The rule would have added title insurance costs into the calculation of the annual percentage rate on new, simpler mortgage forms, according to a Bloomberg report. The CFPB stepped back on the rule after industry feedback suggested it might affect consumer access to credit.
“We applaud the CFPB for listening to our members and eliminating the ‘all in’ APR, as it would not help consumers shop for a mortgage and could limit their settlement choices,” Michelle Korsmo, chief executive officer of the American Land Title Association, said in a statement.
But others criticized the CFPB for the decision, according to Bloomberg.
“There is no evidence that better disclosure restricts access to credit,” National Consumer Law Center Executive Director Willard Ogburn said at a CFPB field hearing in Boston Wednesday. “Instead, it creates a more transparent and well-functioning market, which enables consumers to avoid abusive lenders.”
The rule would have been part of the CFPB’s “Know Before You Owe” mortgage regulations, which will require lenders to give consumers simpler, easier-to-read loan documents starting in August of 2015. Some industry groups have fought the regulations, saying they will be unduly burdensome to smaller lenders.
But Richard Hunt, president of the Consumer Bankers Association – which represents large banks – said smaller lenders shouldn’t get an exemption, Bloomberg reported.
“There should not be different sets of standards which could lead to confusion and uncertainty amongst consumers,” Hunt said in a statement. “Moving forward, we hope to see the CFPB apply this same methodology to other areas of their jurisdiction.”
The Consumer Financial Protection Bureau has backed down on a rule that would have wound title insurance into total costs listed on a mortgage form after industry pressure.