The consolidation of federal mortgage disclosure forms mandated by the Dodd-Frank Act won’t occur until the qualified mortgage rule is finalized, meaning finalization of the new forms won't arrive until 2013.
Raj Date, deputy director of the Consumer Financial Protection Bureau, spoke Wednesday before a House Financial Services Subcomittee on the topic. He and the members discussed the harmonization and combination of the Truth In Lending Act and Real Estate Settlement Procedures Act disclosures that borrowers receive when taking out a mortgage.
Chairwoman Rep. Judy Biggert, R-Ill., who expressed concerns about rushed borrowers overwhelmed at closing time by mountains of papers and jargon, noted to Date the prudence of finalizing the QM rule — which will come at the end of 2012 — before the CFPB completes its work on mortgage disclosures.
“It’s entirely possible that the timetable you (Biggert) contemplate will be the one that plays out,” Date said.
The Dodd-Frank Act directs the CFPB to propose rules and forms combining the disclosures by July 21 and then provide a period of public comment. The bureau is using information gathered from consumers, lenders, mortgage brokers and settlement agents to develop proposed forms that will make the mortgage process easier for consumers and the industry.
Maurice Veissi, president of the National Association of Realtors, told the subcommittee that not considering implementation of TILA/RESPA disclosures in conjunction with the qualified mortgage rule “will cause massive confusion and impose significant cost on industry and consumers.”
“It will be hard to provide meaningful or informed comment with several key rules such as the QM, qualified residential mortgage, loan officer compensation and fees and points rules still outstanding since all of them factor into the RESPA/TILA process in significant ways,” Veissi added.
Date said the QM-before-RESPA/TILA timeline was raised during review panels the bureau held with small business owners. The three separate review panels covered loan originator compensation, mortgage servicing and mortgage disclosure.
The CFPB will issue its findings from the discussions when the mortgage disclosure rules and forms are proposed by July 21, which Date guaranteed would happen.
The proposed rule must reconcile several inconsistencies that exist between TILA and RESPA to create the combined forms. The two federal acts establish different timing requirements for disclosing final loan terms and costs to consumers and require different parties to provide the TILA and RESPA disclosure forms.
During the small business review panel process, the bureau discussed potential solutions to these inconsistencies, seeking feedback on whether the combined final disclosure could be provided three business days before closing so that consumers have time to review the final terms and costs and resolve any questions or problems.
“We want to streamline, clarify, and simplify that which consumers have before them,” Date said. “It is only through maximizing the simplicity of the docs themselves that you can ensure that that timetable doesn’t work against them.”
The CFPB also sought feedback on whether the lender or the settlement agent was better equipped to provide the combined final disclosure or whether some sort of shared responsibility was appropriate. “We will continue to explore these options in the proposed rule,” Date said.