Ever wonder why it takes the government
so many words to say...maybe not so much?
So did a visitor to the Consumer
Financial Protection Bureau's (CFBP) blog. The blog features someone (something?) called
The Explainer who answers consumer questions
and this time the question was about the process of devising new and supposedly
simpler mortgage disclosures. The
visitor, using the name "Interested" referenced a recent notice of proposed
rulemaking published by CFBP regarding the disclosures. The notice was 1,099 pages long. "Why," Interested asked, "does it take so
many pages to create something that's supposed to be easy to use and
Yeah, why? In case you have wondered this yourself, here
is the explanation. For the record, it runs
exactly 900 words. Maybe we should put The Explainer in charge of all
This is a great question, one you're
not alone in asking - 1,099 is a lot of pages, as those of us who were involved
in writing them can attest.
Let's start with some background.
Currently, two federal laws - the Truth in Lending Act (TILA) and the Real
Estate Settlement Procedures Act (RESPA) - mandate that consumers receive
disclosures of certain information about mortgage loans. The Dodd-Frank Act
required the CFPB to propose a rule to combine the TILA and RESPA disclosures.
If you want to see the new combined
disclosures, combine and simplify existing mortgage disclosures check them out here.
If you want to see what the proposal means for you, we've provided summaries,
one on what it would mean
for consumers and one with more
You said "propose a rule to combine
the disclosures" instead of just "propose combined disclosures." Why?
It's an important distinction. The rule explains how we would expect industry
to use the disclosures: when to issue them, how they apply to different loans,
what various terms mean, etc.
And that proposed rule is 1,099
Actually, no. We are not proposing 1,099 pages of new regulations. That page
count is for the notice of the proposed rule, not the rule. Like notices
of proposed rulemaking issued by other agencies (particularly the Federal
Reserve Board), our proposal consists of three basic parts: (1) the preamble
explaining the proposal; (2) the text of the proposed regulations; and (3) guidance
on how to comply with those regulations.
In terms of pages, the new
regulations are only a small part. Most of the pages explain what we are doing
and why we are doing it. As required by law, we analyze the costs and benefits
of the proposal for consumers and industry. We also provide thorough guidance
on how to comply including samples of completed forms, which the industry
requested during our outreach and Small Business Review Panel process. Because
of the variability of mortgage loan and real estate transactions, industry
wanted specific guidance for many different potential scenarios. This added to
the page count.
Here's how the notice breaks down:
- Directions on how to submit
- Summary of the proposed rule
- Overview of the mortgage
market and the mortgage shopping process
- Summary of 43 years of TILA
and RESPA mortgage disclosure regulation
- Summary of the Dodd-Frank Act
provisions requiring the Bureau to combine the TILA and RESPA mortgage
disclosures and related Dodd-Frank Act mortgage rulemakings
- Summary of the Bureau's
outreach, disclosure testing, and Small Business Review Panel
- Statement of the Bureau's
- Detailed explanations of the
reasons for each aspect of the proposed rule and requests for comment
- Analyses of the costs and
benefits of the proposed rule for consumers and industry, as required by
the Dodd-Frank Act, the Regulatory Flexibility Act (as amended by the
Small Business Regulatory Enforcement Fairness Act), and the Paperwork
amendments to regulations
- New rules
- Technical and conforming
amendments to existing rules
guidance regarding compliance with the amended regulations
The preamble is long.
It is. The preamble provides context for the proposed forms and regulatory
changes. The mortgage market is big, and mortgage disclosure regulation has 43
years of history. Also, before writing the rule, we spent a lot of time talking
to industry and consumers and analyzing costs and benefits. That's a lot of
context, and that means a long preamble.
Why bother with all this context?
First, some of it is required by law. Second, we believe that part of our
commitment to open government is providing more rather than less information
about our work. Finally, we want your
comments to help us understand the market better, and providing context can
lead to more informative comments. Explaining what we considered in writing the
proposal makes it easier to craft specific responses or to draw our attention
to something you think we've missed. Comments that provide new insight or
information can be the ones that have the greatest impact on what we do next.
That leaves 415 pages. Only part of
that is new rules, though. What else is left?
The technical and conforming amendments make sure the new rules don't conflict
with existing rules, that they make the right cross-references, etc. This
actually accounts for more than half of the proposed regulatory language.
The proposed guidance explains what
certain regulatory language means in context. For example, the phrase "within
three business days" appears a lot in this notice, as in: a creditor must
deliver the loan estimate disclosure "within three business days" of
application. But what counts as a business day? If a bank is closed the Friday
before an Independence Day that falls on Saturday, does that Friday count as a
business day? (Answer for purposes of delivery of this disclosure: yes.)
Providing guidance that clarifies issues like these can save time, energy, and
costs for both industry and regulators.
And the signature gets its own page?
Yes. We don't expect a lot of comments on that page.
So where can I comment on this
notice of proposed rulemaking?
First, we hope you'll take a look at the Know Before You Owe
project that helped us develop the proposed disclosures. Then, review
the rule and submit your comments at Regulations.gov.