The Consumer Financial Protection Bureau (CFPB), by mandate under Dodd-Frank, will soon change our world once again.
Just barely two years since the title and mortgage industry was turned upside-down with regulatory changes to the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedure Act (RESPA), the CFPB will be releasing its proposed forms and regulations next month to replace the HUD-1 Settlement Statement, Good Faith Estimate, and Truth-in-Lending Disclosure.
These new forms will be known as the Loan Estimate and Settlement Disclosure Form.
On its snazzy website, CFPB states that the current 3-page HUD-1 settlement statement is replete with "... Technical and legal jargon ... that may be more confusing than helpful. Complicated and lengthy disclosures can make it hard to answer or even ask the right questions."
This is hardly an improvement. In our experience at the closing table, homebuyers are less likely to review lengthier disclosure forms compared to short form disclosures.
Among other things, these new CFPB forms will require lenders and settlement service providers to overhaul their existing software production systems, re-tool the lender-to-title company interfacing, and re-train staff members — which meanshomebuyers will end up paying more at settlement.
Currently, homebuyers pay, on average, $750 for total settlement fees in the Washington DC metro area. With little, if any, benefit to the consumer, I expect that figure to increase to approximately $1,000 with the implementation of these new CFPB forms and regulations.
The current disclosures are more than adequate. At the risk of sounding astringent, if a homebuyer can’t understand the HUD-1 Settlement Statement in its current form, then perhaps that homebuyer shouldn’t be a homebuyer.
For those who like the new Settlement Disclosure Form, I'd like to know if you think it's worth an increase of about 30% in settlement fees to your homebuyers.
Secondly, do you think the last round of changes 2 years ago to the GFE, TIL, and GFE improved your homebuyers' experience?
Lastly, all of these regulatory requirements and changes create higher barriers to entry for competition (i.e., increase in start-up costs). Over time, established title companies will increase charges to the consumer when faced with less competition.