ALTA Urges CFPB to Correct Listing of Title Insurance on Closing Disclosure
November 18, 2014
Taking advantage of a comment period for two changes the Consumer Financial Protection Bureau (CFPB) proposed to the final rule for RESPA-TILA integrated mortgage disclosures, ALTA submitted a letter urging the bureau to improve how title insurance fees are listed on the Closing Disclosure.
Through regulation or rate filing, title companies in about half the states offer discounts on the loan policy when an owner’s policy is simultaneously purchased. Despite the common practice, the rule prohibits settlement agents or lenders to disclose the discounted simultaneous issue price for the lender’s title insurance policy on the Loan Estimate and Closing Disclosure forms.
“Rather than disclosing actual costs of title insurance premiums, the Rule requires consumers to make a complex calculation to determine their title insurance premium,” Michelle Korsmo, ALTA’s CEO said in the letter. “We believe that these inaccurate disclosures lead to consumer confusion about the cost of title insurance, and may require settlement agents to provide additional information to consumers detailing their actual closing costs.”
While ALTA’s RESPA Task Force has worked to address the concerns with the bureau’s rule and offered solutions, the CFPB still believes that, “the clear disclosure of the required cost for the lender’s title insurance alone, and the additional incremental cost to be paid by the consumer for the optional owner’s title insurance premium outweighs the benefit of a technical disclosure of the owner's and lender's title insurance premiums.”
In addition to causing confusion, this disclosure requirement will also cause consumers to think they need more cash to close, which will result in money needing to be refunded. Title and settlement agents will have to provide additional disclosure forms to consumers at closing to show the actual title insurance costs and to prove compliance with state law governing industry filed rates.
ALTA believes that the rule’s requirement that the Closing Disclosure provide inaccurate charges for title insurance premiums is inconsistent with state law or regulation in these states: Alabama, Alaska, Arizona, California, Colorado, Florida, Idaho, Kansas, Michigan, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, Ohio, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.
“This practice will negate the Bureau’s goal of making closing costs more transparent to the consumer earlier in the closing process,” ALTA’s letter said.
Additionally, the bureau’s method for disclosure of title fees will also cause confusion in the 31 states where the seller pays or is likely to pay for owner’s title insurance on behalf of the consumer.
“Not only does the Rule cause confusion for the consumer about what they are likely to pay in these situations, but it will also cause confusion for the seller about how much they will contribute to the title insurance costs,” the letter said.
ALTA suggests the CFPB modify its policy through amending the Official Interpretations of the Rule to allow for accurate disclosure of title insurance fees on the Closing Disclosure form.
ALTA is working with the National Association of Realtors, the Mortgage Bankers Association and the American Bankers Association to urge the Bureau to show the actual premiums consumers will pay for title insurance on the Closing Disclosure.
For information on how to disclose discounted premium and simultaneous issue rates, check out ALTA’s blog.
If you have questions about the integrated mortgage disclosures, contact Steve Gottheim, ALTA’s legislative and regulatory counsel, at [email protected] or 202-261-2943.
Contact ALTA at 202-296-3671 or [email protected].