CFPB Keeps Onus on Lenders for Determining to Share Closing Disclosure

July 13, 2017

Implementation of TRID nearly two years ago raised questions regarding who is permitted to receive copies of closing documents, including the Closing Disclosure and alternate settlement statements, such as the ALTA Settlement Statements.

While the CFPB finalized amendments to the rule, it didn’t squash the debate on what documents can be shared. It is important to note that the regulation did not implement any changes on data privacy. TRID requires creditors to provide certain mortgage disclosures to the consumer, but 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."

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.

Because TRID does not address who may or may not receive a copy of closing documents, many lenders refuse to share a copy of the Closing Disclosure with real estate agents or other third parties. Additionally, some lenders include provisions within their closing instructions that prohibit settlement agents from sharing the Closing Disclosure with third parties. These lenders state that the consumer may provide a copy of Closing Disclosure to real estate agents if he or she chooses.

A concern remains about how to get necessary information about the transaction to outside parties, including real estate agents, who need certain information to document their involvement in the transaction. One of the primary reasons real estate agents are interested in receiving the Closing Disclosure is because they have to report certain data fields to MLS to close the listing. These requirements vary by state, and there is not a uniform set of data fields that will satisfy MLS. Reporting these data fields is a requirement for participating in the MLS system, so it is crucial that real estate agent receive this information.

“Settlement agents and title insurance professionals should contemplate the requirements and limitations of their privacy policies and contemplate whether any of these policies need to be revisited,” Korsmo said.

Passed in 1999, the GLBA remains the predominant authority on how to protect data. GLBA requires financial institutions, including title insurance companies and agents, to disclose their data-sharing practices to their customers and to safeguard private and sensitive customer information. To meet these new requirements, GLBA imposed three basic obligations:

  1. a privacy notice requirement
  2. a requirement that all consumers be provided the opportunity to opt-out of certain information disclosures
  3. a requirement that measures be instituted to maintain the "security and integrity" of all nonpublic information.

The GLBA tasked the Federal Trade Commission (FTC) and other government agencies that regulate financial institutions to implement regulations to carry out the Act's financial privacy provisions. The CFPB is not included in the list of government agencies that regulate data privacy, and thus the implementation of the Know Before You Owe regulation did not affect the longstanding data-security requirements that title insurance companies and agents have been subject to.

With the implementation of GLBA, the FTC released guidance regarding the type of information companies should be safeguarding. The FTC is responsible for enforcing its Privacy of Consumer Financial Information Rule, which protects a consumer's "nonpublic personal information" (NPI). NPI is any "personally identifiable financial information" that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is otherwise "publicly available. The Privacy Rule applies to ALTA members that provide real estate settlement services. 

ALTA members should note that the FTC considers NPI to be any information obtained about an individual from a transaction involving a company’s services. This could include a person’s name, address, income, Social Security number or other information on an application. This also includes any information from court records or from a consumer report. The FTC said NPI does not include information that is believed to be lawfully made "publicly available." In other words, information is not NPI when steps have been taken to determine: (1) that the information is generally made lawfully available to the public; and (2) that the individual can direct that it not be made public and has not done so.

ALTA’s Title Insurance and Settlement Company Best Practices reiterate the importance of privacy policies and include guidelines for companies to protect against data theft to help meet GLBA requirements. Pillar 3 of the ALTA Best Practices provides procedures on physical and network security of NPI, how to properly dispose of NPI, developing a disaster management plan, employee training to ensure compliance, and oversight of service providers.

When revisiting your privacy policies, consider the following questions:

  • Why did you initially implement this policy?
  • What was your rationale in implementing this policy? Does that rational still apply?
  • Does this policy continue to provide adequate protection to sensitive data in today’s marketplace?
  • What information do you need to share with your real estate partners?
  • How are you sharing this information?

After re-examining your privacy policies, you should compare these policies with your company’s data-sharing practices to ensure that you are only sharing information in conformity with your policies.

If your lender prohibits you from sharing the Closing Disclosure with third parties, you may consider using an alternative settlement statement, such as ALTA’s Settlement Statements, to document the transaction. The ALTA Settlement Statements were designed to be model forms based on the settlement statements that have been in use prior to the implementation of TRID. These statements may be modified as appropriate to reflect the terms of the transaction and to prevent any disclosure of the buyer’s or seller’s NPI. Four versions of the ALTA Settlement Statement are available: the buyer statement, the seller statement, the combined statement, and a statement for cash transactions.

“If you plan on sharing a closing document, such as a settlement statement, to a third party, consider whether you are sharing any information that would be considered NPI under the FTC’s guidelines and whether you have met the GLBA’s requirements for sharing such data,” Korsmo said. “Also consider why you feel the need to share this information and how you would anticipate your customer would feel about you sharing that information. By keeping GLBA requirements and ALTA Best Practices in mind, you can ensure that your customer remains protected and that you continue to have compliant real estate closings.”

The National Association of Realtors, meanwhile, believes the bureau’s update clarifies the sharing of the Closing Disclosure with third parties.

“The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a Closing Disclosure to consumers, sellers, and their real estate brokers or other agents,” according to a statement by the CFPB on the finalized updates. “The Bureau is finalizing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.”

Contact ALTA at 202-296-3671 or