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MORTGAGE DISCLOSURES: HOW DO 

WE CUT RED TAPE FOR CONSUMERS 

AND SMALL BUSINESSES? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INSURANCE, HOUSING AND 

COMMUNITY OPPORTUNITY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 20, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–138 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON INSURANCE, HOUSING AND COMMUNITY OPPORTUNITY

JUDY BIGGERT, Illinois, Chairman 

ROBERT HURT, Virginia, Vice Chairman 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

PATRICK T. MCHENRY, North Carolina 

LYNN A. WESTMORELAND, Georgia 

SEAN P. DUFFY, Wisconsin 

ROBERT J. DOLD, Illinois 

STEVE STIVERS, Ohio 

LUIS V. GUTIERREZ, Illinois, Ranking 

Member 

MAXINE WATERS, California 

NYDIA M. VELA ́ ZQUEZ, New York 

EMANUEL CLEAVER, Missouri 

WM. LACY CLAY, Missouri 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

MICHAEL E. CAPUANO, Massachusetts 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

June 20, 2012 .................................................................................................... 1 

Appendix: 

June 20, 2012 .................................................................................................... 39 

WITNESSES 

WEDNESDAY, JUNE 20, 2012 

Abbinante, Christopher, President, American Land Title Association (ALTA) .. 14 

Canfield, Anne C., Executive Director, Consumer Mortgage Coalition (CMC) .. 16 

Cosgrove, Bill, CMB, President and Chief Executive Officer, Union National 

Mortgage Company, on behalf of the Mortgage Bankers Association (MBA) . 18 

Date, Raj, Deputy Director, Consumer Financial Protection Bureau (CFPB) .... 4 

Hardy, Chanelle P., Senior Vice President and Executive Director, National 

Urban League Policy Institute ............................................................................ 20 

Hughes, Brenda K., Senior Vice President and Retail Lending Administrator, 

First Federal Savings Bank, on behalf of the American Bankers Association 

(ABA) ..................................................................................................................... 22 

Veissi, Moe, 2012 President, National Association of REALTORS® ................... 23 

Wilson, Tim, President, Affiliated Businesses, Long and Foster Companies, 

on behalf of the Real Estate Services Providers Council, Inc. (RESPRO®) .... 25 

APPENDIX 

Prepared statements: 

Abbinante, Christopher .................................................................................... 40 

Canfield, Anne C. ............................................................................................. 50 

Cosgrove, Bill .................................................................................................... 175 

Date, Raj ........................................................................................................... 186 

Hardy, Chanelle P. ........................................................................................... 189 

Hughes, Brenda K. ........................................................................................... 194 

Veissi, Moe ........................................................................................................ 206 

Wilson, Tim ....................................................................................................... 212 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Biggert, Hon. Judy: 

Written statement of the American Financial Services Association 

(AFSA) ........................................................................................................... 227 

Joint written statement of the Appraisal Institute and the American 

Society of Farm Managers and Rural Appraisers ...................................... 230 

Written statement of the Consumer Bankers Association (CBA) ................. 233 

Written statement of the Credit Union National Association (CUNA) ........ 236 

Written statement of the Housing Policy Council of The Financial Services Roundtable ............................................................................................. 239 

Written statement of the Independent Community Bankers of America 

(ICBA) ............................................................................................................ 242 

Written statement of the National Association of Federal Credit Unions 

(NAFCU) ........................................................................................................ 251 

Written statement of the National Association of Mortgage Brokers 

(NAMB) .......................................................................................................... 253 

Gutierrez, Hon. Luis: 

Written statement of the National Consumer Law Center .......................... 257 

(1) 

MORTGAGE DISCLOSURES: HOW DO 

WE CUT RED TAPE FOR CONSUMERS 

AND SMALL BUSINESSES? 

Wednesday, June 20, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INSURANCE, HOUSING

AND COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 1:30 p.m., in room 

2128, Rayburn House Office Building, Hon. Judy Biggert [chairwoman of the subcommittee] presiding. 

Members present: Representatives Biggert, Capito, McHenry, 

Dold; Gutierrez, Cleaver, Clay, Watt, and Sherman. 

Also present: Representative Green. 

Chairwoman BIGGERT. The Subcommittee on Insurance, Housing 

and Community Opportunity will come to order. 

Without objection, all Members’ opening statements will be made 

a part of the record, and I will begin with my opening statement. 

Good afternoon, everyone. Hopefully, the bells won’t go off too 

soon, but we are expecting votes, unfortunately, in a little bit. So 

we thought we would get started right on time. 

I would like to welcome everyone to today’s hearing titled, ‘‘Mortgage Disclosures: How Do We Cut Red Tape for Consumers and 

Small Businesses?’’ I welcome today’s witnesses to this important 

hearing. 

As we all know, Congress has been examining complex settlement procedures and confusing mortgage disclosures for several 

decades. Mortgage disclosures required under the Real Estate Settlement and Procedures Act, our favorite RESPA, and the Truth in 

Lending Act, or TILA, have been of interest to me since my days 

as a real estate attorney. Many of my colleagues on the committee 

share that interest as they, too, were real estate professionals in 

a former life. 

For most homeowners, the biggest financial decision of their lives 

is made at the closing table as consumers read the mounds of confusing and complicated paperwork. Hence, in States like Illinois, a 

lawyer is required at closing. For many years, Ruben Hinojosa and 

I have authored letters to Federal regulators outlining our concerns 

about these disclosures. At times, these bipartisan letters have garnered the signatures of over 240 Members of the House. 

To Federal regulators, we have emphasized that newly proposed 

mortgage disclosures must: one, be streamlined and simplified; two, 

2 

be thoroughly tested and vetted; three, allow stakeholders ample 

time to provide input; and four, provide a regulatory input analysis, with a particular focus on small businesses. 

It is important to keep in mind that these new disclosures can 

radically change the marketplace for both businesses and consumers. That is why as our housing market recovers and as other 

relevant mortgage rulemakings, such as the Qualified Mortgage, 

QM, and Qualified Residential Mortgage, QRM, rules are under development, it is critical that any new mortgage disclosures first do 

no harm to consumers, businesses, and the recovering real estate 

marketplace. 

And that is why we are here today. This hearing is a continuation of the subcommittee’s examination of provisions in the DoddFrank Act and other regulatory initiatives that will impact the 

mortgage origination process for both consumers and service providers. 

On July 21, 2011, the Dodd-Frank Act transferred general rulemaking authorities on TILA and RESPA to the Consumer Financial Protection Bureau (CFPB). At this hearing, we will examine 

more closely the efforts of the CFPB to improve and combine 

RESPA and TILA mortgage disclosures; and we will examine questions raised by consumers and lenders about the new disclosures, 

hopefully shedding some light on how the CFPB intends to move 

forward. I anticipate this will not be our last hearing on mortgage 

disclosures and rules during the 112th Congress. 

So, with that, I look forward to hearing from today’s witnesses— 

we are having two panels—and to an informative discussion on this 

very important subject. 

Now, I would like to recognize our ranking member, the gentleman from Illinois, Mr. Gutierrez, for his opening statement. 

Mr. GUTIERREZ. Thank you for yielding, Madam Chairwoman, 

and thank you for holding this hearing. 

Complete, accurate, accessible information is critical to ensuring 

that consumers are prepared when they consider what could be 

their largest lifetime investment, purchasing a home. Accurate and 

exhaustive disclosures are also one of the largest deterrents against 

fraud, and eventually, defaults and foreclosures. 

More than 5 million American homeowners are facing the risk of 

foreclosure, and it is clear that many homeowners were not properly informed about loan terms or the risk of certain types of mortgages. The need to harmonize TILA and RESPA disclosures has 

been raised repeatedly over the years, and we were happy to include it in the Wall Street reform law. 

Today, we will learn about the work done by the Consumer Financial Protection Bureau in addressing this provision and meeting 

the two twin objectives of: one, providing appropriate consumer information; and two, keeping the costs reasonable and manageable. 

I look forward to hearing how the CFPB and the industry are 

working to ensure that these new disclosure forms and rules 

prioritize the need of the consumer and how they contribute to a 

more secure housing market. I also look forward to learning more 

about how the concerns of the industry and other stakeholders are 

being addressed by the CFPB as it completes its proposals for inteVerDate Nov 24 2008 19:16 Feb 15, 2013 Jkt 076109 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\76109.TXT TERRI
3 

grated disclosures and accompanying rules for mortgage loans by 

July 21, 2012. 

Madam Chairwoman, before I yield back, I request unanimous 

consent to introduce the written comments submitted to the CFPB 

on April 18, 2012, by the National Consumer Law Center, the Alliance for a Just Society, Community Consumer Action, the National 

Association of Consumer Advocates, and the National Community 

Reinvestment Coalition regarding the ‘‘Know Before You Owe’’ proposed mortgage disclosures. 

Chairwoman BIGGERT. Without objection, it is so ordered. 

Mr. GUTIERREZ. I thank you very much, and I yield back the balance of my time, Madam Chairwoman. 

Chairwoman BIGGERT. Thank you, Mr. Gutierrez. 

The gentlelady from West Virginia, Mrs. Capito, is recognized for 

2 minutes. 

Mrs. CAPITO. Thank you, Madam Chairwoman. Thanks for the 

time and for holding this hearing on the ongoing effort to improve 

the mortgage disclosure process. 

Many of us in this room have been through this process and we 

know it is daunting. To sign the forms is daunting; to read the 

forms, impossible; and it is a very difficult procedure that I think 

can be improved. 

Almost all of us have had these issues, and I know it has been 

a priority of the CFPB to develop a more transparent and understandable disclosure process. As this is not a new endeavor, I still 

wonder if this renewed effort under the CFPB will really do anything to reduce the paperwork and information. I have said from 

this dais here several times, are we just going to have the same 

stack of papers with two new papers on top of it that we are going 

to have to sign anyway because of all the legal disclosures? 

The CFPB has been given substantial rulemaking authorities in 

the mortgage area—I think maybe 20 or 29 or so are pending—giving its broad mandate and the importance of regulatory certainty 

to the mortgage finance industry. We know they are still struggling. I am very interested in the development of many of these 

rulemakings in the pipeline. 

How will the directive being discussed this afternoon impact 

other rulemakings, such as your QRM and the QM definitions, 

which I think have been pushed off to the end of the year? And will 

these rulemakings ultimately really provide the clarity to consumers and small businesses? In promulgating the rules, it is a 

tough task, and I hope they are mindful of the impact that the 

rules will have on access to credit. 

I want to thank the witnesses for being here today, and I want 

to thank the chairwoman for having the hearing. 

I yield back. 

Chairwoman BIGGERT. Thank you. 

It is now time to introduce our first witness, Mr. Raj Date, who 

is the Deputy Director of the Consumer Financial Protection Bureau. 

Welcome. We are happy to have you here. Without objection, 

your written statement will be made a part of the record. You are 

now recognized for a 5-minute summary of your testimony. 

4 

STATEMENT OF RAJ DATE, DEPUTY DIRECTOR, CONSUMER 

FINANCIAL PROTECTION BUREAU (CFPB) 

Mr. DATE. Thank you. 

Chairwoman Biggert, Ranking Member Gutierrez, and members 

of the subcommittee, thank you for this opportunity to testify. As 

you mentioned, my name is Raj Date, and I serve as the Deputy 

Director of the Consumer Financial Protection Bureau. 

For more than 30 years, Federal law has required lenders to provide two different disclosure forms to consumers shortly after they 

apply for a mortgage. The law has also generally required two different forms shortly before or at closing. Two different Federal 

agencies developed these forms under two different statutes: the 

Truth in Lending Act; and the Real Estate Settlement Procedures 

Act. The information on these forms is overlapping, and the language is inconsistent. Not surprisingly, consumers often find that 

the forms are confusing, and lenders and settlement agents often 

find that the forms are burdensome to provide and to explain. 

The American mortgage business was supposed to be the broadest, deepest, most liquid, most sophisticated consumer finance market in the history of the world, but it failed us, and it failed us in 

part because consumers did not understand the products that they 

were getting into or the risk profile associated with those obligations. 

While Federal agencies tried to address these disclosure problems in the past, they did not arrive at a coordinated conclusion. 

Dodd-Frank transferred authority for the TILA and RESPA mortgage disclosures to the Bureau last July, July 2011, and directed 

us to propose rules and forms combining the two disclosures by this 

July, so next month, July 2012. 

The Dodd-Frank Act established two goals for the combined 

mortgage form: number one, improve customer understanding of 

mortgage loan transactions; and number two, facilitate industry 

compliance with TILA and RESPA. 

