Advocacy’s 2012 Comments on Three Key Proposed Mortgage Rules

In 2012, Advocacy commented on three key revisions of the Real Estate Settlement Procedures Act (RESPA or Regulation X) and the Truth in Lending Act (TILA or Reg Z):

• The integrated mortgage disclosure statement (comments filed November 6)
• Mortgage servicing rules for ARMs (October 5), and
• Loan originator compensation (October 16).


Mortgage Disclosure Statements. This major rule governs the practices and documents in use when consumers close on real estate loans. Although the proposal makes several changes to RESPA/TILA, the top five issues for small entities concern the costs from the expanded recordkeeping requirements, the difficulties of integrating the two mortgage disclosure statements used under the previous system, problems arising from the revised definition of the term “loan application,” the burden of requiring three days for the presumed receipt of documents, and confusion arising from defining Saturday as a business day.

To alleviate their impact on small business while maintaining the rule’s purpose, Advocacy recommended that CFPB allow for flexibility in small business compliance with the regulation, delaying the effective date of one measure, providing an exemption from another, and specific modifications of others.

Mortgage Servicing. The proposed rule would require periodic statements for residential mortgages, a six-month notification prior to the reset of the initial rate of hybrid Adjustable Rate Mortgages (ARMs), and the possible extension of this requirement to other ARMs. Small entities have said that these changes would be costly for them. Small mortgage servicers use a different business model that is relationship-based and customer service-friendly. As such, they argue that they were not the cause of some of the problems that the statute was meant to address. Advocacy encouraged the CFPB to exempt small entities from many of the requirements of the proposal. For the aspects of the proposal that do not exempt small entities, Advocacy encouraged the CFPB to provide small entities with a sufficient amount of time for them to comply with the requirements of this proposal.

Mortgage Loan Originator Compensation. The proposal would implement statutory changes to Regulation Z’s current loan originator compensation provisions, including a new restriction on the imposition of any upfront discount points, origination points, or fees on consumers under certain circumstances. Advocacy encouraged the CFPB to clarify aspects of the proposal, to fully consider small entities’ concerns, and to carefully consider the alternatives that have been set forth by the industry. Advocacy also encouraged the CFPB to develop revenue limits that reflect the unique business structure of smaller industry members and provide relief to small entities.

The comment letters and fact sheets summarizing them are available on Advocacy’s website.

—Assistant Chief Counsel Jennifer Smith

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