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

Representatives of the Mortgage BankersrnAssociation (MBA), and the American Bankers Association (ABA) told the HousernFinancial Services Subcommittee on Insurance, Housing and Community Opportunityrnit would be a mistake to rush new mortgage disclosures into use while thernpresident of the American Land Title Association (ALTA) appeared to suggestrnthat a single form might not be such a good idea after all.  Bill Cosgrove, representing MBA, Brenda K. Hughes speaking for ABA, and ChristopherrnAbbinante, president of ALA testified at a hearing titled “”MortgagernDisclosures:  How Do We Cut Red Tape for Consumers and Small Businesses?”</p

Cosgroverntold committee members that the RESPA/TILA disclosures directly impact bothrnlenders and their customers and, if done right can help borrowers make betterrndecisions about what they can and cannot afford and make it easier to comparernestimated costs with actual costs at closing. rnThe two disclosures, split as they were between HUD and the FederalrnReserve, never worked and diverged over the years.  “The CFPB’s (Consumer Finance ProtectionrnBureau’s) “Know Before You Owe” initiative has the potential to finally sync uprnthe information borrowers receive.”</p

He urgedrnlawmakers take their time in finalizing the forms.  Their development has benefited from multiplernrounds of feedback from the public, he said, but they should not be finalizedrnuntil the other Dodd-Frank rules impacting the forms are also complete.  The CFPB alone is currently working on the “Abilityrnto Repay” rule and the definition of Qualified Mortgage as well as rulesrndealing with high cost loans, mortgage originator compensation, and servicingrnrule all of which will have a significant effect on disclosure requirements.  </p

The rulesrnaccompanying the forms should also be developed with an eye toward protectingrnconsumers without unwittingly harming the market and the borrowers they arernintended to serve.  And when both formsrnand rules are complete they should be rolled out in an orderly manner that isrnrespectful of the considerable commitment required from small businesses tornensure compliance. </p

“Pastrnefforts to improve the disclosures have been uncoordinated and ultimatelyrnfailed to achieve their objectives.   Yet small businesses continuernto spend untold sums to implement the most recent RESPA rule, which is about tornbe eclipsed by the CFPB’s latest efforts.  In the end, those costs arernborne by our borrowers – your constituents – who then pay more for theirrnmortgages,” Cosgrove said.</p

Speakingrnfor the Bankers Association, Hughes said, “We believe the RESPA and TILArnforms are convoluted and complex – and must be fixed.  It is common knowledge that consumers eitherrnignore these disclosures or don’t fully grasp the information contained inrnthem.  Simple, clearer forms have long been a priority for allrnstakeholders.”</p

Like Cosgrove, Hughes also expressedrnconcern about the coordination and timing of new forms.  The CFPB is effectively rewriting rules thatrncontrol the timing of the origination process, disclosures to consumers, andrnthe resulting legal liabilities.  In suchrna massive undertaking the goal must be to achieve something workable andrnlasting.  “Rigid time frames should notrntrump quality,” she said.</p

The ABA also feels that the newrnRESPA/TILA forms should be implemented in coordination with Dodd-Frank.  “It would be cumbersome, expensive,rninefficient and confusing to finalize a merger rule without considering thesernother rules that must be implemented,” Hughes said.  “It would result inrnerratic and never-ending amendments to our compliance systems.  Such arnresult is unwarranted and avoidable.”</p

Abbinante took a different tack,rnsuggesting that responsibility for completing the disclosures be split along operationalrnlines.  He told committee members that,rnwhile ALTA supports simplified mortgage disclosures, there are a number ofrnstatutory conflicts between RESPA and TILA. rn”It is not clear if these conflicts can be resolved by the Bureau orrnwill require an act of Congress.”</p

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

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