Consumers Confused by TRID’s Fee Disclosureby Punctual Abstract
The primary goals that the Consumer Financial Protection Bureau (CFPB) had for the TILA-RESPA Integrated Disclosure (TRID) were to make the process of getting a mortgage easier and help consumers better understand the key features, costs, and risks of obtaining a loan.
When the bureau proposed its amendments to the rule back in July, its Directory Richard Cordray acknowledged these goals by saying the rules are crafted to give consumers they need, in a coherent manner, before making a big decision.
Sadly, the results of a consumer survey conducted online by ALTA this summer show the CFPB’s mortgage disclosures, in fact, are not meeting their objectives. ALTA partnered up with Survata, a national research company, to collect data on the consumer experience of shopping for title insurance and using TRID disclosures.
The survey included 2,000 current and prospective homebuyers, with 93% of the respondents being in the current category. Of those current homeowners, just 61% were owners for more than a decade, while 18% had owned between five and ten years, and another 20% were newer homeowners who’ve owned less than five years.
The survey included 14 questions concerning preferences for learning about title insurance. Consumers were shown Closing Disclosures that displayed title insurance premiums according to TRID guidelines. Respondents were then told the actual cost of title insurance, and they survey measured their reactions.
Unfortunately for fans of efficiency and transparency, the data showed a plurality of those surveyed found the rule confusing or deceptive. After seeing the CFPB’s disclosures and then the real costs of title insurance, the most popular response, at 31%, was “I’m confused.” Possibly even more troubling, another 10% of consumers thought they were being taken advantage of by not seeing the true cost of title insurance in the disclosure.
Michelle Korsmo, ALTA’s chief executive officer, sees that 10% as unacceptable. Considering the purpose of the CFPB is to protect consumers and encourage transparent, competitive markets, the bureau’s decision to require inaccurate disclosure of title premiums has had the opposite effects, she says.
ATLA has informed the CFPB of its survey’s results and recommended amending certain portions to allow title insurance fees to be disclosed in the same manner as every other fee.
The survey also asked consumers to rank the factors they value most when working to understand their transaction. At the top was receiving a detailed breakdown of all the costs for a service. Then, the ability to easily compare estimates to final figures and comparing the disclosure to actual expenses. At the bottom came providing marginal cost of optional products and inclusion of bottom-line amounts like cash-to-close.
The survey showed that consumers place more value on accurate final costs for title insurance as opposed to incremental costs. It also reinforced the need to educate prospective buyers about the benefits of title insurance earlier on in the transaction process. Over half of the respondents said they either didn’t know about title insurance or first learned about it at the closing table.