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CUNA suggests CFPB mortgage form changes
WASHINGTON (6/21/12)--The Consumer Financial Protection Bureau (CFPB) continues to work toward a final version of its combined Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) mortgage disclosure form, and the progress of that project, as well as industry impressions on the developing form, were addressed in a Wednesday U.S. House hearing.

The hearing, which was held by the House Financial Services insurance, housing and community opportunity subcommittee, featured testimony from CFPB Deputy Director Raj Date and a second panel of financial services and real estate industry representatives.

Proposed TILA/RESPA forms, and accompanying mortgage disclosure regulations, will be released by July 21, Date said. The regulations are scheduled to be finalized by Jan. 21, 2013.

The Credit Union National Association (CUNA) in a statement submitted ahead of the Wednesday hearing encouraged the subcommittee to closely monitor the CFPB's RESPA/TILA rulemaking and other agency efforts.

Warning that an overabundance of disclosures can create issues for borrowers and lenders alike, the CUNA statement also urged the CFPB to "provide consumers with efficient and complete disclosures."

CUNA also suggested the CFPB allow lenders to use model forms for their TILA disclosures. The use of model forms would still ensure lender compliance with TILA, but would grant lenders a degree of flexibility at the same time, CUNA said. Lenders could still be required to use standardized RESPA forms, CUNA added.

Allowing lenders to use a mixture of model forms and standardized forms for their mortgage disclosures would prevent unscrupulous lenders from hitting borrowers with so-called "bait and switch" schemes, and contribute overall to better consumer protection, CUNA said.

CUNA also suggested the CFPB could remove or revise portions of the developing disclosure that would require lenders to provide:

  • The total amount of interest that a consumer will pay over the life of the loan as a percentage of the principal of the loan; and
  • The approximate amount of the wholesale rate of funds in connection with the loan.
CUNA questioned whether either of these disclosures would provide any benefit to consumers.

The comments of some hearing witnesses echoed other CUNA concerns, as they questioned the CFPB's plan to require integrated settlement disclosures to be provided to home buyers and sellers three business days before closing. CUNA said it is difficult for credit union lenders to coordinate with title companies and others 24 hours in advance of a real estate closing, and adding an additional 48 hours to this equation could create problems for credit unions and borrowers.

Witnesses also called on the CFPB to provide a "reasonable" implementation period to allow financial institutions to adjust to the new disclosures once they are issued.
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