To achieve these goals, the Bureau gathered information in a variety of ways from a variety of sources. We tested draft forms. We 

used interactive online tools and blog posts. We hosted roundtables. 

We held conference calls and meetings. These activities included 

the public, they included consumer advocacy groups, and they included industry stakeholders, as well as other government agencies. 

One of those, one such activity, was our signature Know Before 

You Owe initiative. We used our Web site to share early prototypes 

of the combined disclosure forms to get the public’s feedback on the 

prototypes. We conducted extensive testing of these prototype forms 

through interviews with more than 100 consumers, lenders, mortgage brokers, and settlement agents. Those interviews took place 

in nine cities across the country. 

Consumers were asked to assess whether the forms enabled 

them to understand and compare different mortgage loans and to 

identify changes during the mortgage loan process. Industry participants were asked to use the prototype forms to explain the 

loans as they would to a consumer and to identify areas for improvement. 

5 

After each round of testing, Bureau staff analyzed the results 

and designed new and improved prototypes. In fact, almost every 

month between May 2011, and February 2012, the Bureau posted 

these prototype forms on our Web site and sought additional feedback. In total, the Bureau posted more than a dozen prototype 

forms and received more than 27,000 responses. 

In February of this year, 2012, the Bureau convened a Small 

Business Review Panel with officials from the Small Business Administration and the Office of Management and Budget. This panel 

gathered information from small business representatives about 

the cost of the proposed disclosures and other potentially less burdensome alternatives. We are using all of that information to develop proposed forms that will make the mortgage process easier 

for consumers and for industry. 

We will meet our statutory deadline. The forms will be issued for 

public comment by the statutory deadline of July 21, 2012. At that 

time, we will also be issuing a proposed rule that provides detailed 

requirements and guidance for filling out the forms. The idea is to 

reduce unnecessary compliance burden by providing clear guidance 

for industry while strengthening protections for consumers. 

Finally, the proposed rule must reconcile several inconsistencies 

between TILA and RESPA. TILA and RESPA establish different 

timing requirements for disclosing final loan terms and costs and 

require different parties to provide the forms. 

During the small business review process, we discussed potential 

solutions to these inconsistencies. We sought feedback on whether 

the combined final disclosure should be provided 3 days before closing so that consumers would have time to review the final terms 

and costs and resolve any questions or concerns and problems. We 

also asked about whether the lender or the settlement agent would 

be better equipped to provide the combined final disclosure or 

whether some sort of shared responsibility was appropriate. We 

will continue to explore these options in the proposed rule. 

We are excited about this opportunity to develop a practical solution to what has been a longstanding challenge for both consumers 

and industry. Thank you for inviting me to testify today, and I look 

forward to your questions. 

[The prepared statement of Mr. Date can be found on page 186 

of the appendix.] 

Chairwoman BIGGERT. Thank you. 

We have, I think, just been called for a vote, but we have a few 

minutes. My personal best is 21⁄2 minutes, but I don’t want to try 

to do that again. So we will start with the questions, and as a reminder to each of the Members, there are 5 minutes for questions. 

I will yield myself 5 minutes. 

When you did all of these focus groups or roundtables and everything, what was the timeline that you wanted to get for somebody 

who was going to have a mortgage? Because as I recall in doing 

so many of these—the lawyer always got in at closing, which was 

a little bit late sometimes for knowing what was going on before 

the mortgage had already been made. So how do you decide what— 

and now you are talking about 3 days. What happens? 

Mr. DATE. The concern that you flag is definitely one that is 

shared both by industry stakeholders as well as consumers. ConVerDate Nov 24 2008 19:16 Feb 15, 2013 Jkt 076109 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\76109.TXT TERRI
6 

sumers, unfortunately, feel like they show up at closing and there 

is a gigantic pile of paper that most people don’t even know how 

to begin making heads or tails of. It is only through the guidance, 

for example, of a settlement agent that they even find their way 

through with some level of comfort. 

And, of course, industry stakeholders, be it mortgage brokers or 

lenders or settlement agents themselves, feel like so much ends up 

getting rushed at the last moment that there are certain constraints that the timetable creates that otherwise in a perfect world 

would not exist. 

We are trying to tackle that in at least two broad ways. One is, 

owing to the complexity—it is after all a relatively complex transaction when all is said and done. With that complexity in mind, 

still we want to really streamline, clarify, and simplify that which 

consumers have before them. It is only through maximizing the 

simplicity of the documents themselves that you can maximize the 

chance that that timetable doesn’t work against you. 

Chairwoman BIGGERT. Is it CFPB’s plan to move forward the 

new disclosures and rules? More specifically, what is the timeline 

for rulemaking and shouldn’t the QM and QRM rules be finalized 

before you really complete the work on mortgage disclosures? 

Mr. DATE. Sure. As you know, this is not our only mortgage rulemaking. The CFPB has as many as—I want to say seven different 

mortgage rulemakings, all of which Congress has appropriately 

pointed us towards to remediate reasonably clear deficiencies in the 

mortgage market as it had developed. 

Taking the example that you raised, the Qualified Mortgage 

Rulemaking, the proposal with respect to the ability to repay provision in Dodd-Frank and the Qualified Mortgage definition had been 

made by the Federal Reserve Board before we inherited authorities 

from the Board last July. Our plan—and I can assure you that it 

remains our plan—is to finalize the Qualified Mortgage definition 

before the statutory deadline of January of next year. 

As a practical matter, I certainly understand the argument and 

the concept behind the argument that a number of these rules 

ought to be finalized before the disclosure forms are made final. It 

is in fact an issue that we raised explicitly with the Small Business 

Review Panel, and so it is entirely possible that timetable you contemplate is the one that will play out. 

Chairwoman BIGGERT. Where is the CFPB in the process of its 

work with the Small Business Review Panel? 

Mr. DATE. I am pleased with our work to date. We have conducted three Small Business Review Panels: one with respect to 

mortgage loan originator compensation; one with respect to mortgage servicing; and the third with respect to the subject of today’s 

hearing, the integration of the TILA and RESPA rules. 

We are the first bank agency or financial regulator to conduct 

Small Business Review Panels, so at some level it was hard to 

know exactly what to expect. And I am not particularly an especially optimistic person. I have been very pleased with the process 

as it has played out, the input that we have received, and the utility of that which we have heard as we move forward. So I am really quite pleased. 

7 

With respect to this particular rulemaking, we will issue the report coming out of the Small Business Review Panel at the same 

time as we issue the proposed rule. 

Chairwoman BIGGERT. Okay. You are looking at new disclosures 

for consumers and small businesses that are involved in the mortgage origination process. Are you conducting testing? What is the 

testing for that? 

Mr. DATE. Yes. Our general approach to testing is one that I 

think is shared by other Federal agencies with which I am familiar, 

as well as broadly across much of the private sector around consumer finance, and I would describe it in two big pieces. 

One up front is a series of what in a prior life I called deep customer insight or deep discovery interviews. In this case, we did 

more than 100 fairly lengthy interviews with consumers, small 

business stakeholders, and other industry participants to understand the broad contours and alternatives we might pursue. That 

goes by lots of different names. The term that we use is called 

qualitative usability testing. That qualitative usability testing then 

forms the basis for our proposal and then we would pursue quantitative testing through one of several different means after the 

proposal is issued and before it is finalized. 

Chairwoman BIGGERT. Thank you. 

Mr. Gutierrez, would you like to get your questioning in or would 

you rather wait until we come back? 

Okay. We will recess to go vote. There are three votes, so it 

should take about 25 minutes, I would say. We will be back as soon 

as we can. Thank you so much. 

[recess]. 

Chairwoman BIGGERT. The committee will reconvene. 

Mr. Gutierrez, you are recognized for 5 minutes. 

Mr. GUTIERREZ. Thank you. 

Mr. Date, you spoke about the consumer testing that the CFPB 

has done on the prototype mortgage disclosure forms. Often when 

a buyer is reviewing these disclosures, they are in a high-pressure 

atmosphere. Many of us have been there when we go to a closing, 

sign this, sign that, move papers along, time to get the keys and 

see the house; and this can sometimes lend itself to inadequate review. Has the CFPB’s consumer testing simulated the high-pressure situation that borrowers can find themselves in at all? 

Mr. DATE. Thank you, Congressman. 

It is an excellent question, because some of the criticism that is 

possible with respect to qualitative usability testing is that, in general, it does not exactly simulate real-life pressures in the moment. 

I think you are correct. It would be odd to find a borrower at a closing table who says to himself, ‘‘I would like to be here all day.’’ Nobody says that. 

Usability testing does do some things, but it does not do everything. What it does do is set out the broad contours of what ought 

to work in terms of basic comprehension and understanding how 

the pieces of the transaction fit together. In terms of more statistically significant and larger quantitative testing, it is not a substitute for that, which is why we are going to pursue quantitative 

testing after the proposal and before finalization. 

8 

Mr. GUTIERREZ. I have heard of instances where borrowers are 

the targets of deceptive practices. Let me ask you, has the CFPB 

tested whether consumers understand the information included in 

the prototype forms if they are verbally misled about mortgage 

terms or settlement costs even? 

Mr. DATE. A couple of the elements of that which we may be pursuing with respect to this rulemaking are meant to make it much 

more difficult for bad actors in this space to be able to deceive consumers. So, just a couple of examples with respect to that. 

First, HUD in the most recent revisions to RESPA’s disclosure 

forms tightened rules with respect to tolerances associated with 

changes in closing costs after they are initially disclosed to borrowers. There are areas in which we are evaluating whether or not 

those tolerances were fully effective or fully appropriate and so we 

would try to think through those issues. 

Part of the purpose for that is that it allows borrowers to be 

more surefooted as they evaluate a potential transaction and compare it to alternative transactions but at the same time to be able 

to make it more difficult for so-called bait-and-switch tactics to 

take hold of the process. 

Mr. GUTIERREZ. There have been some concerns expressed that 

in combining TILA and RESPA disclosures, the CFPB may have inappropriately expanded beyond harmonizing and improving the 

disclosures to include a reworking of any underlying regulations. 

How do you respond to the accusation that you may be reworking 

the underlying regulation? 

Mr. DATE. Congress has given us, in my mind, a quite appropriate task, which is to combine, make from several into one, to 

streamline, to clarify, and to make cheaper, less expensive, and less 

burdensome to comply with. All of those are entirely appropriate 

responsibilities for us to undertake, and that is what we are doing. 

And we are doing it in a way that is hopefully at the end of the 

day responsive to borrower needs while providing incremental consumer protections as well as making it easier and cheaper to comply with these two disclosure regimens. 

Mr. GUTIERREZ. The goal—I know it is your goal. I don’t think 

you are changing it. I think you are doing exactly what the Congress of the United States in the last Congress enabled you to do. 

And I do want to say that I have never encountered the problem, 

but then if America only had to deal with problems that we encounter as a Member of Congress, they probably would not encounter a great deal. We are really legislating for the rest of America. 

Because I have to tell you, I go to my bank. I take out a home 

loan. It is pretty clear. Exactly what they said was going to happen 

is what happens. The interest rate, I never get a surprise later on. 

But, at the same time, there are surprises in so many other financial products, even for Members of Congress, like the famous 

credit card, get 25,000 miles, get a free ticket. I don’t know to 

where you get a free ticket for 25,000 miles, but they keep advertising. 

So there still are bad actors out there, and there are still people 

who will again try to manipulate and exploit a maybe somewhat 

unsophisticated public when it comes to having some kind of financial literacy. So I want to thank you and wish you Godspeed in the 

9 

work you do, and please let us know if we can be a helping hand 

to getting that work done. 

Thank you so much. 

Chairwoman BIGGERT. Thank you. 

If I could just quickly follow up on the RESPA and TILA and 

whether there is a conflict, I wasn’t quite clear on how you answered that. Does the CFPB have the authority to resolve what is 

a conflict? Let’s say it is a conflict. And you talked about streamlining and getting them to move together. But in law, there is a 

difference. Can you change that? 

Mr. DATE. We believe that we can, both through the explicit instruction to integrate these disclosures as well as the broader authorities granted to the Bureau, which roughly parallel that which 

the Federal Reserve Board had in Title X and Title XIV. 

Chairwoman BIGGERT. Thank you. Okay. 

The gentleman from Missouri, Mr. Clay, is recognized for 5 minutes. 

Mr. CLAY. Thank you so much, Chairwoman Biggert; and thank 

you, Mr. Date, for being here. 

We hear a lot from community bankers, mortgage bankers, about 

compliance with regulators gumming up the works and the red 

tape. Let me ask you about the requirement that consumers receive 

their final settlement disclosure form 3 days in advance. Give me 

your thinking behind the 3-day requirement. 

