    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                       TILA--RESPA INTEGRATED DISCLOSURE:

                        EXAMINING THE COSTS AND BENEFITS

                         OF CHANGES TO THE REAL ESTATE

                               SETTLEMENT PROCESS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             HOUSING AND INSURANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 14, 2015

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 114-24

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                    ______

                      U.S. GOVERNMENT PUBLISHING OFFICE

    95-068 PDF                WASHINGTON : 2015
    _______________________________________________________________________________________

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
    RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
    BILL POSEY, Florida                  WM. LACY CLAY, Missouri
    MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
        Pennsylvania                     DAVID SCOTT, Georgia
    LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
    BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
    BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
    SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
    ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
    STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
    STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
    MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
    MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
    RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
    DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
    ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
    ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
    ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
    LUKE MESSER, Indiana                 JUAN VARGAS, California
    DAVID SCHWEIKERT, Arizona
    FRANK GUINTA, New Hampshire
    SCOTT TIPTON, Colorado
    ROGER WILLIAMS, Texas
    BRUCE POLIQUIN, Maine
    MIA LOVE, Utah
    FRENCH HILL, Arkansas

                         Shannon McGahn, Staff Director
                        James H. Clinger, Chief Counsel
                     Subcommittee on Housing and Insurance

                     BLAINE LUETKEMEYER, Missouri, Chairman

    LYNN A. WESTMORELAND, Georgia, Vice  EMANUEL CLEAVER, Missouri, Ranking
        Chairman                             Member
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    SCOTT GARRETT, New Jersey            MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            WM. LACY CLAY, Missouri
    ROBERT HURT, Virginia                AL GREEN, Texas
    STEVE STIVERS, Ohio                  GWEN MOORE, Wisconsin
    DENNIS A. ROSS, Florida              KEITH ELLISON, Minnesota
    ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DANIEL T. KILDEE, Michigan
    ROGER WILLIAMS, Texas

                              C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        May 14, 2015.................................................     1
    Appendix:
        May 14, 2015.................................................    31

                                   WITNESSES
                             Thursday, May 14, 2015

    Evans, Diane, Vice President, Land Title Guarantee Company, and
      President, American Land Title Association (ALTA), on behalf of
      ALTA...........................................................     5
    Goodman, Laurie S., Director, Housing Finance Policy Center, the
      Urban Institute................................................     7
    Lowman, Cindy, President, United Bank Mortgage Corporation,
      United Bank of Michigan, on behalf of the American Bankers
      Association (ABA)..............................................     3
    Polychron, Chris, 2015 President, the National Association of
      REALTORS (NAR)................................................     8

                                    APPENDIX

    Prepared statements:
        Evans, Diane.................................................    32
        Goodman, Laurie S............................................    43
        Lowman, Cindy................................................    57
        Polychron, Chris.............................................    67

                  Additional Material Submitted for the Record

    Luetkemeyer, Hon. Blaine:
        Written statement of Habitat for Humanity....................    72
        Written statement of the Independent Community Bankers of
          America....................................................    74
        Written statement of IMPACT Mortgage Management Advocacy and
          Advisory Group, Inc........................................    76
        Written statement of the Mortgage Bankers Association........    85
        Written statement of the National Association of Federal
          Credit Unions..............................................    89
    Ellison, Hon. Keith:
        Written responses to questions for the record submitted to
          Diane Evans, who testified on behalf of the American Land
          Title Association..........................................    91
        Letter to Diane Evans requesting complete answers to the
          questions for the record, dated July 10, 2015..............   101
        Reply letter from Steven Gottheim, Counsel, American Land
          Title Association, dated July 15, 2015.....................   105
    Pearce, Hon. Steven:
        Letter in support of H.R. 2213, signed by 16 organizations,
          dated May 5, 2015..........................................   106

                       TILA-RESPA INTEGRATED DISCLOSURE:
                        EXAMINING THE COSTS AND BENEFITS
                         OF CHANGES TO THE REAL ESTATE
                               SETTLEMENT PROCESS

