ALTA: This is where the CFPB got title insurance wrong with TRID

Requires providing wrong information to consumers

In a hearing before the House Financial Services Committee’s Housing and Insurance Subcommittee in May, Diane Evans, president of American Land Title Association, addressed the glaring issue in the new TILA-RESPA Integrated Disclosure Rule in regards to title insurance.

“For the majority of real estate transactions, the rule requires a complicated formula that will disclose to consumers an inaccurate price for title insurance. Under this new rule, the CFPB actually mandates that the correct and actual price of title insurance products be withheld from consumers,” Evans said in her testimony before the subcommittee.

More on the hearing can be found in “The awful truth about TRID,” from the July issue of HousingWire Magazine.

Evans dove further into the issue in an interview with HousingWire. She explained that since the rule was originally released, ALTA has raised a concern about the requirement under the rule that mandates title insurance agents and settlement providers in about 42 states to inaccurately disclose their fees to the consumer.

So far, ALTA has brought this to the Consumer Financial Protection Bureau’s attention, not only though the testimony, but through comments given to the CFPB during its comment period.

ALTA has also sent letters and written numerous articles about the problem.

“Earlier this year, the CFPB addressed that, yes, the disclosure is wrong in the majority of states, but they believe there are work-arounds,” Evans said.

According to Evans, the problem is that the rule almost flips the price the seller and purchaser are paying for the title insurance policy.

For example, for a $350,000 home in Colorado, a seller would pay for the owner’s policy at a rate of $1,580, which is the seller’s cost. The purchaser would purchase a lender’s policy for $400. But with the new rules, the closing disclosure forms would show that the owner’s policy would be $595 and the lender policy $1,385.

“While the total is the same, when you are sitting at a closing table and trying to explain the actual cost through the form that the government is mandating everyone use, it is wrong,” she said.

Evans attributed the error in the rules to the way that the CFPB conducted its tests, guessing that when they tested they forms, they only looked at a few states and primarily those along the east coast.

It’s mostly states on the east coast that correctly show the price of title insurance when following TRID.

“I think the most important thing is that the title industry has been working since TRID was first introduced to use the new rules, and we are all excited about what the new forms do and informing the consumer about the data or responsibility they assume when buying a home,” Evans said.

“But it is very frustrating for them to make a mistake as serious as this one when it could so easily be fixed. But I also have confidence in the industry that we will do a good job explaining this,” she concluded. 

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