Mr. DATE. Certainly. Consumers, in order to make sense and be 

confident and be surefooted in the transaction they are about to 

undertake, which, after all, both enables for many people the best 

part of their financial lives but also in reality is probably the single 

biggest obligation and single biggest set of financial risk that they 

will face, in order to do that in a surefooted way they need time 

to really understand that which they are getting into. And the idea 

is to the extent that data can be made available in a way that normal human beings would be able to understand, 3 days ahead of 

time as opposed to 31⁄2 minutes, that is rather an advantage. 

Now, obviously, things may change. In routine mortgage transactions, there are some things that do change between 3 days out 

and the time of closing. For example, recording fees might not be 

knowable 3 days ahead of time, hypothetically. So what we are 

going to try to do and what we have been attentive to the feedback 

from small business representatives through our Small Business 

Review Panel about is to be attentive to those areas where: number 

one, there is a real chance that you don’t know 3 days ahead of 

time; and number two, there is not a prejudice to the borrower as 

a result. 

Mr. CLAY. And having been a real estate agent prior to coming 

here, tell us what the CFPB’s rules will do for documentation at 

closing. Does it simplify it? I know that there are numerous documents that each buyer signs and sometimes seller. Does this help 

in that process? 

Mr. DATE. I believe that it does, and it does so by taking a real 

step forward in terms of streamlining Federal disclosure forms 

around the mortgage process. It is not just page count that is reduced, although that will happen, but it is also making it easier for 

10 

someone to actually understand, which, of course, should be the 

goal of any disclosure regimen. 

Now, there is a lot that happens at the closing table and otherwise in a mortgage transaction that has nothing to do with Federal 

requirements per se, but we can absolutely put borrowers in a better context with better tools to understand that which they are facing, and everyone benefits as a result. 

Mr. CLAY. And in your public comment period, what kind of feedback are you getting from the industry, from the mortgage banker 

community and the community bankers, too? What are you hearing? 

Mr. DATE. We will have a formal comment period that extends 

after publishing our proposed rule next month. But essentially 

from the very week that I arrived at the Treasury Department at 

the end of September 2010, during that entire time period we have 

been quite actively reaching out to small business representatives 

and other industry participants across the mortgage landscape. 

And the basic thread, both in general terms—maybe I will give you 

the general and then a specific. 

In general terms, I think it is fair to say that no one looks at 

the Federal disclosure regimen as it exists today and says, yes, 

that is ideal. That is the best of all possible worlds. No one thinks 

that. There are certainly differences of opinion about pace and 

exact trajectory, but fundamentally everyone acknowledges that 

which we have today is not ideal. 

Even to date, we have been able to incorporate specific suggestions over time. One that immediately comes to mind is sort of the 

notion in the loan estimate that we will propose in our rule. Originally, our early prototypes didn’t have, for example, principal, interest, taxes, and insurance all separately enumerated; and it was 

quite clear from the feedback that we received, both from consumer 

groups and from the industry, that you ought to do that, and later 

prototypes did. 

That is not the only example, but it really speaks to the power 

of an iterative approach where you actually reach out to people 

who are affected by these things. 

Mr. CLAY. And I guess that is the key to this process. It is striking a fair balance between more disclosure and the mortgage banker industry and how we can expedite the process while we still protect consumers. So thank you for your efforts at CFPB. 

Mr. DATE. Thank you, sir. 

Mr. CLAY. Madam Chairwoman, I yield back. 

Chairwoman BIGGERT. The gentleman from Illinois, Mr. Dold, is 

recognized for 5 minutes. 

Mr. DOLD. Thank you, Madam Chairwoman; and, Mr. Date, 

thank you so much for taking your time to join us today. 

Congress, through the Economic Growth and Regulatory Paperwork Reduction Act of 1996, directed the Department of Housing 

and Urban Development and the Federal Reserve Board to simplify 

and improve RESPA and TILA disclosures. My understanding is 

that there are some notable conflicting provisions in the statutes 

and the agencies failed to provide a joint disclosure. They concluded that meaningful change should come only through legislation. 

11 

How did the Dodd-Frank Wall Street Reform and Consumer Protection Act differ from the 1996 Act to compel regulatory agencies 

to come up with a joint disclosure document? 

Mr. DATE. As I had mentioned briefly before, the advantages I 

think are threefold post-Dodd-Frank versus obviously what has 

been a long-standing challenge within the mortgage marketplace. 

I say threefold, because the first is about having a singular authority with respect to both statute and regulatory schemes. Not to put 

too fine a point on it, but having a single agency in charge of both 

statutes on the margin makes everything easier in terms of tradeoffs between them. 

Second, there is, of course, a specific mandate within Dodd-Frank 

to integrate these disclosure regimens so that they are simultaneously better for consumers and that they ensure compliance and 

make compliance easier for industry participants. 

And third is that both Title X and Title XIV in our view clearly 

gives us the authority to do just that. 

So the right mission with the right structural accountabilities 

and the right authority to do it. 

Mr. DOLD. Correct me if I am wrong, but Dodd-Frank required 

that by July 21st of this year, the CFPB propose and integrate an 

accompanying rule for mortgage loans that satisfies the requirements of both RESPA and TILA. Will the CFPB be meeting that 

deadline? 

Mr. DATE. Yes, sir, we will be meeting that deadline. 

Mr. DOLD. Fantastic. So we can expect to see it on or before— 

do you think it is going to be pretty close to July 21st? 

Mr. DATE. My hope would be not just before the clock strikes 

midnight on that date, but it will be proposed next month, yes. 

Mr. DOLD. Okay. Fantastic. 

With regard to mortgage disclosures and closings, one of the 

things that I hear oftentimes from my constituents is that they 

don’t read the documents because the stack is so large that they 

couldn’t possibly get through them. When was the last time you 

talked to a consumer who actually read every one of those documents? Or, more importantly, when was the last time you sent 

somebody, an average consumer, to a closing without an attorney? 

Mr. DATE. I will go one further, Congressman. I bought a house 

last year. My wife does financial fraud cases for the Department 

of Justice. Consider what I do for a living. We didn’t read the papers at the closing able. It is an unrealistic premise that the disclosure regimen has been based on, which is why we talked with the 

Small Business Review Panel about the notion of delivering the 

closing disclosure not just in simpler form but in fact earlier than 

the closing itself. 

Mr. DOLD. Okay. Madam Chairwoman, I have no further questions right now. 

Chairwoman BIGGERT. The gentleman yields back. 

The gentleman from Texas? 

Mr. GREEN. Thank you, Madam Chairwoman; and I thank the 

witness for appearing. 

I must say to my colleague who is about to exit the room that 

you have preempted me. I think that probably more than anything 

else when I talk to consumers about mortgages and closing on their 

12 

homes, they talk about just the inordinate amount of paper and 

how it is just impossible to peruse it; and, even if they do, they contend that they don’t really understand all that is there. 

My question is, at the end of the day, when you finish, given that 

lawyers have opinions about what must be done to properly protect 

clients, will you be able to remove enough of the language so that 

the stack of paperwork will be condensed to some extent, and will 

the process be such that people won’t sign papers that have not 

been completed? 

Many times a person simply signs documents, and they are told 

that, ‘‘We will fill that in later. Just go ahead and sign now.’’ So 

at the end of the day, I believe that is a noble and laudable goal, 

but will we get there at the end of the day? 

Mr. DATE. I am optimistic, and I am optimistic in the following 

two ways: one is a process point; and another is substantive. 

The process point is what we have done to date, this iterative approach of developing prototypes that are informed by outreach, informed by qualitative usability testing, informed by hard work, and 

the willingness to change what was originally done. Your first prototype ought to improve as you get to your second, that process 

fundamentally I think is better suited to create disclosure forms or, 

frankly, a lot of other things that are not just things that are written by lawyers for lawyers, but in fact things that are written to 

work in the real world with actual human beings in stressful moments doing important things in their financial lives. That is the 

process point. 

The substantive point is I personally am optimistic that the concept that we spoke about with the Small Business Review Panel 

earlier this year about separating the closing disclosure from the 

giant stack of paperwork at the closing table, so the first time that 

a consumer sees these important bits of information is not when 

they are confronted with, for example, the note itself or all manner 

of other documents that are first subject to State law and at some 

level may be irreducible in order to protect the security interest in 

the underlying, et cetera. 

So I think there are both process and substantive reasons to be 

optimistic, but we absolutely share your objective. 

Mr. GREEN. Thank you. 

And, of course, I think that you have to have an acid test to ascertain whether or not you have succeeded. So you will develop 

your new paradigm, the process will be changed to some extent 

maybe, and you will have your new instruments to be signed, but 

what will be the acid test to ascertain whether or not you have succeeded? 

Mr. DATE. There are two bits of testing that will give us a lens 

into that. 

The first lens happens before we even finalize the rule, as we 

conduct quantitative testing to make sure that what we have proposed in fact does what we hope that it will. Many of these things 

you just don’t know until you really do test them. 

The second is Dodd-Frank, to my mind, appropriately calls on us 

to take retrospective look-backs at new regulations that we promulgate to ensure that what was intended in fact was the result. And 

that is something that we, not just in this context but across-theVerDate Nov 24 2008 19:16 Feb 15, 2013 Jkt 076109 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\76109.TXT TERRI
13 

board in terms of our policy agenda, are quite serious about. Because even if it did work perfectly on day one, markets change. 

They are dynamic. So we should be attentive to circumstances as 

they change as well. 

Mr. GREEN. Thank you very much. You have a daunting challenge, but I do believe that it is not a Quixotic quest. I think it can 

be done. 

I just hope you won’t assume that you will get it done the first 

time. I think looking back and having an acid test will be very 

helpful, because there is just so much involved in what you are 

doing. It really is awesome when you actually go through the process, as you have, I have; and consumers are quick to point out that 

they just give up and they are just so happy to get the home that 

they will sign anything and they will walk away. 

And my final point would be the signing of documents wherein 

you indicate, I have read this and I understand it, can you just give 

me a comment in terms of how you will handle this? Because many 

people will sign a statement saying, I have read it and I understand it, but they really haven’t read it. And even if they did, they 

didn’t understand it, but they want the house, the home. Please. 

Mr. DATE. Why don’t I just make a general comment with respect 

to that? 

I think your observation points to the self-limiting nature of just 

piling on disclosure form after disclosure form after disclosure 

form. If there is a substantive problem in consumer understanding, 

just generating another mostly meaningless to the average person 

piece of paper that has to be signed doesn’t solve that substantive 

problem. They are hard problems to solve, but if you take the right 

approach, again, I am optimistic. 

Mr. GREEN. Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. Thank you, Mr. Green. 

Just one quick question, and then we will excuse you, Mr. Date, 

and go on to the next panel. 

Is the CFPB working to ensure that disclosures ensure transparency in charges that reflect different kinds of business models? 

For example, we have the independent title insurers, but we also 

have title insurers and brokers that have an affiliation business arrangement, and we also have independent appraisers as well as 

banks with in-house appraisal management companies. 

Mr. DATE. In general, the approach is to try to give consumers 

information that is complete enough to understand how it is that 

the money in the transaction is flowing, as well as the information 

presented in a way to give them a real sense of the nature of the 

risks and the nature of the transaction that they are looking at in 

substantive terms. 

We presented to the Small Business Review Panel options 

around changing, for example, the tolerance associated with 

changes in costs for affiliates of lenders versus independent providers of those services, and it could well be there are changes on 

the margin there that would tend to conceivably put those players 

on a better, more competitive, even playing field with each other. 

But, again, it is certainly one of the issues— 

Chairwoman BIGGERT. And will there be transparency? 

14 

Mr. DATE. In general, we have tried to make sure and we will 

continue to try to make sure as we refine going forward that those 

elements that really ought to be important to a consumer’s understanding of the transaction and of risk are as transparent as we 

can make them. 

Chairwoman BIGGERT. Thank you. Thank you so much for being 

here today. You are excused. We really appreciate your time. 

The Chair notes that Members may have additional questions for 

this witness, which they may wish to submit in writing. Without 

objection, the hearing record will remain open for 30 days for Members to submit written questions to this witness and to place his 

responses in the record. 

We will now have the next panel take their seats. 

