October 18, 2016

ALTA submitted two letters to the Consumer Financial Protection Bureau ahead of the Oct. 18 deadline to provide comments regarding the bureau’s proposed changes to the TILA-RESPA Integrated Disclosures Rule.

In the first letter, ALTA reiterated that the CFPB’s proposed changes failed to fix the rule that requires the inaccurate disclosure of title insurance fees. This portion of the rule remains the single biggest cause of confusion that homebuyers express at the closing table.

“Homebuyers deserve to know the true and accurate cost of buying a home. With respect to title insurance costs, the disclosure rule fails to meet this obligation,” ALTA’s letter the stated. “For the overwhelming majority of real estate transactions, the rule requires a complicated formula that discloses to consumers an inaccurate price for title insurance. Under the KBYO rule, the CFPB mandates that the correct and actual price of title insurance products be withheld from consumers. Not only does this hinder consumers’ understanding of transaction costs, but is at odds with what consumers want to know.”

ALTA said that amending the rule to require the disclosure of the actual cost of title insurance is the best way to achieve the Bureau’s missions to ensure “consumers are provided with timely and understandable information to make responsible decisions about financial transactions.” 

The best way to address this is to modify the Official Interpretations for §1026.37(f)(2), §1026.37(g)(4) and §1026.38(g)(4). These comments should allow the industry to disclose title insurance the same way as every other cost (i.e., the actual cost the consumer will pay for the service based on the best information reasonably available). Appendix A includes suggested edits the Bureau should make to those comments.

In its second letter, ALTA encouraged the CFPB to give the industry a year of implementation time to help software vendors make the required adjustments to the finalized rule.

“While most of the proposed changes appear technical, vendors will need more than the proposed four months to program, test, implement and train,” the letter stated. “Implementing other regulatory changes, including Home Mortgage Disclosure Act, Uniform Residential Loan Application and the new servicing rule, only exacerbate this need.”

In addition, the letter also encouraged the bureau to adopt several amendments as proposed or to make modifications to the following parts of the proposed changes:

  • Adopt a Uniform Approach for Co-operatives: ALTA supports the proposal to include loans secured by shares of a co-operative unit. The failure to previously include co-op loans in the rule created unnecessary uncertainty for practitioners.
  • Fix the Black Hole: Currently, the rule states that once a lender issues a Closing Disclosure, they are prohibited from issuing any further Loan Estimates. Once the initial Closing Disclosure is sent, the rule proceeds to set out a complex set of timing requirements for issuing updated Closing Disclosures. When a closing delay occurred, some creditors believed they could send the consumer an updated disclosure to reset tolerances while others believed they could not. The CFPB’s proposal states that an updated Closing Disclosure can be used to reset good faith baselines after a valid changed circumstance in any situation in which a Closing Disclosure has already been issued.
  • Clarify the Interplay Between Tolerance Categories: Under the current rule, creditors are expected to use the best information reasonably available to them to provide consumers with an effective estimate of their closing costs. However, the relationship between different cost categories can cause confusion and it’s unclear whether consumers or creditors should pay the increases in certain costs. ALTA believes the CFPB’s proposed amendment clarifying that tolerance is determined by the type of fee in these instances rather than the provider should aid compliance. ALTA suggested including language that says “so long as the charges are bona fide” at the end of proposed amendment.  
  • Insufficient Guidance on Sharing Disclosures With Real Estate Agents: 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. The bureau said it 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. The bureau is proposing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller. However, the CFPB’s proposed changes in this area remain inadequate and lead to more confusion, according to ALTA’s letter. Creditors control the settlement agent’s ability to share the Closing Disclosure through contractual agreements such as closing instructions. However, the bureau’s proposal does not make mention of any potential contractual limitations. It also fails to guide real estate agents to turn to the creditor as the party that actually controls the decision to share the disclosures. In addition, the bureau summarizes the federal Gramm-Leach-Bliley Act (GLBA), but it fails to discuss any state law concerns. ALTA encourages the CFPB to correct this oversight and provide complete guidance.
  • Prohibit Lenders from Forcing Their Liability onto Settlement Agents: While CFPB Director Richard Cordray has previously made it clear in letters to Congress that lenders are primarily liable for any errors with the disclosures, ALTA stated that the bureau should make this prohibition part of the official rule. “The result is unnecessary conflict between lender and settlement agent as they finalize the Closing Disclosure, which can lead to delays for consumers. Providing more clarity would help ease this tension and make the process smoother for all parties,” ALTA wrote in its letter to the CFPB.

Contact ALTA at 202-296-3671 or

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