CFPB Presentation - Stewart

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					 THE CFPB: Where did it come from,
 What is it and Why you should care
                           Presented by:
 James L. Gosdin, Sr. Vice President and Chief Underwriting Counsel
Deborah B. Yahner, Assistant Vice President and Underwriting Counsel
                  Stewart Title Guaranty Company
                         October 24, 2012

The Consumer Financial Protection Bureau

“CFPB” or the “Bureau”
Where did it come from?
 The Dodd–Frank Wall Street Reform and
  Consumer Protection Act – a U.S. law
  effective July 21, 2010

 Richard Cordray - the Director as of
  January 4, 2012 (previous Ohio Attorney
What is the CFPB?
 The CFPB is an independent unit inside and
  funded by the United States Federal Reserve.

 CFPB’s mission is “to make markets for
  consumer financial products and services
  work for Americans—whether they are
  applying for a mortgage, choosing among
  credit cards, or using any number of other
  consumer financial products.”
 Its jurisdiction includes banks, credit unions,
  securities firms, payday lenders, mortgage-
  servicing operations, foreclosure relief
  services, debt collectors and other financial
 Responsibility for various consumer
  protection laws and regulations previously
  were spread among many different agencies
  (such as the Federal Reserve, Federal Trade
  Commission, the FDIC, National Credit Union
  Administration and HUD). Now those
  responsibilities are consolidated in the CFPB.
Why should you care?
 Consumer Mortgage Loans!!
 We (the title industry) are part of that world
 Whatever the CFPB does affecting
  mortgage loans and mortgage lenders will
  affect us
What is happening? A LOT!

Notice and Comment – 13 Proposed Rules
Dodd-Frank Act

 Ability to repay - QM (qualified mortgage)
 Risk retention – QRM (qualified residential

Both QM and QRM have 3% cap on points
and fees
Integrated Mortgage Disclosures under
the Real Estate Settlement Procedures
Act (Regulation X) and the Truth in
Lending Act (Regulation Z)
Why now? Dodd-Frank provision “Do this”

 Deadline to propose – July 21, 2012;
  Released by CFPB on July 9, 2012
 Proposed rule with request for public

NOVEMBER 6, 2012
New Forms

Loan Estimate integrates Initial TIL (Truth
 in Lending) with GFE

Closing Disclosure integrates Final TIL
 with HUD-1
Photo Album

by Candace Wiggins
Closing Disclosure Form Variations

   Convention Loan
   Adjustable Rate/Interest Only
   Seller Only
   Refinance
Difficulty of the CFPB’s Task

Two different statutes and sets of regulations
 Initial TIL and Final TIL under Truth in
  Lending Act (TILA) and Reg Z
 GFE and HUD-1 under Real Estate
  Settlement Procedures Act (RESPA) and
  Reg X.
 Proposed Rule is amendment to Reg Z
What is similar in Proposed Rule to current
Reg X?
 Shopping – What consumer can shop for and what
  cannot shop for
 Provider Lists
 Tolerances (“good faith analysis”)
    Zero – includes fees paid to affiliates of Lender;
     items consumer cannot shop for
    10% -- aggregate; includes fees to 3rd party if on
     the provider list
 Changed circumstance
What is different in Proposed Rule to
Current Reg X?
 Scope – “closed end” loans only (no HELOC, reverse
  mortgages included for these forms)
 Terminology – Lender is creditor; Borrower is
  consumer; closing is consummation
 Itemization is back; no more “inside” or “outside” the
 Loan Estimate (replacement for GFE) must be
  delivered no later than 7th business day before
  consummation; no more “GFE” at closing
 No underwriter/agent split on Closing Disclosure
What is REALLY different in Proposed
 Who provides the Closing Disclosure to the
 The “three day” rule
 Changes in Closing Disclosure necessitates
Who provides the Closing Disclosure?

Alternative 1:
The creditor shall provide the consumer
with the disclosures in §1026.38 (Closing
Disclosure) reflecting the actual terms of the
Alternative 2:
The creditor shall provide the consumer with
the disclosures in § 1026.38 (Closing
Disclosure) reflecting the actual terms of the
transaction but adds:
A settlement agent may provide a consumer
with the disclosures required (Closing
Disclosure) provided the settlement agent
complies with all requirements as if it were the
creditor. The creditor shall ensure that
disclosures are provided in accordance with the
Official Interpretations
Alternative 1 – silent on “settlement agent”

Alternative 2 – By assuming this responsibility
(providing the Closing Disclosure), the
settlement agent becomes responsible for
complying with all of the relevant requirements
as if it were the creditor, meaning that
“settlement agent” should be read in the place
of “creditor” for all the relevant provisions of §
1026.19(f) (Closing Disclosure)
The settlement agent may assume the responsibility to
provide some or all of the disclosures required by the
Closing Disclosure. For example, both the creditor and
the settlement agent comply with the requirements if the
settlement agent agrees to complete only the portion of
the disclosures related to closing costs for taxes, title
fees, and insurance premiums, the creditor agrees to
complete the remainder of the disclosures required, and
either the settlement agent or the creditor provides the
consumer with one single disclosure form containing all
of the information required to be disclosed by the
Closing Disclosure in accordance with the other
requirements, such as requirements related to timing
and delivery
The “three day” rule
 Closing Disclosure must be received by consumer no
  later than three business days before consummation.