                                  ----------

                             Thursday, May 14, 2015

                 U.S. House of Representatives,
                                Subcommittee on Housing
                                         and Insurance,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 2:02 p.m., in
    room 2128, Rayburn House Office Building, Hon. Blaine
    Luetkemeyer [chairman of the subcommittee] presiding.
        Members present: Representatives Luetkemeyer, Westmoreland,
    Pearce, Ross, Barr, Rothfus, Williams; Green, Moore, Ellison,
    and Beatty.
        Ex officio present: Representative Hensarling.
        Also present: Representative Sherman.
        Chairman Luetkemeyer. Welcome, everybody. Welcome to our
    new digs. We had a hearing this morning, and this is our
    initial subcommittee hearing. Sorry to see you all so far away,
    but this is the new way we are going to have to do business
    here as a result of remodeling efforts. But thank you for being
    here.
        The Subcommittee on Housing and Insurance is hereby called
    to order. And without objection, the Chair is authorized to
    declare a recess of the subcommittee at any time. I do want to
    mention that we have votes coming up probably in the 2:30 to
    2:45 range. So unfortunately, we will probably be leaving
    shortly for a little while. But we hope to get through the
    testimony. We will see how it works here.
        Today's hearing is entitled, ``TILA-RESPA Integrated
    Disclosure: Examining the Costs and Benefits of Changes to the
    Real Estate Settlement Process.''
        Before we begin, I would like to thank the witnesses for
    appearing before the subcommittee today. We look forward to
    your testimony. And I will now recognize myself for 3 minutes
    to give an opening statement.
        For the majority of American consumers, the purchase of a
    home is the most important and expensive financial transaction
    they will ever make, and the process in place today is
    confusing and burdensome. Twenty-three percent of respondents
    in an October 2013 poll by USA Today said that they would
    rather gain 10 pounds than go through the mortgage process.
    Seven percent said they would rather spend a night in prison
    than go through the mortgage process.
        What does that tell you about the system? I think it tells
    you the system needs to be fixed, and we owe it to the
    consumers to make sure this process works and is as
    straightforward and simple as possible.
        August is one of the busiest times of the year for home
    closings, when thousands of homeowners will sit at a closing
    table on or after August 1st. It remains to be seen whether or
    not parties will be ready for the new TILA-RESPA Integrated
    Disclosure process, or TRID. We continue to hear from
    businesses that tell us industry and vendors simply aren't
    ready for TRID or the liability that accompanies it. This is
    despite having spent, according to some estimates, upwards of
    $100 million on new systems, vendors, and education.
        Dramatic changes to the settlement process, paired with the
    reset provisions included in TRID, have the potential to
    unnecessarily delay closings and cause a ripple effect
    throughout the real estate market. Strict enforcement and
    increased liability for lenders will only exacerbate the
    situation. This is particularly true for small businesses party
    to real estate closings that are likely to be left at the table
    with greater exposure and limited guidance from the Consumer
    Financial Protection Bureau (CFPB).
        For years, Congress, consumer advocates, and industry
    groups have called for simpler settlements. To be clear, I
    fully support efforts to streamline the process. No one
    disagrees that there is a need for improvement. But we need to
    go about this in an appropriate manner and take the time to
    ensure that consumers aren't negatively impacted by something
    designed for them.
        Consumers, industry, and the CFPB itself stand to benefit
    from a delayed enforcement period. I imagine that is why the
    Center for Responsible Lending joined in a letter with the
    industry and has since reiterated its support for a period of
    restrained enforcement and liability.
        At the end of the day, what is most important is that we
    get this right. Part of that is ensuring industry has the
    information it needs to facilitate a smooth transition. We owe
    it to consumers to make sure this process is worthwhile and
    does more than give away 5 pages of disclosure and replace it
    with 10 pages. Given the approximately $100 million price tag
    and the years of work we will need to put a disclosure system
    in place that is clear and direct, I am not sure TRID does
    that.
        I look forward to today's testimony and gaining a better
    understanding of what changes to the settlement process will
    mean for everyone sitting at the closing table.
        The Chair now recognizes Mrs. Beatty from Ohio, who today
    is filling in for the ranking member of the subcommittee, Mr.
    Cleaver. She is recognized for 5 minutes for an opening
    statement.
        Mrs. Beatty. Thank you, Mr. Chairman. And thank you for
    holding this timely hearing. I also thank our witnesses today.
        It is my honor to be here pinch hitting for Congressman
    Cleaver. And we are all here for the consumers, and we have
    heard that. But today we are here to hopefully have a better
    understanding of the Consumer Financial Protection Bureau's
    TILA-RESPA Integrated Disclosures and what the implementation
    of these rules will mean both to the industry and to the
    consumers. These disclosures aim to reduce the overlapping of
    the information received by the consumers, as well as to
    simplify the overall origination process, which I support.
        I also applaud the CFPB's efforts in engaging in consumer
    and industry research to put forth a good rule. In fact, just
    yesterday I heard from a large contingency of the Ohio
    Association of REALTORS who are accepting of this new rule.
    They are not asking for change or to challenge the rule, but
    what they have expressed to me is that they would like to kind
    of have a test run, so to speak, of the rule. They need a
    preseason to work out all the nuances in the new disclosures
    form.
        I liken that to a new rule in my district when people were
    speeding and they decided that they were going to put up
    cameras. Well, they gave them a 30-day notice to kind of get
    used to it before they enforced it.
        At the end of the day, we are here to bridge the gap
    between effective compliance and ensuring that the rule's
    implementation is in the best interests of both the REALTORS
    and the home buyers. We have heard the stories from the
    chairman about how difficult it can be for those who are buying
    their first home, and any of you, if you have purchased a home,
    you also know about the plethora of paperwork and the forms
    that have to be signed.
        And in the aftermath of the 2008 housing crisis, I hope to
    learn today that all consumers, both buyers and sellers, will
    have the proper education and understanding of the TILA-RESPA
    disclosures to make the mortgage loan closing process as fluid
    and seamless as possible.
        Thank you, Mr. Chairman, and I yield back the balance of my
    time.
        Chairman Luetkemeyer. Thank you, Mrs. Beatty.
        Today, we welcome to the hearing four great witnesses: Ms.
    Cindy Lowman, president, United Bank Mortgage Corporation,
    United Bank of Michigan, testifying on behalf of the American
    Bankers Association; Ms. Diane Evans, vice president, Land
    Title Guarantee Company, testifying on behalf of the American
    Land Title Association; Ms. Laurie Goodman, director, Housing
    Finance Policy Center, the Urban Institute; and Mr. Chris
    Polychron, executive broker, 1st Choice Realty, and 2015
    president, the National Association of REALTORS, testifying on
    behalf of the National Association of REALTORS.
        Thank you all for being here.
        With that, you will each be recognized for 5 minutes to
    give your testimony.
        Ms. Lowman, you get to start today, 5 minutes. Thank you
    very much.

      STATEMENT OF CINDY LOWMAN, PRESIDENT, UNITED BANK MORTGAGE
    CORPORATION, UNITED BANK OF MICHIGAN, ON BEHALF OF THE AMERICAN
                       BANKERS ASSOCIATION (ABA)

