The American Land Title Association applauds the Consumer Financial Protection Bureau for creating its final round of prototype mortgage disclosure forms, but the association said it remains wary of a proposal that could remove settlement agents from a key part of the loan closing process.
The CFPB released a 1,099-page rule Monday that contains new prototype forms, closing steps and alternatives for lenders and settlement agents.
Michelle Korsmo, chief executive officer of ALTA, says her association will provide feedback to the CFPB on a portion of the rule governing the prototype closing disclosure form.
"While the proposed rule is a step in the right direction to improve the disclosures, more needs to be done to refine the proposal and to bring better transparency to the process," she said.
The rule says the closing disclosure form will replace the HUD-1 form that's now used when conducting real estate closings. It also will replace the revised disclosure under the Truth in Lending Act.
At present, settlement agents, who serve as third parties to the transaction, must provide the HUD-1 form and lenders provide the Truth in Lending Act form to consumers. The bureau proposes two alternatives for the proposed closing disclosure form.
The first option requires lenders to provide the closing disclosure form to consumers. The second option lets the lender rely on the settlement agent to provide the form, while the lender retains sole liability for the form's accuracy.
"Our members are concerned about making sure the information (on the disclosure form) is accurate and that everything is filed that needs to be filed," said Korsmo. "The settlement agent is a key component to the transaction, and we are concerned about having the option on who fills out the form."
Korsmo says her association believes while the lender should be responsible for the numbers and forms they provide, settlement agents should remain liable for closing disclosures, allowing them to continue to serve as an independent, third party to the process.
"ALTA believes lenders should continue to have responsibility and liability for preparing the part of the disclosure related to the loan costs, while settlement agents should continue to have responsibility and liability for preparing the part of the disclosure related to the settlement costs," she said. "Consumers deserve an independent, third party at the settlement table, and this rule should ensure this role remains in the real estate transaction."
Justin Ailes, vice president of government & regulatory affairs with ALTA, warns that putting all of the liability on the lender could end up hurting mortgage consumers in the long run.
"Consumers should be charged a good faith estimate, but to hold lenders liable for charges outside of their control could result in consumers actually receiving inflated estimates because lenders are trying to reduce their exposure to charges outside their control," Ailes said.