While we are having the second panel take their seats, I will just 

ask unanimous consent to insert the following materials into the 

record: a June 20, 2012, letter from the Credit Union National Association; a June 20, 2012, letter from Impact Mortgage Management Advocacy and Advisory Group; a June 20, 2012, letter from 

the Appraisal Institute; a June 20, 2012, letter from the Housing 

Policy Council of the Financial Services Roundtable; a June 20, 

2012, letter from the National Association of Federal Credit 

Unions; a June 20, 2012, letter from the Consumer Bankers Association; a June 20, 2012, letter from the National Association of 

Mortgage Brokers; a June 20, 2012, letter from the American Financial Services Association; and a June 20, 2012, statement from 

the Independent Community Bankers of America. 

Without objection, it is so ordered. 

Okay, welcome to this second panel. 

I will introduce the panel: Mr. Christopher Abbinante, president, 

American Land Title Association; Ms. Anne Canfield, executive director, Consumer Mortgage Coalition; Mr. Bill Cosgrove, president 

and chief executive officer, Union National Mortgage Company, on 

behalf of the Mortgage Bankers Association; Ms. Chanelle Hardy, 

senior vice president and executive director, National Urban 

League Policy Institute; Ms. Brenda Hughes, senior vice president 

and retail lending administrator, First Federal Savings Bank, on 

behalf of the American Bankers Association; Mr. Moe Veissi, 2012 

president, National Association of REALTORS®; and Mr. Tim Wilson, president, affiliated businesses, Long & Foster Companies, on 

behalf of the Real Estate Services Providers Council. 

Once again, without objection, your written statements will be 

made a part of the record. You will each be recognized for a 5- 

minute summary of your testimony, and we will start with you, Mr. 

Abbinante. You are recognized for 5 minutes. 

STATEMENT OF CHRISTOPHER ABBINANTE, PRESIDENT, 

AMERICAN LAND TITLE ASSOCIATION (ALTA) 

Mr. ABBINANTE. Thank you. 

Chairwoman Biggert, members of the subcommittee, my name is 

Christopher Abbinante, and I am the president of the American 

Land Title Association. I have been in the title industry for over 

35 years, most recently serving as the president of eastern operations for Fidelity National Title Group. 

15 

ALTA members act as independent third-party settlement agents 

in real estate transactions. We prepare and provide the HUD-1 settlement statement which provides all parties to the transaction 

with their final settlement costs. 

ALTA supports simplified mortgage disclosures. It is critical that 

the CFPB get this rule right for consumers and industry. However, 

industry groups and the Bureau agree that there are a number of 

statutory conflicts between RESPA and TILA. It is not clear if 

these conflicts can be resolved by the Bureau or will require an act 

of Congress. 

My testimony will outline five principles that ALTA has identified to help the Bureau avoid unintended consequences for consumers and industry. 

Our first principle is to prevent disruptive and costly delays to 

closings for consumers. We recognize that RESPA and TILA have 

conflicting timing requirements for when consumers receive their 

settlement disclosure. To resolve this conflict, the Bureau is expected to adopt the TILA requirement and propose that consumers 

receive their final disclosure 3 days before closing. 

Providing disclosure earlier in the process makes sense in theory, 

but it is simply not practical and will result in delays, increased 

costs, and frustrations for businesses and consumers. A lot of costs 

change within 3 days of closing because of property inspections and 

walk-throughs. If each change triggers a new 3-day waiting period, 

the rule will almost certainly delay settlements and add costs. 

Our second principle is to provide industry with clear guidance. 

Today, a lack of clear and definitive guidance causes lenders and 

settlement agents to unnecessarily lose an estimated 3 million 

hours of productivity each year. When these forms changed just 2 

years ago, HUD issued 400 frequently asked questions after the 

rule was published. This was very costly for businesses, because 

each change required new software coding, testing, and training. 

Our third principle is that the rule should promote competition. 

To improve accuracy and prevent bait-and-switch, regulators hold 

lenders liable for some costs that increase more than a certain 

amount at closing. This is called tolerance. However, the economics 

of tolerance inflate estimates and reduce the number of settlement 

agents that are allowed to compete for business. We urge the Bureau to work with us to improve accuracy for consumers and to protect consumers by ensuring that settlement agents continue to 

serve as the independent third party at the closing. 

Our fourth principle is to avoid unnecessarily high costs for small 

businesses. These forms will be very costly to implement. Software 

vendors estimate that they will each spend around $2.5 million to 

develop and implement compliant software. This is more than twice 

the amount that was spent when these forms changed in 2010. 

These costs will likely be passed on to the 21,000 settlement agents 

across the country, roughly 88 percent of which are small businesses, and ultimately to the consumer. We estimate they will pay 

$800 per employee for up-front implementation and training and 

see a 20 percent annual increase in software fees. It is also estimated that their closing staff will be able to close two fewer transactions per day. 

16 

In addition, changes that might be perceived as industry friendly 

can actually be very costly. One example is that we strongly recommend a standard disclosure form as required by RESPA rather 

than a model disclosure form as required by TILA. Standardization 

reduces costs and prevents consumer confusion caused by the hundreds of different versions of the same disclosure produced for each 

mortgage lender. 

Our final principle is to encourage consumers to make informed 

decisions. The choice of words influences consumers’ likelihood of 

making decisions in their financial interests. Some drafts of the 

form described owner’s title insurance as not required. A consumer 

without an owner’s title policy is out of luck if their ownership is 

challenged. This is tragic and can be prevented. If these forms need 

to use modifiers to describe a particular settlement service, they 

should use terms like ‘‘recommended’’ or ‘‘advisable’’ to encourage 

consumers to make an informed choice. 

We appreciate the opportunity to discuss federally-mandated 

mortgage disclosures. Getting this rule right is critical. ALTA is 

eager to serve as a resource to this subcommittee as well as to the 

Bureau. 

Thank you. 

[The prepared statement of Mr. Abbinante can be found on page 

40 of the appendix.] 

Chairwoman BIGGERT. Thank you so much. 

Ms. Canfield, you are recognized for 5 minutes. 

STATEMENT OF ANNE C. CANFIELD, EXECUTIVE DIRECTOR, 

CONSUMER MORTGAGE COALITION (CMC) 

Ms. CANFIELD. Thank you, Chairwoman Biggert, and members of 

the subcommittee. 

My name is Anne Canfield and I serve as the executive director 

of the Consumer Mortgage Coalition, a trade association of national 

mortgage lenders, servicers, and service providers. We appreciate 

the opportunity to testify and appreciate the subcommittee’s attention to this important issue. 

I would also like to request that the appendices to my testimony 

be made a part of the record. 

Chairwoman BIGGERT. Without objection, it is so ordered. 

Ms. CANFIELD. Thank you. 

Along with its industry colleagues, the CMC has been a longtime and strong supporter of efforts to streamline mortgage disclosures. The disclosure should assist consumers in understanding 

their transaction and help them make informed and prudent decisions. A well-informed consumer will also help prevent abusive 

mortgage practices from taking hold. 

The CFPB does have an historic opportunity, given that the regulatory authority over the two principal government statutes governing mortgage disclosures, RESPA and TILA, now reside in one 

Bureau. 

It would be most unfortunate if the CFPB were to repeat the experience that occurred when the 2008 amendments to Regulation 

X were implemented. At that time, the confusion surrounding the 

2008 rule necessitated 11 rounds of frequently asked questions 

after the rule was final, but never really did provide the clarity 

17 

that the industry needed, and required delaying enforcement of the 

regulation by 4 months. While this was an extremely difficult and 

expensive experience for the industry, more importantly, the 2008 

amendments resulted in a set of mortgage disclosures that are even 

more confusing to consumers than any of the previous disclosure 

regimens. 

In order to get it right, the CFPB must take a holistic and methodical approach to this project. Otherwise, chaos is likely to 

ensue. 

First, the CFPB should examine the existing TILA, RESPA, and 

related rules to determine where modifications to those rules might 

be needed so that any superfluous disclosures that are emanating 

from the existing rules can be either eliminated or modified. 

Second, the Dodd-Frank Act includes a number of provisions that 

will result in additional mortgage disclosures. All the Dodd-Frank 

Act rules that will drive additional disclosures need to be finalized, 

including the QM rule and the QRM rule. The disclosures will only 

work if they are designed together. Indeed, that was the main purpose for assigning to a single regulator the task of designing the 

disclosures. 

Third, once all the Dodd-Frank mortgage-related rules that will 

result in additional disclosures are finalized, those rules should be 

placed on hold until all the new disclosure requirements are ready 

to be implemented. Both the substantive rule changes and the disclosure changes should be implemented once, at the same time. 

Fourth, the new disclosure should then be designed to accommodate all the existing and new disclosure requirements, along with 

the requirements set by the States, unless the CFPB agrees or decides to preempt the State disclosure requirements. 

Fifth, once the new draft disclosures are designed, they need to 

be tested on actual closed loans, not in focus groups, across all 

available loan products to ensure that they actually work. Testing 

the disclosures on closed loans may reveal the changes that will 

need to be made to the draft forms. 

Sixth, once the format of the forms is finalized, a reasonable implementation period needs to be given so that the industry is given 

the time it needs to change its systems, train its employees, and 

monitor and audit the changes to ensure that everybody is compliant. 

I would like to reemphasize that both the rule changes that are 

substantive along with the disclosure changes need to be implemented once, and at the same time. Otherwise, the industry will 

be in a position of having to implement and redo its systems repeatedly, and in this process I can’t even imagine what the disclosures will look like to consumers. It will be very, very confusing. 

Also, the Dodd-Frank Act, as you heard in the prior testimony 

by Mr. Date, requires that the CFPB come out with a proposed 

rulemaking by July 21st. Since the Dodd-Frank rules and the related disclosures are not going to be known at that time, any proposed disclosures they come out with in a proposed rulemaking at 

that time will not make any sense and will not be usable. So we 

would recommend that Congress and the CFPB delay that proposed rulemaking date. It only makes sense. It is not unprecedented that Congress sometimes delays those required dates. They 

18 

did so with the QRM rule. There are many other examples when 

legislation is passed that is a very large bill and not every piece 

of it fits together perfectly. 

The other thing that we would like to recommend is that the 

CFPB implement a four-step disclosure regimenn even when it 

does design its disclosures. 

We think that at step one, a loan estimate can be given to the 

consumer. It is a single disclosure that would be sent to the consumer within 3 days of application. 

At step two, using the same form that was provided at step one 

after the loan has been underwritten, the consumer would receive 

a second updated disclosure form. That second disclosure form 

could also serve the purpose of meeting the Regulation B ECOA notice. So the consumer would receive one form at that stage of the 

transaction versus two. 

Chairwoman BIGGERT. If you could wrap up, we will probably 

come back to this in questions. Thank you. 

Ms. CANFIELD. Great. Thank you. I appreciate your time. 

Our remaining remarks are we think we can get part of the way 

there in meeting the CFPB’s desire to have a 3-day waiting period 

before final closing documents are provided to the consumer, but I 

think that actually requiring 3 days, a 3-day waiting period, before 

the consumer does get the final closing documents will create 

chaos. It was tried in 1975, and it did not work, and it would be 

very harmful to the industry if it were to happen again. 

[The prepared statement of Ms. Canfield can be found on page 

50 of the appendix.] 

Chairwoman BIGGERT. Thank you. 

Mr. Cosgrove, you are recognized for 5 minutes. 

STATEMENT OF BILL COSGROVE, CMB, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, UNION NATIONAL MORTGAGE 

COMPANY, ON BEHALF OF THE MORTGAGE BANKERS ASSOCIATION (MBA) 

Mr. COSGROVE. Thank you, Chairwoman Biggert. 

My testimony this afternoon will provide MBA’s perspective on 

the CFPB’s Know Before You Owe effort. 

I own an independent mortgage banking company headquartered 

in Ohio. We employ 220 mortgage professionals. I have 26 years of 

experience in mortgage banking. Last year, my company originated 

over $750 million of mortgage business, and this year we are on 

track to close approximately $1 billion in mortgage loans. 

RESPA and TILA disclosures directly impact my company and 

our customers. If done right, these new combined disclosures will 

help borrowers make better-informed decisions about what they 

can and cannot afford. These disclosures also make it easier for 

them to compare the estimated cost of the loan versus the actual 

cost at closing. 

MBA has long supported that RESPA and TILA disclosures work 

together as a way to provide better information for home buyers. 

Splitting the authority between HUD and the Federal Reserve 

never worked. The disclosures diverged over the years. The CFPB 

Know Before You Owe initiative has the potential to finally sync 

up the information borrowers receive. 

19 

Let me highlight the key points of our testimony. 

First and foremost, MBA believes this effort must be done right 

and not in haste. 

Second, while these forms have benefited from multiple rounds 

of feedback from the public, more work needs to be done to ensure 

they are as useful as possible to consumers. 