        Ms. Lowman. Chairman Luetkemeyer, Mrs. Beatty, my name is
    Cindy Lowman. I am president of United Bank Mortgage
    Corporation, which is a wholly owned subsidiary of United Bank
    of Michigan. We are a $468 million community bank based in
    Grand Rapids.
        I also serve as the chairman of the ABA Mortgage Markets
    Committee. I am pleased to be here today to testify on behalf
    of the ABA on concerns over the pending implementation of the
    Truth in Lending and the Real Estate Settlement Procedures Act
    Integrated Disclosures, known as TRID.
        These rules are scheduled to go into effect on August 1st
    this year. Between now and then, banks and their vendors must
    undertake a tremendous amount of work to comply with these
    rules. In cases like mine, banks may not even have the third-
    party systems that they need until after the deadline.
        The real impact of this rushed deadline will be felt by
    consumers who will face costly delays in getting the credit
    they need to buy a home. This is why we are joining with
    members of this committee in requesting that the CFPB formally
    announce a clear delay of this enforcement.
        TRID will impact every mortgage loan made in the United
    States. It is critical that this rule is implemented smoothly
    so that it does not end up hurting creditworthy customers who
    want to own a home. Although intended to simplify the
    disclosure process, if not implemented properly, TRID could add
    significant complications that will end up costing consumers.
        TRID's objective of integrating consumer disclosures is
    commendable. TILA and RESPA both serve important purposes. But
    the disclosure regimens developed under each statute have
    swelled in complexity. The sheer volume of documentation
    overwhelms the borrower, and true disclosure has become
    virtually meaningless.
        ABA and consumers and industry groups have sought for years
    to streamline and simplify this process. The CFPB, to its
    credit, undertook this project in an open and responsive
    process and incorporated many changes urged by industry
    participants. Despite this, the new forms remain lengthy and
    intimidating to the average customer. Given the scope and
    complexity of these new rules, this implementation of
    regulation will impose high costs on all lenders and consumers.
        Our most urgent concern right now is the looming August 1st
    deadline. Between now and then, banks must fully review all of
    the final rules; implement new systems, processes, and forms;
    train staff; and test these changes for quality assurance
    before we bring them online.
        Implementation is further complicated by the fact that most
    smaller community banks rely on vendors for regulatory
    compliance and the accompanying software updates and system
    upgrades. An alarming number of banks report their vendors are
    not yet ready to provide the necessary updates to individual
    institutions. An ABA survey shows that 79 percent of banks
    cannot verify that they will have the systems by the deadline.
        For some institutions, stopping any mortgage lending is the
    answer to this deadline because the consequences are too great
    if the implementation is not done correctly. At my bank, we are
    still waiting for systems from our third-party providers and do
    not expect some of the product offerings to be available in our
    software system by the August 1st deadline. This means that as
    of the deadline, I will be able to take mortgage applications
    but will not be able to close certain loans where I do not have
    systems in place.
        We must get this right for the sake of our customers, our
    bank's representation, and to promote the recovery of the
    housing market. There are very reasonable solutions that
    Congress envisioned that enabled the Bureau to avoid the
    negative consequences of an arbitrary August 1st deadline.
        ABA strongly supports the efforts of Chairmen Luetkemeyer
    and Neugebauer and Representatives Maloney and Barr in asking
    the Bureau to treat the time period between August 1st, 2015,
    and December 31, 2015, as a hold harmless period for
    enforcement and liability under the new rules and to formally
    announce such period to ensure that the prudential regulators
    and secondary market stakeholders do the same.
        ABA thanks Representatives Pearce and Sherman for
    introducing H.R. 2213, which provides for a hold harmless
    period. We urge quick action to avoid the potential harm to our
    mortgage customers.
        The bottom line is this: These are complex rules, and
    implementing them must be done in a careful manner. If
    implementation is rushed ahead of schedule, it will only lead
    to confusion and delays that will be costly for consumers.
        Thank you. And I would be happy to answer any questions.
        [The prepared statement of Ms. Lowman can be found on page
    57 of the appendix.]
        Chairman Luetkemeyer. Thank you, Ms. Lowman. We will get
    you a prize. I think you are one of the few witnesses I have
    ever seen in this committee who actually finished significantly
    ahead of schedule. Thank you very much.
        Ms. Evans, you are now recognized for 5 minutes.

    STATEMENT OF DIANE EVANS, VICE PRESIDENT, LAND TITLE GUARANTEE
    COMPANY, AND PRESIDENT, AMERICAN LAND TITLE ASSOCIATION (ALTA),
                      TESTIFYING ON BEHALF OF ALTA

        Ms. Evans. Chairman Luetkemeyer, Ranking Member Beatty, and
    subcommittee members, my name is Diane Evans, and I am vice
    president of Land Title Guarantee Company, a title insurance
    agent in Colorado.
        I joined Land Title Guarantee Company 34 years ago when I
    opened a branch in my hometown. I also have the privilege of
    serving as the president of the American Land Title
    Association, the national trade association representing the
    abstract real estate settlement and land title insurance
    industry.
        ALTA has more than 5,400 member companies ranging from
    small one-person operations to large publicly traded companies.
    Our industry employs more than 108,000 professionals, and our
    members have offices in every county in the United States.
        In 78 days, our industry faces its biggest regulatory
    change I have seen in my 34 years in the business. I am talking
    about the implementation of the Consumer Financial Protection
    Bureau's TILA-RESPA Integrated Disclosures, or TRID, as you are
    hearing it called.
        As president of ALTA, I have had the opportunity and
    privilege to travel across the country and talk to lenders, to
    real estate agents, and to settlement professionals about this
    new regulation. The main lesson from those conversations is
    that collaboration is crucial. The new regulation is
    overreaching, it is expensive, and it is confusing, not only
    for small companies, but for large companies as well.
        Implementing TRID requires more than just simply updating
    our systems for two new forms. It requires a paradigm shift in
    the way we do business and the way real estate settlements
    occur across the United States. Our industry will invest almost
    $1.3 billion to comply with this regulation. After August 1st,
    if a consumer better understands their transaction, it will be
    worth it.
        Let me tell you a little about my company. We have been
    spending a great amount of time coordinating with our real
    estate community. We have already trained over 1,000 real
    estate agents. We have worked with 300 lenders and we have
    worked with their employees and over 60 homebuilder employees
    to understand this new process. It has taken many of our staff
    away from their regular jobs of serving home buyers each and
    every day.
        There are two ways that Congress and the CFPB can help
    industry implement TRID. First, the CFPB absolutely must fix
    their requirement that consumers receive inaccurate prices for
    title insurance. This is the only cost under the new form and
    under the new rule that the CFPB prevents home buyers from
    knowing the actual amount they will pay for title insurance.
        Purchasing a home is one of the largest investments a
    consumer makes in their lifetime. Home buyers want and need to
    know the true cost of that transaction, including the one-time
    cost of the title insurance premium that protects that
    investment. TRID fails consumers in that regard.
        Second, the CFPB should provide a hold harmless period, as
    we heard from other witnesses. While the CFPB has provided some
    helpful assistance on implementation, our members need more
    time to ensure that process changes demanded by TRID won't
    result in delays for those home buyers. This is why we strongly
    support H.R. 2213, and we thank Congressmen Pearce and Sherman
    for introducing this legislation. Without that hold harmless
    period, consumers may experience delays, and REALTORS,
    lenders, and settlement agents want to make sure that doesn't
    happen.
        Disruptions or delays in real-life transactions don't just
    affect one family. Its consequences affect more. In a typical
    transaction, the seller of one house is going to be the buyer
    of another. The domino effect of one's closing being delayed
    results in a number of families being stranded, leaving them
    looking for alternative housing with moving vans sitting in
    their driveways.
        Our members conduct closings each and every day and take
    great pride in helping consumers protect their homeownership.
    Help us ensure that home buyers leave our offices with keys in
    hand and better understand the costs of their transaction,
    including that of title insurance.
        I appreciate the opportunity to be here, and ALTA is eager
    to serve as a resource. Thank you.
        [The prepared statement of Ms. Evans can be found on page
    32 of the appendix.]
        Chairman Luetkemeyer. Thank you, Ms. Evans.
        Ms. Goodman, you are recognized for 5 minutes.

