Tag Archives: CFPB

ALTA Concerned With New CFPB Disclosure

21 Jan

by MPA | Jan 19, 2015

As everyone in the mortgage industry knows by now, the implementation of the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure rule is only a few months away. And while, the bureau states the new rule will simplify and enhance disclosure forms for mortgage transactions, not everyone agrees.

The American Land Title Association (ALTA) said it is concerned with the CFPB’s new Closing Disclosure, which goes into effect Aug. 1, 2015, and replaces the current HUD-1 Settlement Statement.

During a recent speech at the Brookings Institution, CFPB Director Richard Cordray said the new integrated mortgage disclosures will help consumers become better and more informed shoppers. (Click here to read Cordray’s prepared remarks.)

However, ALTA said it believes the Closing Disclosure misleads consumers about the actual price consumers will pay for title insurance. ALTA said it is urging the CFPB to take swift action to ensure consumers receive accurate information about their mortgage costs, including title insurance premiums and settlement services.

“Unfortunately, the current Know Before You Owe forms will create confusion at the closing table for many consumers,” Michelle Korsmo, ALTA’s chief executive officer, said. “In nearly half of the country, title companies are required by state law to charge title insurance premiums and discounts in a manner different than the bureau would have them disclose those fees to the consumer.”

Through regulation or rate filing, title companies in about half the states offer discounts on the loan policy when an owner’s policy is simultaneously purchased. Despite the common practice, the rule prohibits settlement agents or lenders from disclosing the discounted simultaneous issue price for the lender’s title insurance policy on theLoan Estimate and Closing Disclosure forms, according to ALTA.

ALTA said it believes that the rule’s requirement that the Closing Disclosure provide inaccurate charges for title insurance premiums is inconsistent with state law or regulation in 21 states: Alabama, Alaska, Arizona, California, Colorado, Florida, Idaho, Kansas, Michigan, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, Ohio, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.

Additionally, the bureau’s method for disclosure of title fees will also cause confusion in the 31 states where the seller pays or is likely to pay for owner’s title insurance on behalf of the consumer.

This disclosure requirement will also cause consumers to think they need more cash to close, which will result in money being refunded, ALTA stated. Title and settlement agents will have to provide additional disclosure forms to consumers at closing to show the actual title insurance costs and to prove compliance with state law governing industry-filed rates.

“ALTA supports a cleaner real estate transaction but not at the expense of consumers understanding of their actual mortgage costs,” the association said in a statement.
“We agree with Director Cordray that an educated consumer is a more confident and empowered consumer,” Korsmo said. “Our economy can speed up its recovery if we provide more stability, growth and affordability in the mortgage market. We will continue to work with the CFPB and our industry partners toward commonsense solutions that decrease consumer uncertainty and bring demand back into housing market.”

The TILA-RESPA Integrated Disclosure rule includes two new forms for mortgage applications received on or after Aug. 1, 2015. The Loan Estimate must be provided to the consumer three business days after the application, and the Closing Disclosure must be provided to the consumer three days before closing.

Bloomberg Reports Change To CFPB Proposed Title Disclosure Requirements

21 Nov

Bloomberg.com yesterday reported that a U.S. rule that would have wrapped title insurance into the total costs listed on a simplified mortgage-disclosure form was dropped by the Consumer Financial Protection Bureau after industry complaints.


The rule first proposed by the consumer bureau in July 2012 would have incorporated these costs into the calculation of the annual percentage rate on a simplified new mortgage disclosure form. The agency backed down after feedback suggested that the all-in APR, is the rule is known, “might have affected the types of loans available to consumers,” it said in an e-mailed statement today.


The APR feeds into calculations under other regulations that determine whether a mortgage is a higher-priced loan. If a higher APR pushes a loan into that category, lenders could be more vulnerable to lawsuits under a separate CFPB rule that takes effect in January.

“We applaud the CFPB for listening to our members and eliminating the ‘all in’ APR as it would not help consumers shop for a mortgage and could limit their settlement choices,” Michelle Korsmo, chief executive officer of the American Land Title Association, a Washington-based trade group, said in a statement.

Willard Ogburn, executive director of the Boston-based National Consumer Law Center, criticized the CFPB’s decision to step back from its initial proposal.

“There is no evidence that better disclosure restricts access to credit,” Ogburn said at a CFPB field hearing in Boston where the new form requirements were introduced today. “Instead, it creates a more transparent and well-functioning market, which enables consumers to avoid abusive lenders.”

CFPB Director Speaks at American Bankers Association

22 Oct

At the American Bankers Association’s annual conference in New Orleans this week, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said loan originators face huge advantages under the agency’s mortgage rules that will take effect January.


The CFPB issued its Ability-to-Repay rule—also known as the Qualified Mortgage or QM rule—earlier this year in order to prevent bad lending practices.  The purpose of the rule is to make sure consumers are getting mortgages they can afford to pay back.


In addition to the QM rule, CFPB also issued mortgage servicing rules designed to correct many “sloppy and unsatisfactory practices” and to ensure fairer and more effective processes for borrowers at risk of losing their homes.


Both rules were “desperately needed” by the financial industry, Cordray said, as they have paved the way for the agency to issue guidance on how to comply with them, while also helping to resolve ambiguities and unclear interpretations when the rules were proposed in January 2013.


“For example, under the statute you would not have been permitted to charge any points or fees on any loan on which you paid compensation to any loan originator, regardless of whether that was your own employee or a mortgage broker,” Cordray said.


CFPB specified the effective date of its mortgage rules for January 2014.