Third, the forms and rules resulting from this effort should not 

be finalized until after other Dodd-Frank rules impacting these 

forms are finalized and taken into account. 

Fourth, the rules accompanying the forms should be developed 

carefully so that they protect consumers without unwittingly harming the market and the borrowers that they are intended to serve. 

And, finally, when the forms and rules are finished, they should 

be implemented in an orderly manner that is respectful of the considerable commitment of resources small businesses like mine will 

need to make to ensure compliance. 

Let me expand on some of these principles, starting with the importance of getting this right rather than rushing to meet arbitrary 

deadlines. 

Buying and financing a home remains the largest financial transaction in any family’s life, yet the mandated disclosures remain 

confusing and inconsistent. Past efforts to improve the disclosures 

have been uncoordinated, and ultimately failed to achieve their objectives. Yet, small businesses continue to spend untold sums to 

implement the most recent RESPA rule, which is about to be 

eclipsed by the CFPB’s latest efforts. In the end, those costs are 

borne by our borrowers, your constituents, who then pay more for 

their mortgage loan. 

Second, as I noted earlier, we can’t develop these new disclosures 

in a vacuum and ignore the many other mortgage-related rules 

mandated by Dodd-Frank. The CFPB alone is currently working 

on: ability to repay and its QM definitions, as well as rules dealing 

with high-cost loans, originator compensation, and servicing rules. 

All these rules will impact the disclosure requirements. For example, materials related to the loan originator compensation rule indicate the CFPB is concerned about borrower confusion of discount 

points and origination charges. These new forms, not new restrictions, are the right way to address those concerns. 

MBA also does not agree with the CFPB’s suggestion that the application information needed by lenders to issue a loan estimate 

should be reduced to six items without also allowing the lender to 

request other information it deems necessary, as permitted under 

RESPA today. Under the proposed QM rule, lenders face significant liability for failing to determine that a borrower can repay a 

mortgage. Constraining companies like mine from gaining relevant 

information could not only result in unreliable estimates for consumers but could actually put us in legal jeopardy later on. 

Contradictory rules add uncertainty to the mortgage market. 

This uncertainty is leading to factors behind today’s tight credit environment that is preventing qualified borrowers from getting a 

loan, and it is holding back the housing recovery. For these reasons, the final RESPA/TILA forms and regulations should not be 

finalized until issues under the other Dodd-Frank rules have been 

resolved. 

20 

Chairwoman Biggert, we at MBA appreciate your longstanding 

interest in improving the mortgage process. We stand ready to 

work with you and the members of the subcommittee on both sides 

of the aisle to ensure this effort leads to the best and most efficient 

set of mortgage disclosures for consumers. 

Thank you. 

[The prepared statement of Mr. Cosgrove can be found on page 

175 of the appendix.] 

Chairwoman BIGGERT. Thank you so much, Mr. Cosgrove. 

Ms. Hardy, you are recognized for 5 minutes. 

STATEMENT OF CHANELLE P. HARDY, SENIOR VICE PRESIDENT AND EXECUTIVE DIRECTOR, NATIONAL URBAN 

LEAGUE POLICY INSTITUTE 

Ms. HARDY. Thank you. 

Chairwoman Biggert and members of the subcommittee, thank 

you for the opportunity to testify today, and for the leadership you 

have shown on this issue. 

I am Chanelle Hardy, senior vice president and executive director of the National Urban League’s Policy Institute. On behalf of 

the League, its president and CEO, Marc Morial, and the 2.6 million Americans served by our 97 affiliates last year, I am pleased 

to share our views on the CFPB’s effort to create combined TILA/ 

RESPA disclosures as mandated by Dodd-Frank. 

With the help of HUD Housing Counseling Grants, the National 

Urban League acts as a direct provider of housing counseling services in 36 cities throughout the country. Last year alone, the National Urban League affiliates offered counseling to more than 

10,000 families, with services ranging from prepurchase workshops 

to mortgage modification and the initiation of forbearance agreements. The goal of our counseling model is to break down barriers 

and obtain economic equality through education, self-reliance, and 

a greater understanding of financial tools and services. 

Our counselors see firsthand the damage caused by confusion at 

the point of loan origination when well-intentioned and qualified 

borrowers are confronted with hopelessly confusing documents and 

sometimes deliberately abusive and malicious lending agents. 

Today, we know that substantial evidence indicates that AfricanAmerican and Latino borrowers, particularly, who were qualified 

for prime loans were often steered into subprime loans and into 

loans that were overpriced and unaffordable. 

In our view, the CFPB’s proposal discussed today, simplifying 

and consolidating the information required by TILA and RESPA, 

represents a critical step toward combating and limiting this type 

of abuse and confusion that contributed in no small part to the current foreclosure crisis. 

The broader context for these reforms must not be forgotten. The 

fact that between 5 million and 6 million American homeowners 

are currently at risk of foreclosure allows us to accept one of two 

possibilities: either the American people in droves deliberately entered into loan agreements to secure homes that they knew they 

could not afford; or, at minimum, hardworking people seeking to 

achieve the American dream lacked full awareness of the types of 

risks of certain types of mortgages before agreeing to their terms. 

21 

Communities of color, and African-American communities in particular, have borne much of the brunt of this crisis, leading to a 

loss of family and community wealth that can only be described as 

devastating. The Federal Reserve has recently pointed to a 40 percent plunge in the wealth of the average American family, from 

$126,400 before the crisis to $77,300 after. But these numbers are 

shockingly lower for African-American and Latino families, where 

numbers began between $11,000 and $13,000 and are now between 

$4,000 and $6,000. 

The heartbreaking stories that the Urban League counselors 

have heard from our clients reveal that many of them did not fully 

understand the potential of many mortgage terms to cause problems in the future, and many claimed to have been unaware of 

those provisions at all. Better consumer education is a significant 

part of the solution to the recurrence of the current housing crisis, 

and streamlining these disclosure forms is a critical component to 

the solution. 

Now that the CFPB has authority over RESPA and TILA, we believe the combination of these authorities will make it easier to 

unify the legal approach. And while some will certainly argue for 

an approach that reduces the regulatory burden on the mortgage 

industry, we strongly believe the central challenge of CFPB’s focus 

must be on improving the ability of consumers to understand disclosures. 

Timely, consistent, and clearer disclosures have the potential to 

reduce the frequency of poor financial decisions by consumers, 

many of whom lack the sophistication to read between the lines. 

Consumers will benefit from clarity and reinforcement regarding 

elements of mortgage obligations that could create future risks. 

We commend the CFPB staff for its diligent work in crafting this 

proposal and recognize that the home mortgage process is unique 

and complex and that developing a fair and reasonable method of 

ensuring early and accurate price disclosure is challenging. 

Unfortunately, whatever decisions are made with respect to the 

disclosures in this proposed rule, it will not prevent future predatory loans from being made. They will not fix the misaligned market incentives that created this current situation. But what they 

will do is empower consumers with the information they need to 

evaluate all cost factors together so that they can make the most 

informed choices possible. 

I will close today by offering three recommendations to the proposals: one, we believe that requiring all settlement and financing 

terms to be communicated well in advance of settlement with clear 

and consistent language is critical; two, require that client disclosure and acknowledgment forms be completed by the lender, not 

unlike the know-your-client protection provisions mandated in the 

securities investment marketplace; and three, the Qualified Residential Mortgage rules should require all securitized residential 

loans, qualified and other, to feature complete and valid knowyour-borrower documentation in addition to other prescribed forms 

of risk retention. 

Thank you for your time today, and I look forward to your questions. 

22 

[The prepared statement of Ms. Hardy can be found on page 189 

of the appendix.] 

Chairwoman BIGGERT. Thank you so much. 

Ms. Hughes, you are recognized for 5 minutes. 

STATEMENT OF BRENDA K. HUGHES, SENIOR VICE PRESIDENT AND RETAIL LENDING ADMINISTRATOR, FIRST FEDERAL SAVINGS BANK, ON BEHALF OF THE AMERICAN BANKERS ASSOCIATION (ABA) 

Ms. HUGHES. Thank you, Chairwoman Biggert, Ranking Member 

Gutierrez, and members of the subcommittee. 

My name is Brenda Hughes, and I am senior vice president and 

retail lending administrator at First Federal Savings Bank, a 96- 

year-old community bank in Twin Falls, Idaho. We are a $482 million institution serving the southern Idaho region. We do both portfolio lending as well as selling actively into the secondary market. 

We are also the largest lender in our region. 

I am also co-vice chair of the ABA’s Mortgage Markets Committee, and I am pleased today to testify on behalf of the American 

Bankers Association. 

Thank you for holding this hearing on the reform of mortgage 

disclosures. We commend the Consumer Financial Protection Bureau’s ongoing efforts to merge the RESPA and TILA disclosures 

as mandated by Dodd-Frank. Those efforts have been diligently undertaken with a commitment to openness and communication with 

all stakeholders. 

ABA fully supports the reformation of the existing mortgage disclosure system. We believe the RESPA and TILA forms are convoluted and complex and must be fixed. It is common knowledge 

that consumers either ignore these disclosures or don’t fully grasp 

the information contained in them. Simpler, clearer forms have 

long been a priority for all stakeholders. 

Notwithstanding our support, we do have critical concerns to 

share. In reforming the RESPA and TILA disclosure requirements, 

the Bureau is effectively rewriting the rules that control the timing 

of the loan origination process, the disclosures to consumers, and 

the legal liabilities that result. 

This is a massive and important undertaking. It determines how 

we communicate with our customers. We must get this right. The 

goal must to be achieve a workable and lasting framework of clear 

mortgage disclosures. Rigid timeframes should not trump quality. 

The Bureau has thus far demonstrated an excellent capacity to 

analyze the issues. However, they still need to carefully consider a 

great number of elements that affect the RESPA/TILA disclosure 

system. 

The Bureau should be allowed to satisfy the July 21st statutory 

deadline for completing a proposed rule by issuing an advance notice of proposed rulemaking. This would allow the Bureau to continue considering options regarding the structure of the rule and 

allow flexibility to incorporate changes without having to repropose 

additional rules. It also allows Congress to assess the Bureau’s 

progress. 

This flexibility is important because any other approach will lead 

to a difficult sequence of expensive regulatory revisions. The comVerDate Nov 24 2008 19:16 Feb 15, 2013 Jkt 076109 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\76109.TXT TERRI
23 

prehensive forms in Dodd-Frank impose many other regulatory 

changes to the mortgage loan origination process and will significantly affect the disclosures being considered under the RESPA/ 

TILA reform. It would be cumbersome, expensive, inefficient, and 

confusing to finalize a merger rule without considering these other 

rules that must be implemented. It would result in erratic and 

never-ending amendments to our compliance system. Such a result 

is unwarranted and avoidable. 

As a second consideration, we encourage disciplined and efficient 

rule writing, and we therefore offer four important principles to 

guide this process. 

First, the RESPA/TILA merger must result in simplified disclosures that are clearer for consumers. This is not an easy task, 

given the new requirements imposed in Dodd-Frank as well as current Federal, State, and local requirements. 

Second, the merger rule must incorporate all changes that emanate from the Dodd-Frank Act. If this rule misses a new requirement, then it does not achieve the goal of integration. 

Third, the Bureau should not overstep the boundaries of the 

RESPA and TILA laws, which have explicit legal boundaries that 

must be respected as the disclosures are merged. 

Fourth, and finally, adequate timeframes should provide for 

guidance and implementation of the final rule. Once finalized, the 

Bureau should commit to timely guidance and adequate time for 

implementation and interpretations. 

Thank you. I look forward to your questions. 

[The prepared statement of Ms. Hughes can be found on page 

194 of the appendix.] 

Chairwoman BIGGERT. Thank you so much, Ms. Hughes. 

Mr. Veissi, you are recognized for 5 minutes. 

STATEMENT OF MOE VEISSI, 2012 PRESIDENT, NATIONAL 

ASSOCIATION OF REALTORS® (NAR) 

Mr. VEISSI. Chairwoman Biggert and members of the subcommittee, I am honored to testify today on behalf of the over 1 

million members of the National Association of REALTORS® who 

practice in all the areas of residential and commercial real estate. 

My name is Moe Veissi. I am the broker-owner of Veissi and Associates in Miami, Florida, and I have been a REALTOR® for over 

43 years. 

Before I begin, I would like to thank the Chair and the members 

of the Financial Services Committee for all of their hard work on 

extending the National Flood Insurance Program. We strongly support your efforts for a long-term resolution to this vital program. 

