CFPB Testimony: Mortgage Disclosure Drafting a “Learning Process”

Since last Fall, the fledgling Consumer Financial Protection Bureau (CFPB) has been drafting a model disclosure for mortgage loan transactions that integrates disclosure requirements from both the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). On Wednesday, Kelly Thompson Cochran, a Deputy Assistant Director in the Office of Regulations for the CFPB submitted a written testimony to the House Subcommittee on Insurance, Housing and Community Opportunity, stating that the model disclosure drafts have received positive feedback from both consumers and those in the industry.

“The CFPB is working to give consumers the transparency they need to choose the mortgages that work best for themselves and their families, while at the same time eliminating unnecessary regulatory burdens for lenders,” Cochran stated in the testimony. “The disclosure integration project has been a high priority since the beginning of our efforts to stand up the Bureau.”

Cochran explained the CFPB’s thinking behind drafting revised model disclosures, citing widespread consumer struggles in understanding and being able to properly utilize the old models, and mortgage originators’ descriptions that the old forms were costly to complete and confusing to customers.

There was also an update on the “Know Before You Owe” initiative, which features an interactive tool on the CFPB’s website to gather public feedback about the designs; Cochran says each round of formal testing of the draft disclosures coincides with a round of public feedback for this initiative. The CFPB has been “extremely pleased” with the amount of feedback it’s gotten on this project, says Cochran, as more than 13,000 consumers and industry workers have given feedback.

“To our knowledge, we are the first federal financial services agency to seek such broad-based public input this early in the design process—in advance of proposing a rule—for a consumer disclosure,” Cochran stated in the testimony, going on to call it a “learning process” for both the CFPB and participants. “We believe this process can be particularly useful in identifying potential implementation issues that may arise for different kinds of financial services providers, and in helping us to address those issues before final design decisions are made.”

This testimony comes after the first round of model disclosure drafts was released in May, followed by a second round in June. Coming up, says Cochran, the CFPB looks to accelerate work on the regulations underlying the disclosure forms and on developing the integrated closing-stage disclosure; do a review of the proposed mortgage-related rules under TILA that were issued but not finalized by the Board of Governors of the Federal Reserve System that are related to the mortgage disclosure project; convene a panel to consult with small businesses regarding potential impacts prior to proposing a rule, and to consult with the prudential regulators and other relevant agencies.

The National Reverse Mortgage lenders association met with CFPB staff in June, at which point the association urged the CFPB to consider a separate disclosure for reverse mortgage loans. While the CFPB says feedback to the disclosure drafts has been positive, the Mortgage Bankers Association urged the agency in a letter this month that a stronger approach was needed.

Written by Alyssa Gerace

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