       STATEMENT OF LAURIE S. GOODMAN, DIRECTOR, HOUSING FINANCE
                   POLICY CENTER, THE URBAN INSTITUTE

        Ms. Goodman. Chairman Luetkemeyer, Ranking Member Beatty,
    and other members of the subcommittee, thank you very much for
    the opportunity to testify today.
        My name is Laurie Goodman, and I am the director of the
    Housing Finance Policy Center at the Urban Institute. The Urban
    Institute is a nonpartisan research organization located in
    Washington, D.C. The Housing Finance Policy Center provides
    timely, data-driven analysis of policy issues relating to
    housing finance and the housing market.
        Prior to joining Urban 2 years ago, I spent almost 30 years
    as a mortgage-backed securities analyst and head of securitized
    products, research, and strategy groups at several firms
    including Amherst Securities and UBS. The views expressed in
    this testimony are my own and should not be attributed to the
    Urban Institute, its trustees, or its funders.
        Today, I want to cover two points. First, I will discuss
    the TILA-RESPA Integrated Disclosure and make the case that the
    CFPB should offer a hold harmless period through the end of
    2015. Second, I will explain why these disclosures are really a
    minor operational issue in the context of a housing finance
    system that is stuck in limbo. Resolving this limbo by
    finishing the work of reforming Fannie Mae and Freddie Mac is
    the most important issue facing this country's housing market
    today.
        I will start with the new disclosures. The 2010 Dodd-Frank
    Act tasked the CFPB with combining the two sets of disclosures
    borrowers receive and rarely understand into one consumer-
    friendly form. The CFPB completed this enormous task in
    November of 2013, and after a few further tweaks has scheduled
    it to take effect on August 1st, 2015.
        I believe the CFPB has done a good job here and the results
    will definitely improve the closing experience for borrowers.
    But lenders need more time to implement this enormous change.
    The August 1st implementation date is too tight for many
    lenders.
        Yes, they have had 21 months to implement these changes,
    but lenders could not begin systems development until the data
    elements in the Mortgage Industry Standards Maintenance
    Organization (MISMO), on which they were all dependent, was
    complete, and that happened just 3 months ago. And it takes
    time to develop a new system, integrate it into existing loan-
    origination platforms, and train your staff.
        These new disclosures won't meet the end goal, improving
    the consumer experience, if lenders are not ready to implement
    them. What will happen instead is that lenders will delay and
    avoid closings. A hold harmless period is the best of both
    worlds. It requires implementation but offers lenders the
    necessary protection to begin doing their job, which is making
    loans.
        So I would urge the CFPB to provide a reasonable hold
    harmless period through the end of the year following the
    August 1st effective date of the TRID regulation.
        Now, let's talk about the real elephant in the room, the
    unfinished business of reforming Fannie Mae and Freddie Mac.
    The great news is that all the work done to reform the GSEs was
    not wasted. It has allowed me and many on both sides of the
    political divide to conclude that the goals of legislative
    reform should be to preserve the 30-year fixed-rate mortgage,
    assure broad access to credit, and move the bulk of the risk to
    the private market. There has been a growing recognition that
    the government, and hence the taxpayers, must bear the
    catastrophic risk, but this should be insulated behind private
    capital so the risk, if it is ever tapped, is remote.
        Yes, there has been significant progress through
    administrative channels in lieu of legislative movement.
        The Federal Housing Finance Agency (FHFA) has tackled the
    issues of lenders adding their own more restrictive
    requirements to the GSE's requirements by clarifying when the
    GSEs can put loans back to lenders and by curbing compensatory
    fees applicable to delinquent loans on the servicing side. They
    have also brought private capital back through the CAS and
    STACR back-end risk-sharing transactions and transactions with
    reinsurers. There have been a few transactions where risk has
    been shared at the point of origination. And the FHFA has
    instructed the GSEs to begin work on the common securitization
    platform, and has put forth a proposal for a single security.
        And, yes, there are additional steps the FHFA could pursue,
    including creating structures which provide discovery of market
    pricing and expanding the common securitization platform to
    include other market competitors.
        But even so, administrative reforms cannot take us all the
    way, and that presents an opportunity for Congress to make a
    real difference. Without congressional action, as a practical
    matter the GSEs cannot be taken out of conservatorship, and the
    system cannot allow for additional competitors.
        We urge Congress to move forward and address these issues
    in a careful and thoughtful manner.
        Thank you.
        [The prepared statement of Ms. Goodman can be found on page
    43 of the appendix.]
        Chairman Luetkemeyer. Thank you, Ms. Goodman.
        And Mr. Polychron, you have 5 minutes.

      STATEMENT OF CHRIS POLYCHRON, 2015 PRESIDENT, THE NATIONAL
                     ASSOCIATION OF REALTORS (NAR)