The housing industry is experiencing a fragile recovery after the 

financial crisis in 2008. To prevent another financial disaster, 

many well-meaning regulations are adopted. The past several years 

have shown us that tight credit is slowing the recovery of the housing market. It is time for Congress and the Administration to seriously reexamine the breadth of some of the laws and the regulations that have come out of the financial and mortgage crisis, and 

that includes the Real Estate Settlement Procedures Act and Truth 

in Lending harmonization efforts. 

24 

NAR has participated in the effort by the Consumer Financial 

Protection Bureau to continue the Truth in Lending Act disclosures 

with RESPA and good-faith estimates. NAR strongly supports reducing the duplicative paperwork and combining those two forms, 

providing the combined document is useful and effective. The Consumer Financial Protection Bureau has done an adequate job harmonizing the good-faith estimate and the truth-in-lending disclosure. But more testing and work needs to be done, including testing on actual loans and final fine-tuning for products that are not 

plain vanilla. 

Lining up the good-faith estimates in truth-in-lending disclosure 

is the most essential part of the rulemaking and truly represents 

what Congress, industry, and most consumer groups originally intended in pushing for RESPA/TILA harmonization. The effort to 

harmonize the HUD-1 settlement statement and the final truth-inlending disclosure could be very disruptive to industry and consumers. 

Unlike the good-faith estimate and truth-in-lending disclosure, 

the two documents have very different purposes. The TILA is a 

mortgage disclosure and settlement statement, and it is a memorization of the entire transaction. Trying to tie the two together to 

apply truth-in-lending rules and RESPA rules to both could create 

severe complications. For example, at present we do not even know 

who will fill out the combined statements. And, currently, lenders 

provide truth-in-lending disclosure, and the settlement agent does 

the HUD-1. These are people with two definite and determined 

skill sets and roles in a transaction, and neither is totally equipped 

or positioned to do the other’s job or bear their liability. 

Other problems include requiring the HUD-1, 3 days before closing. And, for reference, that was tried in 1970, and Congress had 

to remove that provision because it created disasters in the closing 

process. 

Tightening RESPA tolerances is also a mistake. The HUD tolerances have failed to save consumers money, and since their implementation in 2010, closing costs have increased over 17 percent, according to several studies. The tolerances should not be expanded. 

They should be rolled back to include any lender charges. 

The solution that the National Association of REALTORS® recommends is for the Consumer Financial Protection Bureau to focus 

on fixing the initial disclosures. That would mean merging the 

good-faith estimate and truth in lending and either drop the more 

comprehensive and unnecessary effort to transform RESPA and 

TILA into a single entity or seriously curtail the effort. Currently, 

it is possibly unworkable and will make the expensive, time-consuming, and frustrating HUD RESPA form of 2009 look like a 

minor inconvenience in comparison. 

Thank you for providing the National Association of REALTORS® this opportunity to testify about the critical issues contained here. And we stand ready to work with you and the committee and your staff to find a productive solution. Thank you. 

[The prepared statement of Mr. Veissi can be found on page 206 

of the appendix.] 

Chairwoman BIGGERT. Thank you so much. 

Mr. Wilson, you are recognized for 5 minutes. 

25 

STATEMENT OF TIM WILSON, PRESIDENT, AFFILIATED BUSINESSES, LONG AND FOSTER COMPANIES, ON BEHALF OF 

THE REAL ESTATE SERVICES PROVIDERS COUNCIL, INC. 

(RESPRO®) 

Mr. WILSON. Thank you. 

Good afternoon, Chairwoman Biggert, and members of the subcommittee. My name is Tim Wilson, and I am president of affiliated businesses for Long and Foster Companies and immediate 

past chairman of RESPRO®. Long and Foster is the third-largest independent residential real 

estate brokerage firm in the Nation, with 185 real estate offices 

and 12,000 sales associates in the mid-Atlantic region. We also 

offer a full array of mortgage, title, and insurance services through 

affiliated businesses that are regulated at the Federal level under 

RESPA. 

Affiliated businesses are not new in the industry. In 2011, the 

Nation’s 500 largest residential real estate brokerage firms closed 

almost 120,000 mortgage loans and conducted over 325,000 closings 

through affiliated companies. Economic studies and consumer surveys have shown that affiliated services are competitive in cost and 

that consumers who use them have a more satisfactory home-buying experience. 

My testimony today focuses on three issues in the Bureau’s 

RESPA/TILA rulemaking that are particularly relevant for affiliated businesses. 

First, the Bureau says it is considering imposing a zero tolerance 

on fees offered by a lender’s affiliated companies, meaning that 

these charges at closing could not exceed those disclosed in the loan 

estimate. Fees charged by unaffiliated companies would continue to 

be subject to the current 10 percent tolerance. 

The Bureau’s reasoning behind this proposed zero tolerance is 

that lenders should be better able to estimate the cost of services 

provided by their affiliated companies. This reasoning, however, is 

faulty because the cost of many third-party services are subject to 

variables unknown to both affiliated and unaffiliated lenders at the 

time the loan estimate would be provided. 

In addition, the Bureau says it also may propose to trigger the 

lender’s delivery of the loan estimate after only receiving limited 

information. Imposing a zero tolerance on affiliated services, in addition to limiting the information the lender can collect upon application, would create a difficult compliance burden on affiliated 

lenders that would place them at an unfair competitive advantage. 

Second, RESPRO® believes that the Bureau needs to integrate 

its RESPA/TILA rulemaking with the points and fees definition 

that is being separately developed in its QM rulemaking. A mortgage loan cannot be a QM if the total points and fees paid by the 

consumer exceed 3 percent of the loan amount. Affiliated businesses are particularly affected because the fees that a consumer 

pays to a lender’s affiliated company count toward the 3 percent 

cap but not fees paid to an unaffiliated company. 

As a result, loans in which a lender’s affiliated company is used 

would most likely not qualify as QMs, even if the affiliated company’s fees are equal to or even lower than an unaffiliated company’s fees. Affiliated companies like Long and Foster would need 

26 

to discontinue offering either mortgage or title services in conjunction with those loans in which the caps would be exceeded, which 

would decrease competition and increase the cost of mortgage credit, particularly for low- and middle-income borrowers. 

Moreover, the Bureau has announced that it is considering including additional fees in the finance charge, many of which also 

would count toward the points and fees threshold. This would significantly increase the percentage of affiliated loans that would exceed the points and fees cap, which would further limit competition. 

RESPRO® has two recommendations to minimize this potentially 

harmful impact. First, we urge Congress to pass the Consumer 

Mortgage Choice Act, which excludes from the definition of points 

and fees charges for title services regardless of affiliation. Second, 

it is essential that the Bureau research the potential impact of including these additional fees in the points and fees caps and disclose it to the public for comment in its proposed rule. 

Finally, I would like to comment on the Bureau’s proposal to require that the settlement disclosure be provided to the consumer 

3 days before closing. 

Long and Foster’s affiliated mortgage company, Prosperity Mortgage, has some experience with the issues involved in providing the 

current HUD-1 in advance of the closing. Under its Target Date 

program, Prosperity Mortgage pays an incentive bonus to its operation team members when the HUD-1 is delivered to the consumer 

2 days in advance of their closing date. So far in 2012, we have 

achieved that goal in 56 percent of our transactions. Consumers 

who receive their HUD-1, 2 days in advance of their closing date 

have had a higher documented customer satisfaction score, based 

on independent third-party evaluations. 

RESPRO® supports the concept of a 3-day requirement in principle, and we believe that affiliated businesses could be more capable of complying with this requirement because of the efficiencies 

associated with many of the services needed to close the loan under 

one corporate entity. However, the ultimate viability of such a concept and its ultimate value to the consumer lies in the specifics of 

the proposal. In our written testimony, we have identified many 

issues that will need to be addressed in any proposed and final 3- 

day requirement. 

Thank you for the opportunity to testify before you today, and I 

will be glad to answer any questions. 

[The prepared statement of Mr. Wilson can be found on page 212 

of the appendix.] 

Chairwoman BIGGERT. Thank you, Mr. Wilson. 

We will now proceed to Member questions. And I will give myself 

5 minutes to ask questions. Let me start with Mr. Abbinante. 

I asked a question of Mr. Date about whether the CFPB has the 

authority to resolve conflicts between RESPA and TILA, and he 

said he thought that they did. 

Do you think Congress needs to fix any RESPA/TILA conflicts? 

Mr. ABBINANTE. I think it is a tough question, and I heard Mr. 

Date’s response, as well, where he said he thought he had the authority. I am certainly not a legislative expert, but I think there 

is certainly room to argue that they may not have that authority, 

27 

and, in fact, it may require action by Congress to address some of 

these issues. 

Chairwoman BIGGERT. We certainly had a hard time in the last 

few years trying to get the two of them together to resolve—the two 

bodies to resolve that, so I think that there is a problem there. 

But what are the conflicts? 

Mr. ABBINANTE. Certainly, from my perspective, I think we look 

at a couple of things: the timing of disclosure. TILA requires a 3- 

day provision. RESPA doesn’t have a 3-day rule. Forms, who will 

complete them? Today, TILA is completed by the lender, as is the 

GFE, and what we call today the HUD-1 is completed by the settlement community. 

And then we have the issue of standardized forms versus model 

forms. Under RESPA, it is a standardized form. Under TILA, it is 

a model form. We believe that using a model form will only cause 

more confusion and increase costs tremendously throughout the 

closing process. We would be certainly much more in favor of 

standardized forms. I think it gives the industry and ultimately the 

consumer a better position in terms of understanding what they 

are looking at, because the information they are receiving should 

be consistent no matter who they are using. 

Chairwoman BIGGERT. Okay. Thank you. 

Then, for anyone, the CFPB has indicated that it may require all 

and final settlement charges to be disclosed 3 days before closing. 

And you have all been talking about this. I think that we had a 

bill which did pass to make the 3 days, but I am not convinced yet. 

As I said, in my former life I was a real estate attorney, and I 

know that, so many times, standing by a fax machine—we didn’t 

do as much with email then—by a fax machine, waiting for the 

final decisions to come over so that I could tell the buyer how much 

money they had to bring to closing and whether they had enough 

or they had to run back to the bank before it closed. 

And so many times there were things that were not settled and 

came up very late—for example, fences, where was the fence? Was 

it on the other person’s property? Was it on that property? And 

were we going to have to work that out? And a couple of times 

where sellers had not cleared everything out of the garage, or 

something like that that caused a lot of angst at the very end, very 

close to the closing. 

So I wonder, would that all happen 3 days before so that it would 

be resolved? It really seems to me that when you get there, there 

are still some problems. Now, having to have an attorney in Illinois 

made a big difference, but would anybody like to address that? 

Should the CFPB maybe consider a multistep disclosure process? 

Ms. CANFIELD. Chairwoman Biggert, maybe I can address this. 

In the appendix to our testimony, we wrote a short White Paper 

on the history of this actual experience. 

When RESPA was enacted in the mid-1970s, Chairman Proxmire 

put in a 12-day waiting period. And after it was implemented, the 

regulations and everything were implemented, the Congress ended 

up repealing it 6 months later because there was such dislocation 

around the country. What happened is that people were moving out 

of their homes, and because of the artificial waiting requirement, 

they had to stay in hotels, other temporary lodgings—they had all 

28 

their belongings in moving vans—until the 12-day requirement was 

met. So there was an uproar. It was enormous— 

Chairwoman BIGGERT. I remember that. 

Ms. CANFIELD. Okay. So I don’t think it would be a good idea to 

repeat that experience. 

But I do think that what we are recommending gets you part of 

the way there. I understand the goal, but if you look at the fourstep disclosure regimen we were talking about, what we are saying 

is that within 3 days of closing, you would get a final loan estimate. And because the lenders currently have a zero percent tolerance on their costs from the time the initial good-faith estimate is 

sent to the consumer all the way through closing, the differences 

between the costs of the final loan estimate and closing really 

wouldn’t be allowed to change for the lender’s costs. 

There would be some settlement charges that could change, but, 

again, those are subject to a 10 percent tolerance from the beginning of the initial good-faith estimate to the closing document. So 

there is some limitation as to how much those— 

Chairwoman BIGGERT. Would that be true of what the CFPB is 

proposing? Because if it is zero tolerance, than whenever it is finished— 

Ms. CANFIELD. There currently is a zero tolerance for lender’s 

costs, but then there is a 10 percent tolerance for settlement-related costs. They are suggesting that maybe there be a zero tolerance applied for settlement costs, as well. I think that would be 

quite problematic because the lenders don’t control—Regulation 10 

prohibits them from controlling those costs. So I think it might actually increase settlement charges if that were to be done. 

