The CFPB and the Rules Affecting
the
Way we Do Business!
Presented by
Dawn Enoch Moore
Texas Land Title Association
2014-2015 President
Consumer Financial Protection Bureau (CFPB)
• Independent bureau within the Federal
Reserve System
• Created by Dodd-Frank Wall Street Reform
and Consumer Protection Act
• Regulates consumer financial laws
– Truth-In-Lending laws
– Real Estate Settlement Procedures Act
• Regulates all consumer financial products,
including Mortgages
• Except (among other things):
• Reverse Mortgages
• Home Equity Lines of Credit
• Mobile Home Loans, when Mobile Home
is not attached to the real property
• Investor loans where investor does 5 or
fewer loans a year
Failure to follow the CFPB Regulations
• Daily penalties up to:
– $5,000 for failure to follow laws
– $25,000 for gross negligence
– $1,000,000 for intentional violations
Dodd-Frank Act
• Created the CFPB and
• Gave CFPB jurisdiction over enforcement of
– Truth-in-Lending laws (TILA) and
– Real Estate Settlement Procedure Act
(RESPA)
Note: There have been several significant
enforcement actions under RESPA.
Stated Goals of CFPB:
• Easier-to-use mortgage disclosure forms
• Improve consumer understanding
• Aid in comparison shopping
• Prevent surprises at the closing table
AKA “Know Before You Owe”
Effective August 1, 2015 (for loans originated on
or after Aug 1, 2015)
• Good Faith Estimate (GFE) and initial Truth-inLending (TIL) become one form called LOAN
ESTIMATE
• HUD-1 Settlement Statement and final TIL
become one form called the CLOSING
DISCLOSURE
GFE and initial TIL = LOAN ESTIMATE
• Provided by Lender
• To consumer three business days after
submission of loan application
• Intent is to promote comparison shopping
WARNING: Third Party Financing Addendum – “must
apply promptly” and “furnish all information and
documents required by lender”… “within ___ days”!
HUD-1 and final TIL = CLOSING DISCLOSURE(CD)
• Provided by Lender or Title Company (but
Lender is responsible)
• To consumer three business days before
closing (now known as “consummation”!)
(Closing Date nka Consummation Date!!!)
HUD-1 nka CD final 3 business days before
closing
• What are Lender rules for delivery?
– Add 3 days for mail out rule (email or snail
mail)
A final HUD-1 Settlement Statement 6 days
before closing? Possible?
Can the CD be changed at “Consummation”?
– Yes and No
• CD can be changed without redisclosing; unless change
– Changes APR by 1/8%, or more
– Changes loan product
– Adds a prepayment penalty
Questions:
• If Lender prepares the CD and change is
required at closing, who has to make the
change?
• What if Seller takes the refrigerator when he
wasn’t supposed to which leads to Buyer
credit?
– Does this change the loan program or the APR?
– If so, redisclose and postpone closing.
Other issues:
• Above the signature line on the CD, a
statement reads:
“By signing, you are only confirming that you have
received this form. You do not have to accept this
loan because you have signed or received this
form.” – REALLY?
• CD does not authorize disbursement based
on its numbers
Other issues (cont’d)
• CD requires the loan policy to be shown as
part of the mortgage costs at the full rate
rather than the simultaneous issuance rate
– Contrary to laws in 26 states, including TX
• CD does not allow for disclosures required by
Texas law
Consequence:
• Texas Land Title Association has filed a new
form for approval by the Texas Department of
Insurance
– Authorizing disbursement,
– Disclosing charges as required by TDI (which is
different than that required by the CD), and
– Explaining the differences between the CD and
the Texas form …confusing?
Other than the new disclosures,
how is the industry
affected by the CFPB?
CFPB issued a bulletin that said:
Lenders will be held responsible for failure of
any of their service providers to follow the
requirements of the CFPB!
RESULT: Lenders are “vetting” the service
providers, making sure the provider
• Has all appropriate licenses
• E&O coverage
• Internal controls for receiving and disbursing
proceeds
• Background checks for all personnel handling
money
• IT security protocols, including processes for
maintaining consumer privacy
• All information containing NPI (non
public information) must be sent securely
– Encrypted, password protected, hand delivery
or snail mail
– Only delivered as and to whom needed
Question: The CD contains NPI. Who can give it to the
real estate agent?
Compliance is Expensive:
• The smaller companies, in terms of labor and
revenue, are struggling to comply.
– We have 254 counties in Texas, some are serviced by very
small title agents.
• Others may not be given the opportunity to be
vetted, and then what? Do you have to use the
Lender’s preferred title company?
How do you service your customer?
The CFPB is here to stay, so remember:
“The only way to make
sense out of change is to plunge into it,
move with it, and join the dance.”
-Alan Watts