CFPB Vows to Meet Deadline on Mortgage Disclosure Form

WASHINGTON — The Consumer Financial Protection Bureau is forging ahead with its plan to release a single mortgage disclosure form by July 21, despite industry calls to slow down the process.

CFPB Deputy Director Raj Date told a House subcommittee Wednesday that the agency will meet the deadline it was given by Congress to combine two separate forms required by the Truth In Lending Act and the Real Estate Settlement Procedures Act.

"We will meet our statutory deadline," Date said, adding that by July 21 the agency will also issue a proposal that provides detailed requirements and guidance for filling out the forms. "We are excited about this opportunity to develop a practical solution to what has been a long-standing challenge for both consumers and industry."

The agency's pledge to meet its deadline came at a hearing where mortgage industry representatives, who have generally supported the idea of streamlining the paperwork borrowers are required to sign before they close on a home purchase, argued that the process is moving too quickly.

The American Bankers Association, which took issue with numerous steps taken by the CFPB, testified that Congress should give the agency more time.

"We believe it essential that Congress maintain oversight of this regulatory process and ensure the Bureau take the time necessary to weigh all the options, consider the consequences, and ultimately, get this right," said Brenda Hughes of First Federal Savings Bank in Idaho, who provided written testimony on behalf of the ABA.

The ABA argued that the CFPB should issue only an advance notice of proposed rulemaking by July 21, which would give industry officials and members of Congress an opportunity to provide additional input.

Several members of the subcommittee appeared sympathetic to industry concerns, but in their questioning of the CFPB's Date, they did not signal that they intend to take action that would alter the agency's plans.

"It's important to keep in mind that these new disclosures can radically change the market for both businesses and consumers," said Rep. Judy Biggert, R-Ill., who chairs the housing subcommittee that held the hearing.

The Mortgage Bankers Association testified that more work needs to be done in order to prevent the CFPB's efforts from suppressing demand for housing.

"No matter how well intentioned these rules may be, they cannot be allowed to harm American families, the mortgage market or the nation's still fragile economic recovery," said Bill Cosgrove of Union National Mortgage Company, testifying on behalf of the Mortgage Bankers Association, in written testimony.

But Date argued that the housing bubble and ensuing crisis may have been fueled in part by shortcomings in the current mortgage disclosure forms.

"For example, many consumers select a loan based on their ability to afford the monthly payments," Date said in written testimony. "But some consumers experienced 'payment shock' because they did not understand that their payments could increase to unaffordable amounts a few years or even months after closing."

There is broad agreement that the current process is unnecessarily confusing, and doesn't work in the real world, Date argued. "It would be odd to find a borrower at the closing table who says I would like to be here all day," he said.

He also described the CFPB's process for developing a consolidated form, noting that the agency did extensive testing of prototype forms over a 10-month period.

Other industry trade groups testifying in favor of a slowdown were the National Association of Realtors, the American Land Title Association, and the Consumer Mortgage Coalition, which represents mortgage lenders and servicers.

The trade groups' list of specific complaints about the CFPB's process was long and varied.

In one example, the American Land Title Association took issue with the proposed wording on a prototype disclosure form that described owner's title insurance as "not required." The trade group argued that the adjective should be changed to "recommended" or "advisable."

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