Charles Jones Blog
Change is upon the title industry. Already, major lenders are passing along to their vendors the increased scrutiny they feel from the Consumer Financial Protection Bureau (CFPB). Here at Signature Information Solutions, we have signed off on numerous Master Service Agreements that contained extremely rigorous (and, practically speaking, onerous) physical and data security requirements. I have also heard from title customers who have experienced onsite inspections from their lender customers.
ALTA has developed and published Title Insurance and Settlement Company Best Practices in part to address a misguided perception that the title industry was not adequately protecting consumer funds and non-public personal information. It seems that long standing requirements, established almost 14 years ago under the Gramm-Leach-Bliley Act, are still vexing many title agents. Lenders are starting to call agents to task to ensure their compliance.
In addition, Dodd-Frank requires the combination of certain disclosures in forms required by the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA). During the public comment period, the Mortgage Bankers Association (MBA) submitted comments to the CFPB stating that, “Despite Dodd-Frank’s requirement that RESPA and TILA disclosures be integrated, Congress did not make the RESPA disclosures subject to the TILA remedies and liability, or vice versa.” 1 RESPA and TILA remain separate statutes and the MBA commented that the final rules should clearly explain which disclosures are subject to RESPA and which are subject to TILA. In its comments, the MBA also stated that lenders should not be held liable for the closing agent’s work on the new Closing Disclosure form (the combined TILA and HUD-1 forms). But, If lenders are to be held liable for this work, lenders should have the ability to decide whether the lender or a lender-employed settlement agent will provide the Closing Disclosure.
If banks don’t jump into the settlement game, existing settlement agents will have to navigate the mandated 3-day waiting period that resets for virtually any changes made at the closing table.
And what about the Qualified Residential Mortgage (QRM) requirements? On Wednesday August 28, Federal regulators announced a re-proposed rule for the QRM. It now matches the CFPB’s QM definition. The good news is the QRM rule has been softened from its initial form that many national lenders had indicated would have dramatically reduced the number of loan originations. However, ALTA was not successful in its efforts to insert a requirement for title insurance into the rule’s underwriting criteria.
My read is that the scrutiny will continue to increase and the compliance demands will only rise.
Do you share my view? What are you doing to address these concerns? What does your future look like if banks conduct closings?
The information provided is for informative purposes only and is not intended to be legal advice or a legal opinion. For legal advice, please consult an attorney.
1 Mortgage Bankers Association. “MBA Letter to CFPB” retrieved August 23, 2013 from http://www.mbaa.org/files/Advocacy/TestimonyandCommentLetters/MBARESPATILACommentLetter.pdf
ALTA Advocacy Update 9/3/2013
Patrick T. Roe