In all the excitement over the qualified mortgage, qualified residential mortgage, and Basel III capital rules, as well as the introduction of GSE and FHA reform, it is easy to forget that a major rule still remains to be finalized—the RESPA/TILA harmonization rule. Some may have forgotten the 1,100-page proposal, but the Consumer Financial Protection Bureau (CFPB) most certainly has not, and a final rule has been promised for fall 2013.
The rule was proposed in late summer 2012, and then largely forgotten as the CFPB scrambled to finalize rules that had 2013 deadlines. As with any proposal of its length, it was a mixed bag of good, bad and ugly. The good was the upfront disclosure. While it was a far cry from the simple one-page form promised by CFPB when it began its “Know before You Owe” campaign, it did seem to do a reasonable job aligning the RESPA Good Faith Estimate (GFE) and the TILA disclosure (TIL) in the document they refer to as the “loan estimate.” It remains to be seen what changes the CFPB makes in the upfront disclosure, but of all the elements of the proposal, this seemed to be the most well thought out.
The bad, or ugly, was the proposed transformation of the two laws and the attempt to create a unified settlement statement incorporating the HUD-1 and the final TIL, called the “closing disclosure.” The CFPB decided to propose implementing a three-day waiting period for the combined document, meaning it must be in the consumer’s hand—and accurate—three days prior to closing. NAR strongly discouraged changing the settlement process, or in the alternative, encouraged the CFPB to give consumers the ability to waive the three-day period. Many in the industry say we should be able to get these documents together and finalized three days prior to closing. It is certainly something to aspire to, but real estate transactions remain complex and decisions are not always made promptly, especially by consumers. Therefore, it is essential that consumers have the flexibility to at least waive issues that might cause closing delays.
CFPB should also maintain the flexibility in the issuance of the loan estimate instead of requiring it when only six pieces of information are collected. The practical effect of this is that information essential to properly evaluating a loan prospect will either not be collected and/or estimated closing costs will be outlandishly high in order to avoid tolerance infractions. The result could very well be that lenders with the least expensive ultimate closing costs will not appear that way to consumers because their loan estimates appear more costly. This would not ultimately benefit consumers.
There are numerous other proposed changes that could be adopted or scrapped. NAR believes most should be scrapped and CFPB should focus on simply improving the loan estimate that ensures it provides consumers with timely and accurate information. In terms of implementing new regulations, 2014 will already be a costly and confusing year. There is no need to make it even worse by piling on massive changes to the closing process, some of which were unworkable as originally proposed.
This column is brought to you by the NAR Real Estate Services group. Ken Trepeta is the director of Real Estate Services for the National Association of REALTORS®.
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