        Mr. Polychron. Thank you, sir.
        Chairman Luetkemeyer, Mrs. Beatty, and subcommittee
    members, I am Chris Polychron, the 2015 president of the
    National Association of REALTORS (NAR). I am a commercial and
    residential REALTOR and executive broker for 1st Choice Realty
    in Hot Springs National Park, Arkansas.
        On August 1st, 2015, significant RESPA-TILA changes will go
    into effect. NAR is generally supportive of this move to
    harmonization as long as it benefits consumers and makes the
    real estate transaction smoother.
        However, we see potential bumps in the road, bumps in the
    road that could cost families time and money and cause serious
    frustration. It is clear that RESPA-TILA integration is going
    to be a learning experience for everyone.
        Before I get to the heart of my testimony, I would like to
    thank Chairman Luetkemeyer for weighing in with the CFPB on
    this issue. I would also like to thank Congressman Barr and
    Congresswoman Maloney for their bipartisan sign-on letter to
    the CFPB, and finally Congressman Pearce and Congressman
    Sherman for their bipartisan legislation to aid in this effort.
        NAR and a broad coalition have sent a letter to Richard
    Cordray, Director of the Consumer Financial Protection Bureau,
    outlining our concerns. Here is what we communicated to the
    Bureau.
        First and foremost, NAR has asked the CFPB to make August
    1st, 2015, through December 31, 2015, a trial implementation
    period of restrained enforcement. During this period the
    industry will operate under the rule and new forms but will be
    held harmless in terms of enforcement and liability as long as
    they act in good faith. Industry and the CFPB can then collect
    data on problems and develop solutions to minimize costly and
    harmful impact on consumers. This 5-month testing period should
    provide enough time for everyone to get it right.
        It also means the full-fledged implementation from some of
    the busiest months in our industry to the least busy months of
    January and February. We are asking for this grace period
    because of the potential impact to the consumers. Even if only
    10 percent of the transactions experience issues with the rule
    implementation, the numbers will still be significant. That
    could mean as many as 40,000 transactions a month with
    problems, and potentially many more. This is certainly
    something REALTORS and the industry would like to avoid.
        The good news is there is a precedent for the CFPB to
    create such a period. The Department of Housing and Urban
    Development took a similar approach when we revised the RESPA
    disclosure in 2010. We believe that effort should serve as a
    model for the CFPB and would produce the best outcomes for
    everyone involved.
        We believe the CFPB can provide more detailed written
    guidance on a number of issues; clarify where RESPA and TILA
    liability apply, and that the preapproval process can coexist
    with the rules regarding issuance of the loan estimate; ensure
    that consumers can still choose an agent that closes a
    transaction without lender interference, the same way one
    chooses their lawyer to represent them and not their opponent;
    and finally, provide more information and flexibility on the
    bona fide financial emergency waiver and other waiver
    authority.
        Overall, REALTORS understand that RESPA-TILA integration
    is a monumental effort, decades in the making. The CFPB has
    done good work, and we hope a few small steps can help take
    this giant leap forward. We will continue to work with the CFPB
    and our industry partners in this effort.
        Thank you for this opportunity to testify, and I look
    forward to answering any questions.
        [The prepared statement of Mr. Polychron can be found on
    page 67 of the appendix.]
        Chairman Luetkemeyer. Thank you, Mr. Polychron.
        With that, I will begin the questioning and recognize
    myself for 5 minutes.
        Mr. Polychron, one of the arguments that CFPB uses for
    their date of August 1st is that it is a slow time of year for
    applications/closings. You are in the business. Tell me.
        Mr. Polychron. I am in the business, and that is an
    erroneous statement.
        Chairman Luetkemeyer. We have 12 months, where does August
    rank in the--
        Mr. Polychron. Busiest.
        Chairman Luetkemeyer. Busiest.
        Mr. Polychron. Third.
        Chairman Luetkemeyer. Probably third. Okay.
        Mr. Polychron. I have statistics for that, sir.
        Chairman Luetkemeyer. Perfect. That is what I am looking
    for, that is the answer I need. Because we need that
    information to be able to refute what they are saying. So thank
    you for that testimony.
        Mr. Polychron. You are very welcome.
        Chairman Luetkemeyer. Ms. Lowman, I recently met with a
    group, I spoke to a group of bankers on Monday and they were
    talking about this issue. And I told them, I said, ``You really
    have two choices. You either stop lending for a period of time
    prior to and thereafter August 1st or you fill out two sets of
    documents and hope that by handing the examiners two sets of
    documents, you are compliant, and let them take their choice.
        And so I am kind of curious what your solution is, because
    I just got done talking yesterday with one of the largest
    mortgage lenders in the country, and they are going to go the
    route of two sets of paperwork. This is double cost for them.
    They are going to eat the cost of this because they don't want
    the consumer to bear it. But by the same token, it is going to
    be very, very cumbersome to protect themselves against the
    liability exposure of making a mistake.
        Can you tell us what your thought process is on that?
        Ms. Lowman. As you know, anything that we do after August
    1stst falls under the new rule, but we still will be closing
    business from the prior application. So we will be using two
    sets of documents throughout that period anyway.
        As I indicated earlier, I have been working side by side
    with my software company since last year. They have not been
    able to produce the final documents to the satisfaction of our
    staff. So we are just now starting the testing of those
    documents. We are not handing any of those new documents to
    customers as of this point in time.
        Chairman Luetkemeyer. What do you estimate is your time to
    be able to be compliant? Do you think you will be able to get
    it done by the first of August, be able to have your software
    and systems in place so that you can comply?
        Ms. Lowman. We are being promised that most of our
    documents will be available, but there will be some loan
    products that we offer, including the rural development
    products for 100 percent down on low income, that will not be
    available only August 1st.
        Chairman Luetkemeyer. Okay. You represent the ABA. So
    across the country, what is the consensus, that most banks will
    be in compliance or be able to be compliant, or most will not
    be able to be compliant? Or do you have a percentage? What are
    your thoughts on that?
        Ms. Lowman. We do have statistics on that, but the
    understanding is that most of our banks are concerned that they
    won't be compliant. There may be the last minute where the
    software companies will produce, but then we are concerned
    about procedures, processes, and testing.
        Chairman Luetkemeyer. Very good.
        Ms. Evans, title insurance folks normally do the closings
    on a lot of real estate transactions. Is that correct?
        Ms. Evans. That is correct. Yes, sir.
        Chairman Luetkemeyer. Under the new proposal, is that
