The Consumer Financial Protection Bureau is working on simplifying the mortgage disclosure process and industry groups are just as busy—drafting their own disclosures to influence the new agency.
The American Land Title Association, for instance, has a task force working on model disclosure forms. Dan Wold, chairman of ALTA's Real Estate Settlement Procedures Act implementation task force, said it's a challenge to combine Truth in Lending Act disclosures with the HUD-1 settlement sheet and the RESPA good-faith estimate.
Every time Elizabeth Warren talks about CFPB's efforts to combine RESPA and Truth in Lending Act disclosures, she mentions it will be a one-page form that will enable homebuyers to shop for a mortgage. "We were struggling to get that all on one form," said Wold, speaking at ALTA's recent legislative conference.
He noted that ALTA has decided to go with two forms: one used early in the process and the second later on to reflect the settlement sheet.
Despite the industry's best efforts, the CFPB has a major advantage when it comes to merging the TILA and RESPA disclosures—the bureau can take regulatory short cuts.
The Dodd-Frank Act gave the fledging bureau a mandate to "cut back regulatory costs," Warren has said, and eliminate duplicative and unnecessary rules.
"We are aiming to consolidate the TILA and RESPA forms to create a shorter, cheaper form that consumers can understand—and that lenders can fill out quickly and easily," Warren said at a U.S. Chamber of Commerce forum last week.
She noted the CFPB implementation team is making "progress" on the TILA/RESPA consolidation effort. Its CFPB's aim to make regulations clearer and less complex, which will allow lenders to comply with the rules and avoid litigation.
Warren has hired a consulting firm to design the new RESPA/TILA disclosure forms. The bureau also plans to conduct nationwide testing, with an ear toward consumer feedback.
The CFPB also decided not to pre-empt state RESPA laws which means new disclosures will have to comply with state requirements.
The Consumer Mortgage Coalition is drafting a "suite" of disclosures, according to Anne Canfield, executive director the industry trade group.
"The idea is to come up with a series of disclosures from beginning to end that provides the information consumers need as well as all the people in the mortgage process, including the closing agent," she told National Mortgage News.
First, there will be separate disclosures for each mortgage product. These disclosures will be modeled after the current TILA disclosures with RESPA requirements layered on. "It's very simple to come up with a single disclosure for a fixed-rate product," said Canfield. "It is more difficult for ARMs, interest-only or negative amortization loans."
Second, there will be a form for shopping and a GFE when the borrower actually applies for a mortgage.
"Instead of getting continual redisclosures under the current RESPA rules, we update the GFE after the loan is underwritten and the property is appraised," Canfield said.
The CMC executive director is trying to get the input of other industry groups and their support for the suite of disclosures. Her goal is to get some of consumer groups on board and deliver a draft to the CFPB for its consideration.
