1,099 Pages to Propose a Three-page Mortgage Disclosure – CFPB Explains Why
Ever wonder why it takes the governmentrnso many words to say…maybe not so much? </p
So did a visitor to the ConsumerrnFinancial Protection Bureau’s (CFBP) blog. The blog features someone (something?) calledrnThe Explainer who answers consumer questionsrnand this time the question was about the process of devising new and supposedlyrnsimpler mortgage disclosures. Thernvisitor, using the name “Interested” referenced a recent notice of proposedrnrulemaking published by CFBP regarding the disclosures. The notice was 1,099 pages long. “Why,” Interested asked, “does it take sornmany pages to create something that’s supposed to be easy to use andrnunderstand?” </p
Yeah, why? In case you have wondered this yourself, herernis the explanation. For the record, it runsrnexactly 900 words. Maybe we should put The Explainer in charge of allrngovernment documents. </p
This is a great question, one you’rernnot alone in asking – 1,099 is a lot of pages, as those of us who were involvedrnin writing them can attest.</p
Let’s start with some background.rnCurrently, two federal laws – the Truth in Lending Act (TILA) and the RealrnEstate Settlement Procedures Act (RESPA) – mandate that consumers receiverndisclosures of certain information about mortgage loans. The Dodd-Frank Actrnrequired the CFPB to propose a rule to combine the TILA and RESPA disclosures.</p
If you want to see the new combinedrndisclosures, combine and simplify existing mortgage disclosures check them out here.rnIf you want to see what the proposal means for you, we’ve provided summaries,rnone on what it would meanrnfor consumers and one with morerntechnical detail. </p
You said “propose a rule to combinernthe disclosures” instead of just “propose combined disclosures.” Why?<br /It's an important distinction. The rule explains how we would expect industryrnto use the disclosures: when to issue them, how they apply to different loans,rnwhat various terms mean, etc.</p
And that proposed rule is 1,099rnpages?<br /Actually, no. We are not proposing 1,099 pages of new regulations. That pagerncount is for the notice of the proposed rule, not the rule. Like noticesrnof proposed rulemaking issued by other agencies (particularly the FederalrnReserve Board), our proposal consists of three basic parts: (1) the preamblernexplaining the proposal; (2) the text of the proposed regulations; and (3) guidancernon how to comply with those regulations.</p
In terms of pages, the newrnregulations are only a small part. Most of the pages explain what we are doingrnand why we are doing it. As required by law, we analyze the costs and benefitsrnof the proposal for consumers and industry. We also provide thorough guidancernon how to comply including samples of completed forms, which the industryrnrequested during our outreach and Small Business Review Panel process. Becausernof the variability of mortgage loan and real estate transactions, industryrnwanted specific guidance for many different potential scenarios. This added tornthe page count.</p
Here’s how the notice breaks down:</p<table cellpadding="2" cellspacing="0" border="1"<thead <tr<td width="525"
Proposedrn amendments to regulations</p<ul type="disc"
Proposedrn guidance regarding compliance with the amended regulations</p</td<td
The preamble is long.<br /It is. The preamble provides context for the proposed forms and regulatoryrnchanges. The mortgage market is big, and mortgage disclosure regulation has 43rnyears of history. Also, before writing the rule, we spent a lot of time talkingrnto industry and consumers and analyzing costs and benefits. That's a lot ofrncontext, and that means a long preamble.</p
Why bother with all this context?<br /First, some of it is required by law. Second, we believe that part of ourrncommitment to open government is providing more rather than less informationrnabout our work. Finally, we want yourrncomments to help us understand the market better, and providing context canrnlead to more informative comments. Explaining what we considered in writing thernproposal makes it easier to craft specific responses or to draw our attentionrnto something you think we’ve missed. Comments that provide new insight orrninformation can be the ones that have the greatest impact on what we do next.</p
That leaves 415 pages. Only part ofrnthat is new rules, though. What else is left?<br /The technical and conforming amendments make sure the new rules don't conflictrnwith existing rules, that they make the right cross-references, etc. Thisrnactually accounts for more than half of the proposed regulatory language.</p
The proposed guidance explains whatrncertain regulatory language means in context. For example, the phrase “withinrnthree business days” appears a lot in this notice, as in: a creditor mustrndeliver the loan estimate disclosure “within three business days” ofrnapplication. But what counts as a business day? If a bank is closed the Fridayrnbefore an Independence Day that falls on Saturday, does that Friday count as arnbusiness day? (Answer for purposes of delivery of this disclosure: yes.)rnProviding guidance that clarifies issues like these can save time, energy, andrncosts for both industry and regulators.</p
And the signature gets its own page?<br /Yes. We don't expect a lot of comments on that page.</p
So where can I comment on thisrnnotice of proposed rulemaking?<br /First, we hope you'll take a look at the Know Before You Owernproject that helped us develop the proposed disclosures. Then, reviewrnthe rule and submit your comments at Regulations.gov.
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