The American Land Title Association in comments on the Consumer Financial Protection Bureau’s policy to encourage trial disclosure programs, and encouraged the bureau to use the program to allow lenders and title companies to test the disclosure of the accurate cost of title insurance under TRID.
ALTA began its comment letter by stating, “The American Land Title Association generally supports the proposed Policy to Encourage Trial Disclosure Programs, published in the Federal Register by the Bureau of Consumer Financial Protection on Sept. 10, 2018. We encourage the bureau to use this program to allow lenders and title companies to test the disclosure of the accurate cost of title insurance to consumers under its TRID rule.”
The proposed policy, announced by the bureau Sept. 10, “includes a number of revisions designed to more effectively encourage companies to test new disclosures:
- Streamlining the application and review process to focus on the quality and persuasiveness of the application
- Granting or denying applications within 60 days of submission
- Establishing an expected two-year time frame for the testing of disclosures
- Specifying procedures for permitting companies to continue to use disclosures that test successfully
- Coordinating with state regulators so that entities within state "regulatory sandboxes" may be able to participate in the Bureau’s Disclosure Sandbox without applying separately to the Bureau.
Interested parties had until Oct. 10 to submit comments.
In its letter, ALTA continued by stating, “When finalized, we believe the bureau should use the final policy to encourage the industry to test trial disclosures extensively, including those provided in connection with the origination and closing of residential mortgage loans. Importantly for consumers of title insurance policies in connection with mortgage loans, the policy should be used to test how providing consumers with accurate information about the actual cost of title insurance policies increases their satisfaction and understanding. This testing should be done in conjunction with state insurance regulators, for the reasons described below. Additionally, the policy should encourage lenders and title companies to utilize trial disclosures in connection with the use of electronic real estate and mortgage loan closings. This innovation in the mortgage market should be encouraged, because it may increase access to credit and reduce consumer costs.”
It also urged coordination with state regulatory authorities, noting that many state disclosure requirements overlap with the TRID disclosures.
“The proposal should spell out how the bureau will work with state regulators,” ALTA stated. “One problem with the 2013 policy is that it created uncertainty how the bureau would obtain state approval for a trial disclosure. A formal process to coordinate and enter agreements with state regulatory authorities would greatly increase the industry’s ability to conduct a trial disclosure program. This coordination should include all of the state regulatory authorities that supervise entities that are subject to the bureau’s enumerated consumer laws, including state insurance and escrow regulators, or that otherwise enforce compliance with any applicable state disclosure laws (e.g., state attorneys general).”
It also sought clarity and guidance surrounding the proposed streamlined application and approval process.
“The proposal allows groups to apply for the program. This would include trade associations,” ALTA stated. “Under this authority, each company testing disclosures under the trial ‘must notify the bureau that the company will utilize the disclosure under the terms permitted for the group.’ ALTA has a long history of developing uniform disclosures and insurance forms for the industry. We would welcome a chance to work with a group of members to test out alternative title insurance disclosures on the TRID disclosures. We request that the bureau clarify its requirements for trade associations to obtain approvals for trial disclosure programs on behalf of their membership, including the required form and timing of the notification for testing companies.
“ALTA also encourages the bureau to provide additional guidance in the policy regarding how the delivery of trial disclosure program data to the bureau would not violate federal or state privacy laws,” it continued. “In an era of increased focus on privacy requirements and new, more stringent privacy laws being enacted, we believe such guidance would further encourage participation in trial disclosure programs.
“Lastly, the bureau should finalize a policy that provides a compliance waiver as to all the necessary industry participants in a transaction in which a trial disclosure was utilized,” ALTA concluded. “As you know, the processing and closing of residential mortgage loan transactions typically involve multiple parties, including lenders, title insurance companies, real estate brokers and agents, escrow agents, and other settlement service providers. These parties may not be willing to participate in transactions in which another settlement service provider has obtained approval for a trial disclosure program from the bureau, without the benefit of a compliance waiver. The use of a trial disclosure without a compliance waiver may result in noncompliance for the other settlement service provider. For example, if a settlement agent is required under state law to provide a Closing Disclosure to a borrower, but the lender in the transaction is conducting a trial disclosure program to provide a different form of disclosure to the borrower, it could result in noncompliance for the settlement agent. In addition, if the lender is utilizing a trial disclosure for the borrower, it may also frustrate the ability of a settlement agent to provide a Closing Disclosure to the seller as required under TRID. For this reason, ALTA encourages the bureau to provide in the final policy that the compliance waiver will extend to other settlement service providers participating in a mortgage transaction in which an approved company or they utilize the trial disclosure approved by the bureau. ALTA encourages the bureau to coordinate with state regulators regarding this issue as well.”