits disclosure of a negative number and how this disclosure will impact the consumer’s ability to understand their financial responsibilities,” according to Korsmo.

Finally, ALTA asked for clarification on how to handle seller credits. Lenders and settlement agents are unsure if the credits should be listed as individual line items on the Closing Disclosure or whether they should be aggregated and disclosed under a general “seller credits” heading.

Contact ALTA at 202-296-3671 or