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CFPB Delays Rule Implentation Until October, 2015

The Consumer Financial Protection Bureau [“CFPB”] has proposed to delay implementation of its so-called “Know Before You Owe” regulations from August 1 to October 3, 2015. The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 [“Dodd-Frank”], which also transferred HUD’s RESPA jurisdiction to the CFPB. Section 1032(f) of Dodd-Frank required the CFPB to propose for public comment rules and model disclosures that integrated the Truth¬in-Lending Act [“TILA”] and Real Estate Settlement Procedures Act [“RESPA”] requirements. CFPB accordingly published drafts of the mortgage and settlement disclosures in May and November 2011 (respectively). This was followed in July 2012 by a series of proposed regulations, over 1,000 pages in length, collect- ively known as the proposed “Final Rule” (or as the TILA-RESPA Proposal). The ultimate version of the Final Rule was published in the Federal Register late in 2013 and is 1,888 pages in length. Formally known as the Integrated Mortgage Disclosures under RESPA (Regulation X) and TILA (Regulation Z), it was originally set to take effect on August 1, 2015. But the CFPB has published a notice in the Federal Register that the effective date will be delayed until October 3, 2015. The Final Rule replaces the current Good-Faith Estimate [“GFE”] and HUD-1 Settlement Statement [“HUD-1”] with new documents known (respectively) as the Loan Estimate and the Closing Disclosure. (The current RESPA rule went into effect on January 1, 2010 and is the basis for the HUD-1 and GFE forms now in use.) The CFPB has adopted the catchphrase Know Before You Owe to describe its consumer-friendly regulations. (The acronym TRID, for TILA-RESPA Integrated Disclosure, is sometimes used to describe CFPB-mandated rules and forms.) In the words of the CFPB:

“The forms use clear language and design to make it easier for consumers to locate key informa¬tion, such as interest rate, monthly payments, and costs to close the loan. The forms also provide more information to help consumers decide whether they can afford the loan and to compare the cost of differ- ent loan offers, including the cost of the loan over time.”

The scope of CFPB’s Final Rule is extensive, and is not limited to the proper use of the new Loan Estimate and Closing Disclosure forms. Rather, the CFPB seeks to protect consumers through a broad range of regulations which cover all aspects of the mortgage lending process. The CFPB has advised lenders that they cannot avoid responsibility for errors by seeking to shift the blame to third-party contractors or vendors. [See CFPB Bulletin No. 2012-03 (April 13, 2012) and OCC Bulletin No. 2013-29 (Oct. 30, 2013).] Thus, title companies providing settlement services may be subjected to additional requirements imposed by lenders in anticipation of increased scrutiny by the CFPB. In response, the American Land Title Association [“ALTA”] has created the Best Practices Initiative [“Best Practices”], which consists of the following seven pillars:

1. Establish and maintain current licenses

2. Written procedures and controls for escrow trust accounts

3. Written policies to protect non-public personal information

4. Written polices ensuring compliance with Federal and State consumer financial laws

5. Written procedures related to policy production, delivery, reporting and premium remittance

6. Maintain appropriate professional liability insurance

7. Procedures for resolving consumer complaints

It is unclear whether (or to what extent) lenders will require settlement-service providers to furnish evidence of compliance (whether through self- or third-party certification). At this point, the title industry does not know if Best Practices compliance certification will generally be accepted as conclusive proof of a provider’s fitness to conduct settlements. Nevertheless, ALTA and many title insurers, including FNTG, believe that Best Practices compliance is the best path for title insurance agents to take.

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