 Unless the Closing Disclosure is delivered by hand
  (i.e. by mail, courier, email, Fed Ex), the consumer is
  presumed to have received three business days after
  put in the mail or delivered to the address.

It is not just three days!
Changes in the Closing Disclosure
Under RESPA, the HUD-1 can (and does)
change at closing

Under proposed rule (issued under TILA), if the
Closing Disclosure is subsequently revised
(after delivery to the consumer), another
Closing Disclosure (and another “three”
business day delivery) is triggered, with only the
following exceptions:
 Seller and consumer negotiations
 Amount paid by consumer (“Cash to Close”)
  does not increase more than $100
 Payment to government entity changes after
 Non-numeric clerical error
 Refunds due to “good faith analysis”
  (tolerance cure)
Waiver of “three day” delivery
Consumer can waive or modify the “three business
day waiting period if there is a “bona fide
personal financial emergency” that necessitates
consummating the transaction before expiration of
the waiting period
 Written statement by consumer (cannot be
  printed form)
 Only after receipt of the revised Closing
 Signed by all liable for the loan
Official Interpretations:
 Whether there exists a bona fide personal
  financial emergency is determined by the
  facts surrounding individual situations.
 Example given: Imminent sale of the
  consumer’s home at foreclosure
Other issues in the proposed rule
 Expanded Finance Charge to include title fees; Effect
  is higher APR
 Quoting title premiums when “simultaneous issue”

   Lender Policy equals full premium for lender policy

   Owner’s Policy equals [full premium for OTP] plus
   [simultaneous issue charge] less [full premium for
   lender policy]
 Loan Estimate and Closing Disclosure
 “Title - Owner’s Title Policy (optional)”
Liability and Penalty questions
TILA and RESPA – different statutes
 Under RESPA violations for GFE/HUD-1, no
  penalty; no private cause of action
 Under TILA violations of TIL disclosure,
  $4000 per violation, private cause of action
  with liability for actual damages and attorneys
Proposed Rule is under Reg Z (TILA regs)
Closing Disclosure – what liability will apply?
So do you care now?

REMEMBER:       Proposed Rule with Request
for Public Comment

REMEMBER:         CFPB’s mission is “to make
markets for consumer financial products and
services work for Americans”

REMEMBER:        You know consumers and you
know closings
What can you do?


Deadline is November 6, 2012

Directly to CFPB – MUST include Agency Name
(Consumer Financial Protection Bureau) and Docket
No. (Docket No. CFPB-2012-0028) or Regulatory
Information Number (RIN 3170-AA19)

Mail/Hand Delivery/Courier (must be received by
November 6, 2012):

Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street,
NW, Washington, DC 20552
“click” on Law and Regulation; then on Notice and
Comment; then on Open for Comment; then look for the
title of proposed rule (Integrated Mortgage Disclosures
under the Real Estate Settlement Procedures Act
(Regulation X) and the Truth in Lending Act (Regulation
American Land Title Association (ALTA)

Title Action Network

“The Title Action Network (Network) is a voluntary, non-
partisan and free nationwide grassroots lobbying network of
title insurance, abstract and real estate settlement services
professionals, affiliated with the American Land Title
Association (ALTA).

Network Membership is open to any owner or employee of a
company that is engaged in, or supports the business of,
title insurance and real estate settlement services. You do
not need to be employed by an ALTA member company to
join the Network.”
The “Vetting Issue”
CFPB Bulletin April 13, 2012

Separate and apart from the Proposed Rule
on Integrated Disclosures

CFPB is not looking for public comment on
the April Bulletin
Bulletin’s Content: Subject is “Service
 Definition of Service Provider: any person that
  provides a material service to a covered person (i.e.
  supervised banks and nonbanks offering consumer
  financial products) in connection with the offering or
  provision by such supervised bank or nonbank of a
  consumer financial product or service.
 CFPB states it has supervisory and enforcement
  authority over service providers
 CFPB’s expects supervised banks and nonbanks to
  conduct thorough due diligence
Why are Lenders Concerned?
Jul 18 2012 - Press Release

CFPB probe into Capital One credit card
marketing results in $140 million
consumer refund
WASHINGTON, D.C. – Today, the Consumer Financial
Protection Bureau (CFPB) announced its first public
enforcement action with an order requiring Capital One
Bank (U.S.A.), N.A. to refund approximately $140
million to two million customers and pay an additional
$25 million penalty. This action results from a CFPB
examination that identified deceptive marketing
tactics used by Capital One’s vendors to pressure or
mislead consumers into paying for “add-on products”
such as payment protection and credit monitoring when
they activated their credit cards.
Title Industry’s Response

ALTA Title Insurance and Settlement
Company Best Practices
Thank You

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