Recently, the Consumer Financial Protection Bureau (CFPB) announced new disclosure rules, which will go into effect this summer. While their activation is still months away, lenders are already weary that it will make the closing process much more complicated, and could possibly mislead consumers.
“New disclosure forms for real estate transactions will completely change the homebuying process as it’s known today,” said Michelle Korsmo, CEO of The American Land Title Association, in response to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray’s recent testimony before the House of Representatives Financial Services Committee.
“As our member companies work to implement these new forms on Aug. 1, we strongly urge Director Cordray to announce a five-month restrained enforcement period so that new business processes can be adjusted to comply with these regulations,” Korsmo continued, explaining that as with previous regulatory reform, only when the new forms are in practice will many issues and defects be discovered.
“Unfortunately, we’re already aware of one major problem with the new CFPB forms,” Korsmo stated. “The Bureau’s Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers. State law and regulation in half of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer.”
As buying a home may be the largest investment a consumer will ever make, Korsmo stressed the importance of allowing homebuyers to be accurately informed about the total cost of homeownership, including real estate closing fees which, according to Korsmo, are not clearly outlined on the new CFPB forms.
“It’s critical that Director Cordray and the CFPB staff adjust the disclosure forms prior to Aug. 1 to ensure consumers receive accurate information about their mortgage costs,” Korsmo said. “ALTA and our member companies stand ready to help the Bureau ensure consumers are neither confused nor misled at the closing table.”
For more information, visit www.alta.org.