CFPB Fails to Fix Inaccurate Disclosure of Title Fees in TRID Update
July 11, 2017
The Consumer Financial Protection Bureau (CFPB) on Friday finalized updates to its TILA-RESPA Integrated Disclosures rule with amendments intended to formalize guidance in the rule.
The 560-pages of amendments includes a number of helpful clarifications, but, as ALTA expected, fails to fix the requirement that results in inaccurate title insurance pricing disclosures for consumers at closing.
“Chalk this one up to an opportunity missed,” said ALTA CEO Michelle Korsmo. “While it made some important clarifications, the CFPB failed to address the item that confuses buyers and sellers the most at closing, the requirement that they receive incorrect information about the cost of title insurance at the closing table. “While the CFPB’s disclosures have helped homebuyers better understand their mortgage costs, consumers would value their disclosures more if the CFPB showed the accurate costs of title insurance instead of the incremental costs. The CFPB has an obligation to make this simple change. We strongly urge the bureau to start the process of writing a new regulation to fix the title fee disclosure so consumers receive accurate information about title insurance at closing.”
When the bureau proposed the amendments in July 2016, it said it did not intend to revisit major policy decisions in this rulemaking. A survey ALTA conducted in July 2016 found that more than 40 percent of homebuyers feel taken advantage of or are confused by the calculation of title insurance fees on the mortgage disclosures.
Here are highlights of the finalized amendments:
- Tolerances for the total of payments: Prior to TRID, the total of payments disclosure was determined using the finance charge as part of the calculation. This rule changed the total of payments calculation so that it did not make specific use of the finance charge. The bureau finalized updates to include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.
- Housing assistance lending: The rule rule gave a partial exemption from disclosure requirements to certain housing assistance loans, which are originated primarily by housing finance agencies. The bureau’s update, as finalized, clarifies that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The update also excludes recording fees and transfer taxes from the exemption’s limits on costs. Through the update, according to the CFPB, more housing assistance loans will qualify for the partial exemption, which should encourage these loans.
- Cooperatives: The bureau finalized updates to extend the rule’s coverage to include all cooperative units. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property.
- Privacy and sharing of information: TRID requires creditors to provide certain mortgage disclosures to the consumer. The bureau reported it has received many questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. There is extensive discussion of the comments and the interplay between Gramm-Leach-Bliley Act (GLBA) and state law. The rule does not go so far as to mandate sharing. Instead, it states, "the Bureau notes that such sharing of the Closing Disclosure may be permissible currently to the extent that it is consistent with GLBA and Regulation P and is not barred by applicable State law. However, the Bureau does not believe that expansion of the scope of such permissible sharing would, in this rulemaking, be germane to the purposes of Regulation Z."
Although the amendments will become effective 60 days after publication in the Federal Register, mandatory compliance with the amendments will be required for applications received on or after Oct. 1, 2018. The CFPB advises that during the optional compliance period between the effective date and Oct. 1, 2018, a party may comply with the amendments “all at one time or phase in the changes over time (even within the course of a transaction).”
In addition to the final rule, the CFPB plans to issue a proposal addressing when a creditor may use a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance. Comments are due 60 days after the proposal’s publication in the Federal Register and will be weighed carefully before a final regulation is issued.
Contact ALTA at 202-296-3671 or firstname.lastname@example.org.