The CFPB and the Rules Affecting the

Way we Do Business!Presented by

Dawn Enoch MooreTexas 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-in-

Lending (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 re-disclosing; 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