October 14, 2011
Authored by: Bryan Cave
The Consumer Financial Protection Bureau (CFPB) has moved into its fourth round of testing of a new consumer mortgage loan disclosure. Acting under the mandate of the Dodd-Frank Act, the CFPB is preparing a single, integrated disclosure to address the disclosure requirements of both the Truth in Lending Act and Real Estate Settlement Procedures Act.
The specific focus of this fourth round of testing is comparison shopping. Consumers and the lending industry have been asked to compare two different types of loan products using the same version of the form. The CFPB states that it wants to be sure that the disclosure actually helps consumers to understand the features of competing loan products, from the overall loan amount to estimates of tax and insurance costs.
The CFPB’s efforts in this area have generally met with approval from all interested parties. The proposed form is more clear, concise and informative than either the existing TILA or RESPA disclosures. For example, all of the useless “seller’s column” and “buyer’s column” information on the RESPA good faith estimate has been eliminated in favor of total dollar amounts for the services the consumer can shop for and for the services the consumer cannot shop for. Implementing the new requirements will require systems changes, but we might finally arrive at a disclosure that eliminates useless information, reconciles the differences between TILA and RESPA, and that is easier to explain to borrowers.
Past efforts to reconcile TILA and RESPA disclosures were hampered by the fact that the Federal Reserve had primary regulatory authority for TILA and the Department of Housing and Urban Development had primary authority for RESPA. The Dodd-Frank Act removed this roadblock by transferring these powers to the Bureau.
Regulatory changes will be needed in order for the model form to satisfy both TILA and RESPA requirements. The Dodd-Frank Act directs the Bureau to propose rules and a model form for public comment by July 12, 2012 (one year after the designated transfer date). The Bureau is well on its way toward producing the disclosure form for formal comment.