But if you do have a final loan estimate 3 days before closing and 

there are the existing tolerances that are kept in place, the only 

costs that could change between the final loan estimate and the 

closing document would be changes related to the property, such as 

those you were describing, or if the person changed the closing 

date, the odd-days interest and transaction taxes would change. 

But they would be relatively minor changes. 

Chairwoman BIGGERT. Thank you. And my time has expired. 

Mr. Cleaver from Missouri, you are recognized for 5 minutes. 

Mr. CLEAVER. Thank you, Madam Chairwoman. And thank you 

for holding this hearing, because I think this is extremely important. We did a lot of work to try to create an opportunity for consumers to be protected. 

And, Mr. Abbinante, on the 3-day requirement, you have said 

that the 3-day requirement might cause things to change over that 

3-day period. Give me an example of some of the things that could 

change that would impact the consumer. 

Mr. ABBINANTE. Sure. In my experience of 35 years, both as an 

attorney and then as a member of the title industry, it is not unusual for a walk-through to occur just prior to the closing, sometimes literally hours before the closing. So the closing is scheduled 

at 1:00, the buyer wants to see the property and make sure there 

was no damage, that everything that was supposed to be left, in 

fact, was left or if something was taken and something else substituted. It happens all the time. They show up at the closing, 

29 

haven’t had a chance to talk to each other about it, so the first time 

the issue is raised is at the closing. 

And then you get into, is this going to require an adjustment in 

price? Is this going to require a holdback? Is this going to require 

damage to be repaired? And do any of these things then prevent 

the closing from occurring? Does it affect the loan-to-value ratio? 

Does it affect the ability to close that day? Because a change may, 

under the CFPB rule, require a new 3-day waiting period because 

something has changed, something substantial. If it requires a new 

3-day waiting period, will the borrower now lose the lock on that 

loan? Or can they waive that? 

So I think the situation in theory makes a lot of sense. Look, I 

think our goal, everyone’s goal is to protect the consumer. And I 

don’t think anyone on this panel or anyone else that is involved in 

the real estate industry would argue with that. We want the consumer to be protected, we want them to have the information. But 

there are just some practicalities that occur all the time in the 

process, and frequently occur the day of closing. 

Mr. CLEAVER. I am going to stay on that subject, but, Ms. Hardy, 

and you, too, Mr. Abbinante, do we need 10 days? Do we need 15 

days? Do we need 20 days? Do we need 30 days? What happens if 

the consumer is subjected to bait-and-switch? People buy a home, 

and they are—and I can say this in front of everybody here because 

everybody here has bought a home, and most people in here are 

guilty. There is probably not a person in here who owns a home 

who read every line in the contract. If you did, you are rare, and 

somebody needs to give you some apples or something. The chances 

are not high. 

So everybody wants to sign; I want to get into my new home. So 

aren’t they more subject to bait-and-switch, Ms. Hardy, that things 

can actually—some new stuff ends up in the contract? 

Ms. HARDY. With a longer time period? 

Mr. CLEAVER. Yes. 

Ms. HARDY. I think that we think that the 3-day period sounds 

reasonable. It provides enough time, in terms of the loan disclosure 

documents, for them to get additional insight from those who have 

expertise. We are flexible around the settlement disclosures because we recognize that there is a need for some flexibility toward 

the end of the process. 

Mr. CLEAVER. Do you agree with that, Mr. Abbinante? 

Mr. ABBINANTE. I agree that there has to be some rethinking in 

terms of flexibility, absolutely. Otherwise, you are stuck with the 

problem of, it is a change; does it require a new 3-day waiting period? And if it does, what happens to the borrower’s lock on the 

loan or the ability to complete the transaction? Because, frequently, 

the furniture is sitting on the truck, parked out in front, waiting 

to move into the new property. Who picks up that cost? Or how 

does the seller go close on their transaction, because they needed 

the cash from the transaction that they are involved in so they can 

walk next-door and buy their house? 

Mr. CLEAVER. Now, during this 3-day period, we are automatically assuming that the interest rate doesn’t change. 

Mr. COSGROVE. Congressman, if I may add, as well, in 2010, 

RESPA put in a provision for the tolerances that cannot go over 10 

30 

percent—that were talked about earlier. And I think that also goes 

a long way toward eliminating any possibility of bait-and-switch, 

because the lender is locked into the lender fees at application. 

And, also, another thing that we are talking about, the goal here 

is—everybody mentioned that there has been just a pancake of 

mortgage disclosures, that six disclosures say the same thing, and 

the borrower checks out. And everybody has acknowledged that the 

borrower doesn’t read all those disclosures. I think the goal here 

is, if we truly get simplification from the CFPB, that would go a 

long way—if the borrowers see that the disclosures have been reduced and they truly read all the documents, both at application 

and closing, that would go a long way to eliminate any bait-andswitch that is in the marketplace today, which I think is very little. 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Chairwoman BIGGERT. Thank you. And I might note, Mr. Cleaver, I don’t want to be a ‘‘Goody Two-Shoes,’’ but I did read every 

line to my clients. And they were dying by the end, but it was my 

job. 

Mr. CLEAVER. She is an attorney. 

Chairwoman BIGGERT. Mr. McHenry from North Carolina is recognized for 5 minutes. 

Mr. MCHENRY. Thank you, Madam Chairwoman. And I am glad 

I have finally met someone who has. 

I am still licensed as a REALTOR® in the State of North Carolina, but I want to concur with my colleague across the aisle that 

the stack of information—we have mandated so much disclosure, 

that there is no disclosure now. I want to be gentle about how I 

say that, and I am grateful that there are great legal minds who 

actually will go through those documents, and I am glad I trust my 

attorney—in the State of North Carolina, we have attorneys do 

closings, rather than settlement companies—but I am very grateful 

for that, and I put a lot of trust in him. 

So, I would say to my colleague, I was going to begin by asking 

the panel if they have actually read all the disclosure documents— 

not to impair any reputations with the business you are in. 

But I want to just understand this because, in the first panel, 

Mr. Date, I think he has a very sharp mind, and is a very talented 

individual, but last week he apparently referenced the fact that he 

didn’t go through all the documents. And so we have a very highranking government official who is in charge of refining this process, and when he has his closing, he doesn’t go through it. It is 

clear we have a problem here. 

So the question here is, what is the appropriate amount of information a consumer should have before they go to the closing table, 

before all their stuff is in the truck outside the settlement company 

or outside the attorney’s office, they come in and they find out 

there is a mistake. That means hotel rooms, that means kids displaced—big troubles. Not that this doesn’t happen now, but how 

can we make sure that consumer has the appropriate amount of information ahead of time? What is that balance? 

What are the essential ingredients? Is it the HUD-1? We say you 

are supposed to get certain disclosures beforehand. But what are 

the essential ingredients a consumer needs to know before he goes 

31 

in? Can we figure that out, and can the consumer get that 3 days 

in advance? Could that work? 

So I just want to sort of offer that as a broad question. Start with 

Mr. Wilson, and we could just go down the list here and you all 

could make your comments on that. 

Mr. WILSON. I believe the HUD-1 is the one of the few forms they 

do, in fact, focus on, because that is, in fact, where the seller’s proceeds come from and where the buyer’s check is written from, that 

is where the number comes from. So having that what I would consider very important document to them 3 days ahead of time, I 

would be a fan of that. 

There would be a lot of rules around that. I think you would 

have to build in some flexibility for a garbage disposal or some 

small item that could be adjusted at close based on the final walkthrough, as one of the witnesses said. 

But, I am looking for more than just doing what is right for the 

consumer; I am looking for a good customer experience. And I 

think for last-minute changes at closing that happen in the last 

hour, nobody feels good about that. And it happens too often in our 

industry, from my perspective. This will force everybody in our industry to be better at what we do. The real estate contracts that 

are written in 30 days needs to be written in 45 days. And everybody should—if you need it there 3 days ahead of time, then you 

get it there 3 days ahead of time. We pay a bonus to do that today, 

2 days ahead of time. We do it for a reason: Because we want a 

great customer experience, and that gives us good referrals. 

So, I think it can be done, but I think we have to be careful and 

protect not just the buyer’s side of the transaction but also the seller’s side. And done right, it can be done. 

Mr. MCHENRY. Mr. Veissi? Or down the line, if you all would like 

to comment? 

Mr. VEISSI. There is little disagreement in the fact that when 

there are minor instances that impact the closing, that would create the kind of experience at the end that just doesn’t occur. 

I am reminded of the time when I went to Disneyworld and the 

folks kept telling me where I parked, where I parked, where I 

parked. And they did that because they knew I was going to have 

8 hours’ worth of wonderful experiences, but they also knew that 

if I had a lousy time trying to find my car in 95-degree weather 

with humidity, it would be horrible. And that is what happens at 

the closing statement when we don’t get advance information. 

So advance information with the respect of telling our customers 

and our clients exactly what is going to happen—not necessarily 

changing it or not necessarily concerned about giving it a 3-day or 

a 5-day or a 10-day, but making sure that they understand upfront 

what the situation is so that their experience at the end is exactly 

what they had been wanting to do, and that is to close on that 

home. 

Ms. HUGHES. I would agree that we just need clarity in the disclosures that we have presently. I am not sure more disclosures are 

going to solve the issue. RESPA, as it is currently written, allows 

for a provision for consumers to receive their settlement statement 

24 hours at a minimum in advance of closing if they desire. And 

that settlement statement, I agree, is the key to telling them what 

32 

they need, and if initial disclosures are done appropriately, that 

should be all that is required. 

I don’t have an issue with an additional disclosure required 3 

days before closing. I believe that my buyers and my REALTORS® 

in my community will have a huge issue with it, because it is just 

an additional 3-day delay in a process that is already too cumbersome. 

Ms. HARDY. I think our concern is making sure that the egregious and abusive activities don’t happen. And so, to the extent 

that simplification increases the likelihood that consumers will actually read the documents that are set before them and that an additional time period provides them with opportunities to verify 

their understanding of the documents with independent experts, 

we think that that is useful. 

Mr. COSGROVE. I would say that we all have a passion for customer service. Referrals is how we make a living. At my company, 

we have over a 99 percent referral rate, and we are very proud of 

that. 

I find it somewhat ironic that after 26 years in the business— 

and we talk about fixing what is broke. The process that we have 

tried over the 26 years is to add disclosure after disclosure, and we 

have pancaked disclosures for 26 years, thinking more is the answer. And I find it ironic that I am sitting here contemplating another disclosure, 3 days before closing. And though I understand 

what we are trying to accomplish— 

Mr. MCHENRY. No, that is not my question. I am just asking 

what the consumer needs to know ahead of time. 

My time has expired, so if we could just keep this brief and wrap 

up. I want to know what the consumer needs to know, because that 

gets to the root of the whole disclosure process. 

Mr. COSGROVE. I think the consumer needs to know the pertinent lending information is payment, downpayment, all the settlement charges, and the lender fees. And although I do believe that 

at closing a 3-day disclosure potentially could be problematic because, as we are talking about here, things happen within 3 days 

of the closing that a lot of times can’t be foreseen. 

Mr. MCHENRY. Sure. 

Ms. CANFIELD. Thank you. Very quickly, I think it is important 

to design the disclosures so that the consumers receive a disclosure 

relevant to the particular loan product of their choice. That would 

also help prevent a bait-and-switch situation. So if a consumer has 

chosen a fixed-rate product, they should get the same disclosure 

form from the beginning of the transaction through to the end, 

through closing, so that they are seeing the same document all the 

way through the transaction. 

And at the end they get a HUD-1 that would be a revised document that is similar in style to what they received at the beginning 

at the transaction, accompanied by a detailed document that would 

detail where all the costs and where all the fees are going. But that 

is what I think is important. 

Mr. ABBINANTE. Congressman, I would suggest that they certainly would need to know their downpayment. You could certainly 

tell them that 3 days before closing. They would need to know their 

interest rate. You could tell them that before closing. 

33 

It becomes a little bit more questionable, if there is a change that 

occurs, whether you can actually give them the cash they need to 

bring to closing. Because if that walkthrough occurs on the day of 

closing, the cash they may need may change. It could also affect 

the itemized disbursement that both consumers at the closing require and should have, not just the buyer but the seller as well. 

Chairwoman BIGGERT. Thank you. 

Mr. Sherman from California, you are recognized for 5 minutes. 

Mr. SHERMAN. Thank you. 

Mr. Veissi, I want to commend you for bringing to our attention 

the importance of passing the bill to extend the Flood Insurance 

Program. This is critically important in so many parts of the country. Even I know it is critically important. I have been working on 

it, and I represent a desert where we built a city. 