    regimen going to change, or is this going to be the same, or
    what do you foresee happening?
        Ms. Evans. I think the processes could change. That is part
    of the reason why collaboration and discussion and education is
    so important, and the hold harmless period allows us to work
    through those issues to make sure that in working with Ms.
    Lowman's bank, we may do it one way, and working with the next
    bank, it may be different. But we need to make sure we have the
    opportunity to engage in that dialogue and make sure we
    understand that so the home buyer isn't interrupted in his
    transaction.
        Chairman Luetkemeyer. To me, it is a concern because if
    there is not consistency here, if there is not something that
    is done a certain way most of the time, that leaves the
    possibility for problems to be there. And, to me, this is a
    moving target here. And I assume that you have some plans for
    that.
        Ms. Evans. The new rule specifically has put forward forms
    and put forward some timelines that we must comply with, but it
    still recognizes the role that title and settlement agents have
    in the process and has encouraged us to continue to work with
    our bank and lending partners to determine what is the best
    process for the consumers in our marketplace.
        Chairman Luetkemeyer. Thank you.
        One more quick question before my time runs out here. And
    you can probably just give this a really quick answer.
        You made a comment during your testimony that consumers
    don't know the cost of title insurance. Can you elaborate on
    that just a little bit?
        Ms. Evans. Yes. I am happy to. Thank you.
        The rule has a ridiculous and inaccurate formula for which
    to disclose title insurance rates to the consumer, and it in
    fact is wrong in about 43 States and totally inaccurate in 26
    States. And we would ask that the CFPB correct that calculation
    and remove the formula from its rule, because if we just
    disclose the actual cost of the title insurance product, the
    problem is solved and consumers know the answer.
        Chairman Luetkemeyer. Thank you very much for your
    testimony. I am out of time.
        With that, I will yield to Mrs. Beatty, the ranking member
    today, for 5 minutes.
        Mrs. Beatty. Thank you, Mr. Chairman.
        And thank you to all our witnesses for being here.
        Certainly as I look around this committee room, I imagine
    that probably more than half of us have participated in that
    mortgage loan closing process, and we have sifted through the
    hundreds of pages and provided countless signatures because we
    want part of that American dream, to be a home buyer and to own
    a home.
        As you heard from me earlier, I have heard from my
    REALTORS, and they don't want to necessarily change or
    challenge it, they just want that hold harmless period. They
    have expressed to me that a possible gridlock on the
    transactions could occur if the rules are implemented before
    they are given a chance to fully understand them, to come into
    compliance, to be trained.
        Ms. Lowman, can you walk me through a closing process under
    CFPB's TILA-RESPA disclosures and highlight what you anticipate
    could cause hiccups in the mortgage loan process?
        Ms. Lowman. From what we understand, the biggest changes
    that are being proposed for the August 1st new rules have to do
    with the lockdown of the transaction 3 days prior to the loan
    closing. The lender is at 100 percent liability for what is on
    that closing disclosure. For those of you who have bought a
    home, you will know that in a lot of cases there are numbers
    that are changing within hours before the closing. That can't
    happen anymore. If something changes, it stops the closing and
    pushes it back out 3 more days at minimum.
        So those are the concerns we have in working with our
    partners, the REALTOR community, and ALTA groups, that we are
    100 percent responsible. So therefore, we are going to have to
    lock that document down.
        Mrs. Beatty. Okay. Mr. Polychron, in Ms. Goodman's written
    testimony she stated that without a hold harmless period or a
    grace period, the severe consequences for errors under the
    TILA-RESPA may cause lenders to reduce originations, ultimately
    harming the borrowers it was designed to help. Do you agree
    with this assessment?
        Mr. Polychron. I do agree with it, and in this period we
    certainly don't need fewer lenders making money. Our inventory,
    our loan process is difficult enough right now with credit
    scores, et cetera, to put this extra burden upon it.
        Mrs. Beatty. Ms. Evans or Ms. Goodman, can you comment on
    what the grace period from CFPB's TILA-RESPA disclosures based
    on good faith compliance efforts would allow REALTORS to
    accomplish?
        Ms. Evans. What it allows is for everyone in the real
    estate transaction, all the real estate professionals, to
    really work through real-life transactions to understand where
    there might be bumps in the road, where there might be delays
    that would cause a home buyer concern, and also recognize that
    we can work out those systems without the fear of any kind of
    enforcement or penalty.
        Ms. Goodman. Just to elaborate a little bit more, it is
    important to realize, as Ms. Lowman said, the systems are just
    being delivered now. In many cases they still have to be
    integrated with loan origination systems. And in many cases
    either you can't do certain products or there is a heavy manual
    feature.
        So the possibility of errors is very, very large in the
    early months on all sides. And in addition, there are parts of
    the CFPB rules that are a little bit unclear. And this just
    gives you time to both clarify and work out and test the
    system's bugs. It is really, really important to get this done.
        Mrs. Beatty. And lastly, since your customers are our
    constituents, let's just assume this doesn't happen, you are
    not given the grace period or the hold harmless. What happens
    to me as that home buyer coming in?
        Ms. Lowman. The idea that you would sense nothing is
    happening to you because we are still trying to deliver a
    mortgage to you for your home purchase.
        The risk is that after 50 years and the combination of
    RESPA and TILA, there now are civil penalties that are going to
    go along with mistakes. In my world, working with my regulator,
    if I make three errors in a row that is considered pattern and
    practice and I can be fined for that. Those are the risks to my
    business, not to the customer, but to my business, and
    ultimately, then, to my customer if we can no longer operate
    efficiently and have to change those costs for our customers.
        Mrs. Beatty. Thank you.
        Chairman Luetkemeyer. Thank you.
        Next up is the distinguished gentleman from Georgia, Mr.
    Westmoreland, for 5 minutes.
        Mr. Westmoreland. Thank you, Mr. Chairman.
        First of all, I just want to make a couple of comments, and
    I say this to most of the witnesses who come here, with the
    unintended consequences of what Dodd-Frank has created, and
    specifically the CFPB. In fact, a lot of us who were not on the
    committee when Dodd-Frank was passed feel kind of like that guy
    in the circus walking behind the elephant with a broom and a
    shovel. And the elephant is Dodd-Frank, and we need to get rid
    of that elephant.
        I was in the real estate business for over 20 years. I have
    been to many, many, many closings. And I have bought things
    myself. And the majority of the time the purchaser wants to
    know how much money he has to have, he wants to know what his
    note is, possibly the interest rate, and that is it.
