Title Matters – President’s Message: The Future of the CFPB and the Reintroduction of Title Insurance-Related Legislation

It did not take long for NAILTA to hit the ground running in 2017!

Members of NAILTA were in Washington D.C., this week to meet with policymakers at the Consumer Financial Protection Bureau (CFPB) and to discuss the impact of HR 517, the Ensure Fair Prices in Title Insurance Act, that was reintroduced on January 13, 2017 by Representative Keith Ellison (D-MN).

More on HR 517 in a moment, but first the CFPB news.

There seems to be a decent amount of chatter on the national level concerning the future of the CFPB, RESPA enforcement and the role of government in our industry since the election.  Whether the new administration will curtail Fannie and Freddie’s role in mortgage finance?  Whether the CFPB will be shuttered?  Whether RESPA enforcement will continue from the CFPB?  Whether the Dodd-Frank Act will be repealed?  All of these questions have circulated in and around us since November 9th.  We went to DC to get answers straight from the policymakers.

As it pertains to the future of the CFPB, I believe our collective takeaway from our meeting suggested that the Bureau will continue with “business as usual.”  Director Cordray’s term runs until July of 2018.  While there is talk that the Trump Administration may seek to remove him “for cause,” both the result in the PHH Mortgage case (which we mentioned late last year) and discussions with Capitol Hill folks who support the Bureau suggest that they will fight to retain Cordray as the Bureau’s leader, no matter the challenge.  Litigation would likely outlast the tenure, even if he loses.  Thus, it seems like the “tea leaves” suggest Cordray and the Bureau will press on.

Meanwhile, President Trump has attempted to stop federal agencies from proceeding with federal rulemaking interpretations of federal law through executive order.  Thus, the CFPB may not necessarily be proceeding with new rulemaking for the time being – such as tweaks to TRID – but they still have the full breadth of law enforcement for laws such as RESPA at their disposal.  In fact, it seems like the CFPB is more interested than ever in enforcement activities related to RESPA.

Other quick answers from our meeting:
  • The CFPB will continue to implement TRID changes, including the rulemaking that was underway prior to the election.  Expect some delay in rulemaking caused by the Trump executive order, but TRID is here to stay.  No surprise there.
  • The Bureau will continue to enforce prior rulemaking interpretations against marketing service agreements, as indicated in the Lighthouse Title case.  Think “grave concerns” remain over the operation of these entities.
  • RESPA enforcement is on the radar.
  • Bulletin 2012-03 regarding Best Practices supervision of banks and their third party service providers (i.e., you) will continue.  You should continue to maintain a Best Practices plan similar to what we have provided you.

Our collective sense of the political winds in DC suggest that the CFPB will likely remain intact throughout the Trump Administration.  There will be attempts to change its structure and its funding which may be successful in this current Congress, but the Bureau will survive in some form.  If anything, the race is on to constrict the CFPB prior to the 2018 mid-term elections when party control may be hotly contested or even switch from Republican to Democrat.  For now, stay tuned.  We will continue to meet with lawmakers and policymakers on your behalf and take your issues directly to their doorstep.  We have had good success doing so.

RESPA Enforcement is a Priority:

In the meantime, if you believe you or your customer have information pertaining to a possible RESPA Section 8 or 9 violation, the Bureau urged us to have you or your customer use their whistleblower/complaint website to report the matter directly to the CFPB.  Again, their level of seriousness in this regard was a noteworthy change of tone from prior meetings.
For more information on the whistleblower process, click here.

HR 517: RESPA Reform for All Independent Settlement Service Providers

The Ensure Fair Prices in Title Insurance Act, known as H.R. 517, is a bill designed to address the fact that American homebuyers and mortgage borrowers are paying unnecessarily high real estate settlement service costs, including those fees paid for title insurance.  The bill was introduced on January 13, 2017 by Representative Keith Ellison (D-MN).
Because of the way title insurance is marketed to the public, American real estate consumers rarely participate in the selection of their title insurance provider and instead rely upon the referral advice of those in position to financially benefit from the referral, such as mortgage brokers or homebuilders. This concept is called “reverse competition” and it is unique to the title insurance marketplace.
Reverse competition prevents the price of title insurance from reacting positively to pricing pressures. While in most industries, normal or “forward” competition models cause consumer prices to fall, the title insurance industry’s reliance upon reverse competition causes consumer prices to rise because the incentive in a paid-referral relationship is to increase the amount paid for the incentive, not lower it. As amounts paid for referrals increases, the overall cost of the underlying product – i.e., title insurance risk rates – increases.
According to a report recently authored by the National Association of Realtors (NAR), “there has been little or no effective RESPA enforcement by HUD over the last decade and … [while] most brokerage companies are either ignorant of the fact or believe they are in compliance with RESPA, most are likely in violation already.”
The goal of H.R. 517 is to address the root cause of runaway real estate settlement costs and compliance issues: kickbacks and reverse competition in the settlement services industry.The bill does the following:

  • Prohibits any referral source from receiving a financial benefit for referring home-buying clients to a title insurance agency.
  • Extends the current private right of action statute of limitations under RESPA from one year to three years.
  • Provides a competitor’s right of action under RESPA.

RESPA was originally designed to prohibit kickbacks in real estate, but changes made in the 1980’s helped to usher in the growth of referral-based affiliations between title insurance agencies and their referral sources.

The casualty of this growth was consumer protection.

Rather than laws that protect against unlawful referral arrangements, RESPA has been construed to permit affiliated business arrangements in which participants are paid dividends resulting from the amount of business referred by referral sources to the title insurance agencies they supposedly benefit. Not surprisingly, consumer costs for title insurance have increased at the same time without any antecedent consumer benefit. The closing process is not any better than it was in 1983, it has only become more expensive and more opaque.

NAILTA supports H.R. 517.  For more information on this legislation and our support thereof, please feel free to contact me at board@nailta.org.If you want your member of Congress to support HR 517 and thereby support you, call them today.  To find your representative, please click here.

This is just the beginning of our efforts.  I hope you will join with me on this journey to make a difference for all of us!


Rob Holman
President, NAILTA

Value. Scholarship. Ethics.