Now, on page 3 of your testimony, you talk about the interconnection of the rules we are dealing with now with rules that are 

probably not going to be available anytime soon. The Consumer Financial Protection Bureau plans to issue rules that we are discussing by July 21st, but it will be long after that that we find out 

what is a Qualified Mortgage and what is a Qualified Residential 

Mortgage, when we define what mortgages you have to have a risk 

retention—and I think it is going to be very few banks are going 

to want to make those mortgages—and what is the definition of an 

ability to pay. 

Should we delay the RESPA and TILA rule finalization until we 

can make sure it is coordinated with QM and QRM? 

Mr. VEISSI. There is no question in my mind that you don’t want 

to do anything right now that would otherwise hurt a fledgling recovery of the real estate marketplace in this country. And if you 

were to impose rules and regulations without total comprehension 

of what those rules and regulations would be, I think you would 

do that. 

So I would want to get it right the first time out of the box. That 

would be my simple answer to your question. 

Mr. SHERMAN. Thank you. Let’s hope they do that, because the 

last thing my area needs is another precipitous decline in home 

values. 

Mr. Abbinante, what do you think is the most important one or 

two things that the CFPB could do to protect consumers during the 

closing process? 

Mr. ABBINANTE. It would seem to me the thing that is most critical to the consumer is information that is useful and easily understood in a format that they can read and not need a special technical degree to figure out how forms interrelate one to the other. 

So simplification, easily understood, easy to use—the kind of basic 

premise of prudent business. 

Mr. SHERMAN. I am going to turn to Mr. Cosgrove, but I am 

going to add one more concept, and that is shorter. Because I know 

what is politically correct. Politically correct is to take anything 

that anybody could argue needs to be disclosed to the consumer 

and require it to be in 20-point type on red paper. The result to 

the consumer is 400 pages of red paper with everything in 20-point 

type. And just putting it in 20-point type isn’t going to get me to 

read it, as a consumer, if it goes on for hundreds of pages. 

34 

Mr. Cosgrove, what can we do to prevent a layering of disclosure 

requirements in increasingly large type on increasingly brighter 

shades of red paper? 

Mr. COSGROVE. I think the CFPB has truly an opportunity that 

has not been in front of us for 35 years, since RESPA, and the 

TILA document, the good-faith estimate and the closing document, 

was in different regulatory bodies. So we have an opportunity and 

the CFPB has an opportunity that we have not had as an industry 

in this country for 35 years. 

And if they would work with the industry and all the stakeholders, consumer groups, everyone, and truly work with the 

States—because you have municipalities, you have State disclosures, you have Federal disclosures, FHA disclosures, VA disclosures—again, the pancaking of 26 years of, the answer has been 

more disclosures— 

Mr. SHERMAN. Let me just try to squeeze one more thing in. And 

I hope that Mr. Abbinante, but other witnesses as well, would respond for our record, but, more importantly, bring to the CFPB’s 

attention: What are the situations where you can make a change 

in the last 3 days? The last thing I want to do is lose my 3 percent 

mortgage because we have to delay closing 3 days because of a garbage disposal. And, at the same time, what are the changes that 

would require restarting that 3-day period? 

I know my time has elapsed, but I have been through a few of 

these closings, and the last thing I want to do is have to choose 

between getting a $100 reduction in the purchase price because the 

garbage disposal doesn’t work on the one hand and having to come 

back to the closing 3 days later, endangering my loan, endangering 

the sale price, et cetera, and, as some of the witnesses pointed out, 

endangering the seller’s ability to close on his or her property because I can’t give up my check until you give me the hundred 

bucks for the garbage disposal or something that minor. 

So I look forward to reading your comments. 

And I yield back to the chairwoman. 

Chairwoman BIGGERT. Thank you, Mr. Sherman. 

The gentleman from North Carolina, Mr. Watt, whom I believe 

is also a former real estate attorney, is recognized for 5 minutes. 

Mr. WATT. I don’t know why you malign me that way, gratuitously. But you are correct. I did a lot of real estate work, which 

is why I came. I actually just wanted to hear the questions. I 

couldn’t get here for the testimony, but I will review it. 

This is a subject that is very difficult, and I won’t belabor that 

point. So I don’t think I have any questions because I am afraid 

I would repeat something that somebody has already asked. So I 

will review the record, and if I have any questions, I will submit 

them in writing. 

Chairwoman BIGGERT. All right. Thank you. 

That gives me an opportunity to—I would like to ask just a couple of questions, and I recognize myself. 

Ms. Hughes, on page 8 of your testimony, you state that one complication of the merger of RESPA and TILA disclosures is the question of whether the merged document will be prepared by the settlement agent or the lender, creditor. Who should prepare the document, and why? And I think, particularly, I am concerned about 

35 

who would bear the liability if the merged document form isn’t correct? 

Ms. HUGHES. Presently—and Idaho is a settlement agent State, 

so we do not have attorneys who do our closing documents for us. 

But we need to define within the regulations who is responsible for 

completion of those documents. If they are combined into one document and we utilize a settlement agent to prepare that closing, 

who is going to prepare that document? Are they going to do it? 

Are we going to do it? Are we responsible for their data? Are they 

responsible for our data? Are they responsible for the regulatory 

disclosures that go into that? There just needs to be some very 

clear clarification as to how that breaks out. 

Chairwoman BIGGERT. I think that is something that we probably should have asked earlier, but I think it is a very good question and something that we really have to look at. So I thank you 

for that. 

Then, for the witnesses, we haven’t talked much about costs. So 

what are the potential costs of new mortgage disclosures to businesses, particularly lenders and other real estate service providers 

that are small businesses? What is going to happen with them? 

Mr. Veissi? 

Mr. VEISSI. Some of the documentation that we have seen with 

reference to that would add additional cost in the form of labor at 

the time of closing, extending the closing itself, having more people 

involved in the process, that cost being either absorbed by small 

business—and that is not a great thing to have happen right now— 

or absorbed by the folks who are trying to make the purchase of 

the property or the seller in those terms. 

So more paperwork means more people. More people means more 

money, more time. It is not an efficient and economical way to 

process a closing. 

Chairwoman BIGGERT. Thank you. 

Would anybody else care to address this? 

Ms. CANFIELD. Yes, I would like to make a comment. 

That is why it is so important—this is going to be a very costly 

endeavor, to change all of the systems, do all the training, do the 

audit, et cetera. So that is why it is so important that all the rule 

changes, the substantive rule changes and the related disclosures 

changes, be done once. Because if you do it on a piecemeal basis, 

the costs are just going to be astronomical. In addition, the disclosures resulting from that piecemeal disclosure process will be even 

more confusing to consumers than they are today. 

Mr. COSGROVE. And that, as a business owner— 

Chairwoman BIGGERT. Mr. Cosgrove? 

Mr. COSGROVE. Thank you, Madam Chairwoman. As a business 

owner, there is no doubt the last few years, as piecemeal regulations have come, we continually are working on our systems. And 

even a company like ours, a small business, is spending hundreds 

of thousands of dollars on systems and people. And all that does 

is increase the cost to our customers. 

Chairwoman BIGGERT. Thank you. 

Mr. ABBINANTE. Chairwoman Biggert? 

Chairwoman BIGGERT. Yes? 

36 

Mr. ABBINANTE. I would like to, if I may, just add to both questions you have asked, the previous question about who. 

I think today the system—and when we talk about this, we want 

to focus on what is not working. Today, I don’t think it is a question of what is not working. Lenders today adequately, accurately 

fill out the forms that have to do with the GFE and with the TILA 

requirements. And the settlement agents across the country, regardless of the State, whether it is an attorney, a settlement agent, 

a title company, they fill out the forms relative to the HUD-1. We 

have expertise that exists, and it would seem to me this current 

proposal is confusing or creating a murky situation that we don’t 

need to create. 

In terms of costs, I can only reiterate what everyone else has 

said, and that is: It is the cost of software, it is the cost of training, 

it is the cost of implementation. And we have a pretty good handle 

on this because, just 2 years ago, we did this with the last changes 

to HUD in 2010. And it wasn’t an easy set-to at that time, especially when you had to deal with over 400 FAQs. And as responses 

came in, things were constantly changing. It just seems that there 

is a better way to do this. 

Mr. COSGROVE. I would agree, the system is working much better 

today than it has in the past. 

Chairwoman BIGGERT. Thank you so much. 

Mr. Cleaver, do you have another question? 

Mr. CLEAVER. I just have one question, Madam Chairwoman. 

Chairwoman BIGGERT. You are recognized for 5 minutes. 

Mr. CLEAVER. And this is related to the earlier discussion we 

had. And maybe, Mr. Cosgrove, this would be directed to you. 

How often at a closing have you ever experienced a consumer 

contesting the cost? How often, if ever? 

Mr. COSGROVE. I can’t remember a scenario in which a consumer 

of ours has come in and contested the cost in the last 5 years. 

Mr. CLEAVER. Anybody else have any—yes, Ms. Hughes? 

Ms. HUGHES. I have been in real estate lending for 22 years, and 

I can never recall a borrower coming in and saying, ‘‘I don’t understand what these fees are.’’ I believe if you explain what the process is upfront and you get to the end and it is the same, it is all 

about the education along the way. And I can never recall one instance. 

Mr. CLEAVER. Could it also be that, as somebody said, the moving van is outside? 

Mr. COSGROVE. No. 

Ms. CANFIELD. Actually, I think there have been changes that 

have been implemented in—one of the things that happened in 

2010—a change that was made in 2010 was that there was a zero 

percent tolerance on the lender’s costs from the beginning of the 

transaction to the end, and there is a 10 percent tolerance on thirdparty costs. So what can change has been limited. 

The changes that could occur between the final documents that 

you get 3 days before closing today and the actual closing documents are related to if the closing date changes, the odd-days interest and taxes might change the calculations, or changes related to 

the property itself, such as was described by Mr. Abbinante and 

Chairwoman Biggert. 

37 

Mr. CLEAVER. Hypothetically, if there is a change—and you answered the question exactly how I thought you would answer it— 

isn’t it also possible because of that, someone would ignore, move 

over, not recognize cost changes? 

Ms. CANFIELD. I think you might be concerned about the baitand-switch situation. Is that what you are most concerned about? 

Mr. CLEAVER. Yes. 

Ms. CANFIELD. I think, first of all, there are currently laws in 

place that prohibit that. So that would be mortgage fraud. It would 

be a fraudulent loan. 

Second, with the tolerances that are currently in place, your ability to do that is very limited. 

Third, I think with even clearer disclosures, which is what we 

have been talking about, the consumer would be able to see that 

they are not getting the loan product that they had signed up for 

when they chose the loan product at the beginning of the process. 

Mr. CLEAVER. Thank you. 

Let me yield to Mr. Watt from North Carolina, because the time 

is running out. 

Mr. WATT. Actually, they say we have to get out of the room. 

I had an unrelated question that occurred to me. It has come to 

my attention that, because of the meltdown, there seems to be a 

lot more conservatism in appraisals now. Mr. Cosgrove and Mr. 

Abbinante in particular, have you all experienced that and is there 

any recourse if both the seller and the buyer believe that the appraisal is too conservative, too low? 

Mr. COSGROVE. I would believe that today the system is fixed. 

And what I mean by that, the loan officer, no one involved in the 

lending process, the real estate agent, the borrowers are allowed to 

have contact or influence the appraiser. So the appraiser is truly 

independent. And we believe— 

Mr. WATT. But that assumes that appraising is a science that is 

so precise that nobody ever makes a mistake. What does one do if 

they disagree with the appraisal? 

Mr. COSGROVE. If we have a consumer who disagrees with the 

appraisal, most times we will make a business decision to get a second opinion, pay for a second opinion, which we pay for as a company, and then we analyze both of the appraisals and make an underwriting decision. 

Mr. WATT. Okay. That is not related to this hearing. I appreciate 

the chairwoman— 

Chairwoman BIGGERT. Thank you, Mr. Watt, and thank you, Mr. 

Cleaver. I might note that we are having a hearing on the appraisals on June 28th, next week. So we will see you there. 

I would like to thank you all. You have been a great panel with 

a lot of information that you have given us on a topic that seems 

to go on and on and on, but it hasn’t been fixed yet, and I think 

you have been very helpful. 

38 

The Chair notes that some Members may have additional questions for this panel, that they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for 

Members to submit written questions to these witnesses and to 

place their responses in the record. 

With that, this hearing is adjourned. 

[Whereupon, at 4:10 p.m., the hearing was adjourned.] 

(39) 

A P P E N D I X 

June 20, 2012 

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