        So when I started selling real estate, you could have a
    one-page contract. And now I think they are going to get to the
    point where you are going to have to give the buyer an IQ test
    to see if he is smart enough to even go to closing. We need to
    be giving an IQ test to some of these people at the CFPB who
    are making up these rules, who have never sold a piece of real
    estate. They have never made a loan. They have never written
    title insurance. They have never experienced this. Some of the
    things that you have mentioned are just a little bit of the
    collateral damage that is going to happen.
        And I will say this, in the hundreds of closings I have
    been to, I have never seen the interest rate change, the note
    change, the price of the house change. There may be some
    adjustments in some tax escrow or something, but not really
    anything to affect that sale that would cause you to have to
    put the paperwork back for another 3 days to mail off to get
    somebody to look at it. That is insanity.
        Part of the real estate industry, what we made, was the
    fact that everything had to be disclosed between the buyer and
    the seller. But even in this case, as I understand the rule,
    the buyer would have to do a handwritten note explaining the
    differences in this and send it back. This is pure stupidity. I
    mean, stupidity. And in fact, I would encourage the CFPB,
    before they make any of these other rules, to have some people
    who are actually doing this business come in and say: Hey, how
    can we make this simpler on the buyer? I promise you this whole
    deal was intended to make it simpler for the buyer.
        If you want to make it simpler for the buyer, don't have
    him sign stuff where he waives his rights away or is just doing
    something to make sure he has signed a paper to say that he
    understands the last paper he signed. And then after he signs
    that, he will sign one that said: I understand the last three
    papers I have signed. That doesn't make him understand what is
    going on.
        And so it is a good real estate agent, it is a good
    mortgage person, it is a good attorney, those are the people
    who make that customer understand what he is doing. And I think
    you all do a very good job of it.
        Now, I will ask a question.
        Ms. Lowman, the CFPB's whole reason for this was
    consolidating it to streamline it for paperwork. Do these new
    forms in any way that they are designed give borrowers a more
    accurate picture of what they are doing?
        Ms. Lowman. No, sir. If I had been a part of the original
    transaction, I wouldn't have to explain it today as a first
    grade story problem where the information is fragmented through
    the report. I have to train my closer to be able to make sense
    of that to the borrower. I have to train my closer how to
    explain what a TIP is, and it is not a restaurant, it is the
    total interest paid, and why that is important for the consumer
    to understand.
        Mr. Westmoreland. So it is not simpler, it is not less
    paperwork. It is really more complicated. You feel like from
    the experience that you have we have made it more complicated
    than simpler.
        Ms. Lowman. Yes, that is what I believe.
        Mr. Westmoreland. Thank you. And I think that would be true
    to all the witnesses up there, is that we have taken something
    and made a mess of it. And we are just really good at that. So
    hopefully, we will be able to postpone this ruling.
        Thank you.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we go to the distinguished gentleman from
    Minnesota, Mr. Ellison, for 5 minutes.
        Mr. Ellison. Mr. Chairman, Ranking Member Beatty, thank you
    very much.
        And also thank you to all the panelists. We really
    appreciate your help, and all the information you share with us
    helps us make hopefully better decisions.
        Ms. Goodman, one of your fellow panelists, Ms. Lowman,
    offered her views on whether this change, this consolidation,
    would be of benefit to the consumer. She doesn't think that it
    will, and I respect that based on her experience and study. Do
    you share the same view?
        Ms. Goodman. No. I actually think it will be beneficial to
    the consumers at the end of the day. When they walk in for
    closing, they will know exactly what those closing costs are
    going to be, which is an assurance they don't have under the
    present system. I think it really does help improve the
    consumer experience, but it only helps if it is implemented
    properly.
        Mr. Ellison. Thank you.
        In due respect to all the panelists, I just want to make
    sure that the people who are watching this know that there are
    at least two sides to the story. I think that is just fair.
        Ms. Evans, I would like to learn a little bit more about
    ALTA's membership. How many of ALTA's members are engaged in
    what RESPA would define as affiliated business arrangements?
        Ms. Evans. Thank you, sir, for that question.
        We don't know. That is not data that we capture. We capture
    the identity of those members who provide title and settlement
    services.
        Mr. Ellison. Okay. So let me ask you just a follow-up, in
    order to neutralize advocacy efforts for a trade organization,
    I have to imagine that the number of impacted members who
    identify as affiliated business arrangements must be a
    significant number. Is that right? Without asking a numerical
    specificity, is it a good number? I don't know. Would you say
    half? What would you estimate?
        Ms. Evans. I really don't have actual figures on that.
        Mr. Ellison. Okay.
        Ms. Evans. But I do not believe half is accurate, sir.
        Mr. Ellison. What would you say?
        Ms. Evans. I would say it is far less than that.
        Mr. Ellison. Twenty-five percent?
        Ms. Evans. I really don't know, sir.
        Mr. Ellison. Mr. Polychron, do you have a view on this?
        Mr. Polychron. I saw that statistic at one time, and I know
    it is less than 50 percent. I think it is closer to 25 percent
    than 50 percent.
        Mr. Ellison. Ms. Lowman, did you have a thought on this?
        Ms. Lowman. Only that TRID does require, if you have an
    affiliate business arrangement, that it is 100 percent zero
    tolerance.
        Mr. Ellison. Okay.
        Going back to Ms. Evans, I noticed in your testimony you
    note: ``The majority of our members are small businesses with
    the average title agency earning $156,000 in gross annual
    revenue and employing 3 or fewer people.'' So could you tell
    me, is there any reason why ALTA does not keep the information
    about the affiliated business arrangements?
        Ms. Evans. It is not a matter of whether you are an
    affiliated business or not to qualify for membership with ALTA.
    We represent the title insurance industry.
        Mr. Ellison. Okay. And I appreciate that. Is that
    information you could perhaps, if you had the time, share with
    me later on if I were to submit a question to you?
        Ms. Evans. We would certainly consider it. It is not
    anything that we even capture. So we would have to go back and
    determine if that is an appropriate inquiry to make to our
    membership.
        Mr. Ellison. Okay. Thank you.
        Iwould also like to ask you a little bit about financial
    benefits for referral. Under RESPA, it prohibits financial
    benefit for referral. Yet there are so many ways that
    REALTORS, homebuilders, lenders, and mortgage brokers benefit
    from a referral--a way that is currently legal, a shared
    ownership interest, and ways that are currently illegal but
    practiced, lower desk rents or bonuses for REALTORS, special
    event tickets, things like that.
