Last month, the Consumer Financial Protection Bureau (CFPB) published two prototypes of the integrated mortgage disclosure form that it is required to prepare by the Dodd-Frank Wall Street Reform and Consumer Protection Act. After reviewing the new drafts, industry associations are voicing their opinions.
On May 27, the American Bankers Association (ABA) submitted its comments in a letter to the CFPB.
“ABA submits these comments in the spirit of ensuring that this initial step is conductive to workable disclosure for all stakeholders in the mortgage finance system,” the association said in its letter. “We congratulate the CFPB for providing an open process that allows for exchange and communication, and for promoting input from banking institutions. ABA members have extensive and sustained experience in understanding consumer financial needs, and we are pleased to offer our insights to advance the success of this reform process.”
The letter explained that the ABA's focus group was “overwhelmingly of the opinion that the draft labeled as Ficus Bank contains the clearest presentation of information.”
“This opinion is based on several factors,” ABA stated. “First, the form contains clearly demarcated headers that are effective in separating and ordering the contents of the disclosure. Second, the layout is one in which the reader is able to start at the top of the form and systematically read the information horizontally without confusion. This does not occur with the Pecan Bank prototype, where the information runs both vertically and horizontally, depending on the section. Finally, the order of the information, with the key loan terms on top, sets forth the most effective presentation of the information that is necessary to understand the loan product.”
The group also said that ABA members expressed concern about potential implementation challenges posed by the formatting of the forms. They said that both forms include a number of graphics, columns and horizontal lines that may prove challenging to reproduce.
“Indeed, our members stated that many core processors and form vendors were unable to reproduce the tabular formatting requirements of the Regulation DD overdraft fee disclosures on periodic statements,” the association stated. “They urge consideration of these challenges and, where possible, simplification of graphics and formatting.”
At an industry conference last week, Justin Ailes, vice president of Government Affairs for the American Land Title Association (ALTA), lauded the Consumer Financial Protection Bureau's (CFPB) first attempt at improving the mortgage disclosure forms, but said there is work yet to be done to make sure forms are effective for the consumer.
“The CFPB's first attempt at combining the TIL and GFE produced a refreshing form that presents some information in a more effective style, but is by no means perfect and does not quite achieve its goal of making the real estate transaction easier to understand for consumers,” Ailes said during a presentation at the 12th annual LPS SoftPro User Group Conference in Chapel Hill, N.C.
“While this is only the first step in a long process, ALTA is encouraged that the CFPB has taken a collaborative approach by working with the industry because this disclosure form needs to be created in a way that is beneficial to consumers and industry stakeholders,” Ailes told the audience. “ALTA will continue to provide feedback on future versions of the forms. Together we can help consumers make educated decisions when shopping for a mortgage loan and related real estate settlement services.”
Ailes cautioned it's equally important that the CFPB be willing to provide plenty of implementation time for the new forms.
“Once a new form is settled on, the industry is going to need enough time to prepare for its use,” Ailes said. “It was only last year that new settlement documents became mandatory due to changes to the Real Estate Settlement Procedures Act (RESPA). This reform overturned 35 years of certainty in the form of law, practice and judicial opinions, and forced companies to spend a great deal of time and money overhauling operations in order to produce the new documents.”
Ailes said ALTA is hopeful the CFPB will continue to seek industry feedback to make sure the forms do what they are intended to do.
“The real test will be whether the Bureau is as collaborative and open to industry input at the end of this process as it seems to be at the beginning,” he concluded.