Last week, as reported here the new Consumer Financial Protection Bureau (CFPB) released a second version of prototype documents designed to integrate disclosure forms mandated by the Real Estate Settlement and Procedures Act (RESPA) and the Truth in Lending Act (TILA). Consolidation of the two forms has long been sought by the lending community and is mandated by the Dodd-Frank Wall Street Reform Act. Comments on the revised prototypes were due by July 5.
On that date the Mortgage Bankers Association (MBA) sent a letter to Elizabeth Warren, Assistant to the President and Special Advisor to the Treasury Secretary responsible for establishing CFPB asserting that the week allotted for comments on the prototypes, which included the July 4 holiday, was not sufficient to allow the industry to conduct a suitable review. This is especially true, the MBA said, "considering that comments are sought on the presentation of closing costs. This is a matter that the Department of Housing and Urban Development (HUD) considered for several years through two successive rulemakings that engendered tens of thousands of comments. "
The letter to Warren, signed by Stephen A. O'Connor, MBA's Senior Vice President for Public Policy and Industry Relations suggested that, rather than the expedited comment period the Bureau meet with MBA and other industry representatives to focus on closing costs and concerns as to which rules are applicable so that the Bureau could provide lenders a better understanding of the direction of the project and hear the practical concerns of stakeholders posed by the prototypes.
MBA said that it considered the forms improved but found that the presentation of closing costs to be inconsistent with current RESPA rules and the suggested disaggregation of fees to be unclear. For example, the listing of closing costs on one prototype combines fees that are subject to zero and ten percent tolerances and groups fees that are subject to tolerance with fees which are not, such as transfer taxes. The grouping of fees on the other prototype under "Costs" combines origination fees and fees that are connected to the interest rate thus, mixing some fees that are subject to change during the life of the loan with fees that are not.
The two prototypes make identical presentations of loan terms, projected payments, and comparisons but differ substantially in the manner in which they present loan estimate details.
MBA said that the forms may be operationally difficult for lenders to use; expressing what are largely formatting concerns relating to double-sided disclosures, shaded printing, fonts, and printing within shapes. Some of the formatting requires complex programming and in some cased could make it impossible to properly disclose some specialized products.
The letter also made some detailed criticisms of the manner in which information is presented. For example, under loan terms, there are projected payments for intervals downstream for adjustable rate mortgages which give minimum and maximum payments within the loan caps and margins. These do not agree with the projected payments elsewhere in the form which also include estimated tax and insurance figures - a deviation that MBA said might not be readily apparent to the borrower.
The letter concludes that, if the Bureau intends to modify the RESPA and TILA requirements, "we believe that point should be made clear so commenters can provide their views on the direction the new forms might take. Given the lack of clarity on this point, it is unnecessarily difficult for commenters to provide comprehensive and informed responses."
