Industry Reps say RESPA/TILA Should Wait for Dodd-Frank Implementation


Representatives of the Mortgage Bankers
Association (MBA), and the American Bankers Association (ABA) told the House
Financial Services Subcommittee on Insurance, Housing and Community Opportunity
it would be a mistake to rush new mortgage disclosures into use while the
president of the American Land Title Association (ALTA) appeared to suggest
that a single form might not be such a good idea after all.  Bill Cosgrove, representing MBA, Brenda K. Hughes speaking for ABA, and Christopher
Abbinante, president of ALA testified at a hearing titled “”Mortgage
Disclosures:  How Do We Cut Red Tape for Consumers and Small Businesses?”

told committee members that the RESPA/TILA disclosures directly impact both
lenders and their customers and, if done right can help borrowers make better
decisions about what they can and cannot afford and make it easier to compare
estimated costs with actual costs at closing. 
The two disclosures, split as they were between HUD and the Federal
Reserve, never worked and diverged over the years.  “The CFPB’s (Consumer Finance Protection
Bureau’s) “Know Before You Owe” initiative has the potential to finally sync up
the information borrowers receive.”

He urged
lawmakers take their time in finalizing the forms.  Their development has benefited from multiple
rounds of feedback from the public, he said, but they should not be finalized
until the other Dodd-Frank rules impacting the forms are also complete.  The CFPB alone is currently working on the “Ability
to Repay” rule and the definition of Qualified Mortgage as well as rules
dealing with high cost loans, mortgage originator compensation, and servicing
rule all of which will have a significant effect on disclosure requirements.  

The rules
accompanying the forms should also be developed with an eye toward protecting
consumers without unwittingly harming the market and the borrowers they are
intended to serve.  And when both forms
and rules are complete they should be rolled out in an orderly manner that is
respectful of the considerable commitment required from small businesses to
ensure compliance.

efforts to improve the disclosures have been uncoordinated and ultimately
failed to achieve their objectives.   Yet small businesses continue
to spend untold sums to implement the most recent RESPA rule, which is about to
be eclipsed by the CFPB’s latest efforts.  In the end, those costs are
borne by our borrowers – your constituents – who then pay more for their
mortgages,” Cosgrove said.

for the Bankers Association, Hughes said, “We believe the RESPA and TILA
forms are convoluted and complex – and must be fixed.  It is common knowledge that consumers either
ignore these disclosures or don’t fully grasp the information contained in
them.  Simple, clearer forms have long been a priority for all

Like Cosgrove, Hughes also expressed
concern about the coordination and timing of new forms.  The CFPB is effectively rewriting rules that
control the timing of the origination process, disclosures to consumers, and
the resulting legal liabilities.  In such
a massive undertaking the goal must be to achieve something workable and
lasting.  “Rigid time frames should not
trump quality,” she said.

The ABA also feels that the new
RESPA/TILA forms should be implemented in coordination with Dodd-Frank.  “It would be cumbersome, expensive,
inefficient and confusing to finalize a merger rule without considering these
other rules that must be implemented,” Hughes said.  “It would result in
erratic and never-ending amendments to our compliance systems.  Such a
result is unwarranted and avoidable.”

Abbinante took a different tack,
suggesting that responsibility for completing the disclosures be split along operational
lines.  He told committee members that,
while ALTA supports simplified mortgage disclosures, there are a number of
statutory conflicts between RESPA and TILA. 
“It is not clear if these conflicts can be resolved by the Bureau or
will require an act of Congress.”

 “Lenders should continue to have
responsibility and liability for preparing the part of the disclosure related
to the loan costs, while settlement agents should continue to have
responsibility and liability for preparing the part of the disclosure related
to the settlement costs,” Abbinante said.

Leave a Reply