“The central concept behind this project is our belief that compliance with regulations is a concern we all share, because successful compliance is good for everyone—consumers, industry, and regulators,” Cordray said. “We believe that working together makes the process go more smoothly, attains greater understanding, and helps achieve better results.”


“We believe that such a marketplace is the right outcome for all involved, and will lead to more stable and sustainable financial conditions that strengthen the future of this country,” Cordray said.
adapted from Reverse Mortgage Daily

Dodd-Frank Reforms To Go Into Effect 2014

11 Jun

In a press release last week, the Consumer Financial Protection Bureau (CFPB) published the first update to its exam procedures for the new mortgage regulations it issued in January 2013.

The release of exam procedures will help financial institutions and mortgage companies understand how they will be examined for CFPB rules that:

  • Set qualification and screening standards for loan originators: A loan originator must be ethical and knowledgeable. They will need to: meet character, fitness, and financial responsibility requirements; pass criminal background checks; and complete appropriate training.
  • Prohibit steering incentives: Compensation for a loan originator generally cannot vary with the loan terms. A broker or loan officer cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees.
  • Prohibit “dual compensation:” A loan originator cannot get paid by both the consumer and another person such as the creditor.
  • Protect borrowers of higher-priced mortgage loans: The required duration of an escrow account on higher-priced mortgage loans extends from a minimum of one year to a minimum of five years.
  • Prohibit the waiver of consumer rights: It is prohibited to bar consumers in their mortgage or home equity loan or related agreements from bringing a claim in court in connection with any alleged violation of federal law.
  • Prohibit mandatory arbitration: Mandatory arbitration of disputes related to mortgage loans is generally prohibited for mortgage and home equity loans.
  • Require lenders provide appraisal reports and valuations: Mortgage lenders will need to provide applicants with free copies of all appraisals and other written valuations developed in connection with certain mortgage loan applications.
  • Prohibit single premium credit insurance: Creditors will be prohibited from financing certain credit insurance premiums in connection with certain mortgage loans.

Read the full press release here:



CFPB New Rules

14 Feb


The Consumer Financial Protection Bureau list of new mortgage rules can be read in full at the link above.  Some of these will be implemented by January 2014.

Final rules issued by the CFPB for 2013

January 22 Remittance Rule (Regulation E) Temporary Delay

January 20 Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

January 18 Appraisals for Higher-Priced Mortgage Loans (issued jointly with other agencies) Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity Act (Regulation B)

January 17 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules

January 10 Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z) Escrow Requirements under the Truth in Lending Act (Regulation Z) High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (Regulation X)

CFPB Issues Final LO Compensation Rule

22 Jan

” The final rule implements the Dodd-Frank Act and clarifies the scope of the rule as follows:

• The final rule defines “a term of a transaction” as “any right or obligation of the parties to a credit transaction.” This means, for example, that a mortgage broker employee cannot receive compensation based on the interest rate of a loan or on the fact that the loan officer steered a consumer to purchase required title insurance from an affiliate of the broker, since the consumer is obligated to pay interest and the required title insurance in connection with the loan.

• To prevent evasion, the final rule prohibits compensation based on a “proxy” for a term of a transaction. The rule also further clarifies the definition of a proxy to focus on whether: (1) the factor consistently varies with a transaction term over a significant number of transactions; and (2) the loan originator has the ability, directly or indirectly, to add, drop, or change the factor in originating the transaction.

• To prevent evasion, the final rule generally prohibits loan originator compensation from being reduced to offset the cost of a change in transaction terms (often called a “pricing concession”). However, the final rule allows loan originators to reduce their compensation to defray certain unexpected increases in estimated settlement costs.

• To prevent incentives to “up-charge” consumers on their loans, the final rule generally prohibits loan originator compensation based upon the profitability of a transaction or a pool of transactions. However, the final rule clarifies the application of this prohibition to various kinds of retirement and profit-sharing plans. For example, mortgage-related business profits can be used to make contributions to certain tax-advantaged retirement plans, such as a 401(k) plan, and to make bonuses and contributions to other plans that do not exceed ten percent of the individual loan originator’s total compensation.”


“Regulation Z already provides that where a loan originator receives compensation directly from a consumer in connection with a mortgage loan, no loan originator may receive compensation from another person in connection with the same transaction. The Dodd-Frank Act codifies this prohibition, which was designed to address consumer confusion over mortgage broker loyalties where the brokers were receiving payments both from the consumer and the creditor. The final rule implements this restriction but provides an exception to allow mortgage brokers to pay their employees or contractors commissions, although the commissions cannot be based on the terms of the loans that they originate.”

The rules will take effect in January 2014, except for the prohibition on mandatory arbitration and on the financing of credit insurance which will take effect in June 2013

A summary of the rule can be read here:


What Might Proposed New LO Comp Do To Reverse Mortgage Compensation?

31 Aug

Earlier this month, the Consumer Financial Protection Bureau proposed new guidelines for Loan Officer compensation.  Their purpose, as stated, is to simplify fees and discount points as presented to borrowers.  The problem is, the Federal Housing Administration’s Home Equity Conversion Mortgage program does not allow for discount points, and eliminating origination fees could cause an increase in the loan’s interest rate, resulting in fewer funds available for the borrower.

With respect to reverse mortgages, the CFPB clarified interpretation of “amount of credit extended” as it related to compensation. The CFPB specifies the “initial principal limit” rather than the “max claim amount” is the interpretation to be used.

Because government-insured reverse mortgages fall under many of their own rules under the Department of Housing and Urban Development and Federal Housing Administration, the industry has asked for reverse mortgage exceptions with many of the rules that are currently being made.

The current rule making is open for comments through October 16, with a final rule expected in January 2013.