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Consumer Financial Protection Bureau

CFPB Releases Second Round of Draft Settlement Disclosure Form

December 15, 2011

The Consumer Financial Protection Bureau released its second round of alternative prototypes of a settlement disclosure form to be used during closing to replace the current HUD-1 and Truth in Lending disclosure.

The Bureau is seeking comments through Dec. 21. It is important ALTA members inform the Bureau how these draft forms of a new HUD-1 will affect closings and your business. Go to the CFPB’s Know Before You Owe webpage to leave comments. Make sure to switch to the “Industry Tool.”

Last month, the CFPB tested two prototypes for a disclosure of final loan terms and closing costs. They were both similar. This time around, the CFPB created a different format for this information. In the latest prototypes, the CFPB are testing a design that displays final closing costs in a format similar to the prototype it has tested for the application disclosures. In this round, the CFPB released two, five-page drafts called Mimosa and Sassafras.

“We’re wondering if this design will make the disclosure even clearer and easier for consumers,” the CFPB said. “Our goal this time around is to find out which is better for disclosing closing costs: a design that mirrors the disclosure people receive when they apply for a mortgage, or one that is similar to the current HUD-1 settlement statement.” The Dodd-Frank Act requires the CFPB to integrate the two disclosures homebuyers currently receive when closing on a mortgage loan: the HUD-1 Settlement Statement and final Truth-In-Lending disclosure. The Bureau’s goal is to make this one combined form easier for both consumers and industry to understand and use. When reviewing the forms, the CFPB wants you to ask:

• Is the information presented in a consumer-friendly format?
• Could consumers easily identify key loan terms and closing costs?
• Does the disclosure cover all the important information you need?
• Is the document easy for lenders and settlement agents to use?

The CFPB also wants to know which design works best and what improvements you would make to the form. The CFPB is asking to hear from settlement agents, lenders and consumers. It will test this round of forms in Birmingham, Ala. If you are selected to test the forms, please reach out to ALTA’s Nick Hacker. ALTA's RESPA Task Force met Dec. 6 with CFPB staff to discuss concerns with the Bureau's first round of draft settlement disclosure forms and the RESPA reform process.

To improve the draft settlement disclosure form, the Task Force suggests the Bureau:

• Separate the form into two parts;
• Make the form a final disclosure;
• Itemize for transparency;
• Reform the use of tolerances;
• Discontinue the use of provider lists;
• Connect the initial disclosure to the final disclosure;
• Improve the Paid Outside of Closing column; and
• Work with software providers.

The Task Force sent a letter to the Bureau explaining these issues in detail and also created chart a describing all of its concerns with the form, as well as suggested solutions to make the form easier to use for consumers and the industry.

As with all of the Task Force's meetings with HUD and the Bureau over the past three years, the goal is to continue to be a resource to policymakers on RESPA issues. If you have questions for the CFPB please reach out to Steve Gottheim, ALTA’s legislative and regulatory counsel.