The Consumer Financial Protection Bureau’s “Know Before You Owe” project to consolidate Truth in Lending and Real Estate Settlement Procedures Act disclosures is a step in the right direction, said NAFCU President/CEO Fred Becker, but conflicting requirements inherent in the two statutes might make the task impossible.
The problem is that TILA and RESPA disclosures detail two related, but different steps in the process: mortgage lending and home purchasing. The proposed consolidation could require credit unions to fill out the RESPA portion of the settlement document, which would be problematic, Becker said in a letter to the agency.
“Most credit unions do not have the existing expertise on staff to carry out this task,” he said. “Further, given the complexity and legal liabilities, this is not the type of job for which an existing employee might be easily trained.”
Additionally, the CFPB should do everything in its power to ensure mortgage rules it’s proposing, as well as others under consideration by other agencies, should be “written in a complementary manner” that takes new requirements, forms and effective dates into consideration, he said.
“The worst-case scenario in this regard is for small entities to implement one rule only to discover that the other mortgage rules impose conflicting or duplicative requirements or confusing directives that do not mesh with the other new mortgage rules,” Becker said.
Other NAFCU objections to CFPB’s proposed changes center around disclosures meant to educate consumers regarding all costs associated with mortgages. For example, the proposal would lower the tolerance for certain settlement costs currently included in the good faith estimate, while at the same time reducing the amount of information the borrower would provide up front.
“NAFCU questions whether it is wise or fair for the CFPB to hold lenders to even tighter standards (regarding third party providers, no less) while simultaneously reducing the amount of information and the amount of time the lender has to perform due diligence and review the application,” Becker said.
The trade association said it also takes issue with restrictions on higher settlement costs, technology requirements for the retention of compliance records, and inconsistencies in proposed forms.