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Consumer Financial Protection Bureau

ALTA Submits Letter to CFPB Addressing Mortgage Disclosure Issues

September 22, 2011

ALTA submitted a letter Sept. 22 to the Consumer Financial Protection Bureau expressing concern over disclosure of specific settlement costs.

In the letter addressed to Rajeev Date, special advisor to the Secretary of the Treasury, ALTA said the “Know Before You Owe” project has successfully identified ways to improve the disclosure of loan costs by making them more transparent.

“However, suggestions for how to disclose some settlement costs, in particular title insurance and attorney fees, have not reached a desired level of transparency and lack the necessary flexibility to avoid consumer confusion,” ALTA President Anne Anastasi said in the letter. “We fear that this will unnecessarily lead to consumers paying higher settlement costs.”

ALTA has requested the CFPB staff meet with members of ALTA’s RESPA Task Force to assist in the Bureau’s efforts to improve transparency.

Attempting to disclose the cost and availability of Owner’s Title Insurance has been a lingering debate since the last round of RESPA Reform in 2009. With differences across the country in who pays for owner's title insurance, it is difficult to devise a single scheme to accurately disclose the cost to consumers on a standardized form.

ALTA has suggested a method that allows appropriate disclosure in all jurisdictions, regardless of local practice. If local law or practice determines that the costs of owner’s title insurance are likely paid by the borrower in that jurisdiction, disclosure of an appropriate estimate for such coverage would be shown. Conversely, where local practice provides that the seller bears the expense of such coverage, a cost estimate of “0” would appear. Using this approach would allow the form to more accurately identify whether owners title insurance is purchased in connection with the transaction and disclose the cost of that owner’s policy to the appropriate party. This method also reduces the confusing practice of charges and credits that is currently required.

Another major concern ALTA has with the forms concerns is the “Borrower’s Attorney” entry on the "Services You Can Shop For" section of Page 2. This could mislead consumers into believing that an attorney must be retained to perform the closing. Depending on the state in which the property is located, and in some cases which county or locality, the closing may be performed by an attorney, a non-attorney title agent, or a corporate or individual escrow agent. Rather than tailoring this form for the relatively few states in which an attorney closes the transaction, the form should be flexible enough to reflect market practices in each state.

“Real estate practices vary state by state and county by county. While this fact makes the task of designing a national disclosure form more difficult, a national disclosure form should be flexible enough to prevent a “one size fits all” scheme on consumers,” Anastasi said. “We urge the Bureau to provide sufficient flexibility in the forms to allow them to reflect the consumer’s actual transaction.”

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