        We would be a little surprised to learn that dentists could
    receive a benefit from referring a client to an orthodontist or
    that a lawyer could receive a financial benefit by referring to
    another lawyer. In fact, for both of those, doing so could get
    you into some difficulty, depending.
        So Ms. Evans, could you share with me why referral sources
    should be allowed to receive benefit or payment for the
    referral of settlement service businesses?
        Ms. Evans. Sir, I believe that RESPA very strictly
    prohibits the payment of a thing of value or the giving of a
    thing of value in exchange for the referral of business. And
    the enforcement of RESPA we are continuing to see today, both
    at the CFPB level and at the State level through our State
    regulators. So it should not be tolerated and is not permitted,
    in my opinion.
        Mr. Ellison. Thank you, ma'am.
        Do you think the overall costs of a referral as those are
    used in the affiliated business arrangement business structure
    is included in the cost of operating a title insurance company?
        Ms. Evans. RESPA clearly permits an affiliated business
    arrangement under certain circumstances with very set
    guidelines. And so, there is no reason why it should be
    disallowed. It must comply with the standards set under the
    law.
        Mr. Ellison. I have gone over my time.
        Thank you very much, Ms. Evans.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we go to the distinguished gentleman from New
    Mexico, who is also one of the co-sponsors of H.R. 2213, Mr.
    Pearce, for 5 minutes.
        Mr. Pearce. Thank you, Mr. Chairman. I appreciate it.
        I would like to ask unanimous consent to submit a letter
    from 16 different agencies or different groups who support H.R.
    2213.
        Chairman Luetkemeyer. Without objection, it is so ordered.
        Mr. Pearce. Thank you, Mr. Chairman.
        Also, I would draw to the attention of the Members here
    that a small title group in my hometown just recently called in
    the last week saying that it had to spend $100,000 on a program
    to try to implement this new regulation, and they are not sure
    that is going to do it. For a small company, that is
    extraordinarily difficult.
        Ms. Evans, I was absolutely pleased to hear that you say
    you don't track that information that was being requested by my
    colleague. Now, keep in mind that we watched the NSA track
    every darn thing for every individual in the whole country, and
    so they are probably going to call us and tell us the answer to
    all the questions that we just heard. But I am glad that you
    are not tracking it because I think that the government knows
    enough about us already, frankly.
        Ms. Evans, if you were going to speculate, would the larger
    title companies or the smaller title companies be more
    disadvantaged by the coming rules?
        Ms. Evans. I think we are going to share that pain equally.
    It actually depends on, as Ms. Lowman said, the ability for our
    software providers to provide us the services and the systems
    that we need. But it also relates to the markets that we do
    business in and the banks and lenders that are our customers in
    those markets.
        Mr. Pearce. Having been a small business person myself, I
    worry at the number of small businesses who can afford $100,000
    software. I will just tell you that. And when businesses start
    closing down, I know where they are going to close down first.
    They are going to close down in the smaller communities first,
    and someone from outside is going to come in and service that,
    and now you have lost contact with your customer base. And I
    just see disadvantages for the smaller places, for the poorer
    places.
        Obviously, the lower the income levels, then the less
    attractive that is going to be to outside providers. And so I
    worry about the loss of jobs in areas like New Mexico, because
    we have a lot of small communities, a lot of communities under
    25,000. And so I worry about that.
        Have you all done any studies on the pressures that would
    cause companies to close?
        Ms. Evans. We haven't done exact studies, but we have
    talked with many of our members across the United States that
    are exactly like you describe in your local communities, and
    they are very concerned about the ability to continue to serve
    consumers, home buyers, and sellers in their markets and making
    sure that they have the systems and the financial stability and
    are able to go forward.
        Mr. Pearce. Ms. Goodman, I really appreciated your
    testimony. I thought that it came across covering both sides of
    the issues very well. And I will tell you as one of the
    Republicans, I was a little alarmed when you said you were
    going to take aim at the elephant in the room. And so other
    than that, I was okay with it. But all right. I took a while to
    catch on there.
        Ms. Goodman. Thank you.
        Mr. Pearce. Again, as a small State, I worry, and I really
    appreciate your comments on GSE reform. That is kind of where I
    would like to track toward, as again in a small State, the
    manufactured housing is 50 percent of the houses sold in my
    district. And so I worry that the secondary market, the private
    market, would actually get out and service these.
        Have you all done any studies on the privatization and the
    private sharing of risk? I am not trying to put words in your
    mouth. Have you all done any studies about that?
        Ms. Goodman. We have done a lot of work on risk sharing
    between the GSEs and the private markets, and we have done a
    lot of work on credit availability. And one of our concerns is
    that those being squeezed out of the market now are those
    borrowers with lower credit scores, and disproportionately
    include those living in manufactured housing.
        Mr. Pearce. Yes, that would be my worry.
        Ms. Goodman. We have not done anything explicitly on
    manufactured housing, although we have done a lot of work on
    credit availability. But that is an interesting topic to add to
    our research agenda. Thank you.
        Mr. Pearce. I'll tell you what, if you would like to come
    and visit our office, I would like to dig into this a little
    deeper. If we had the capability to do it ourselves as an
    office, we already would have. It is just very complex. And I,
    again, appreciated your testimony and would invite you--
        Ms. Goodman. Thank you. I accept.
        Mr. Pearce. Okay.
        Ms. Lowman, you had mentioned the risk to your business if
    you make bad disclosures. Can you tell me a little bit more
    about that risk and how it pyramids up or down or whichever way
    pyramids go? I don't know exactly, not coming from Egypt.
        Ms. Lowman. It will get broader at the bottom, I can tell
    you that.
        What we have seen since 2010 is a zero tolerance in
    compliance. And the compliance, again, doesn't impact the
    consumer directly, it impacts my business and that of all the
    mortgage lending industry. And I think it was intended to
    improve the delivery of information to the customer, but the
    measurement now is that you can't make a mistake. For an
    example, if I disclose to a customer an incorrect title
    insurance fee, I eat the difference if it is wrong. That is the
    new rule.
        Mr. Pearce. Yes. So that zero tolerance ought to work
    backwards toward the government regulators.
        I have extended past my time, Mr. Chairman. Thanks for your
    tolerance.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we go to the gentlemen from Texas, Mr. Williams,
    for 5 minutes.
        Mr. Williams. Thank you, Mr. Chairman.
        And I want to thank all of you for being here today. This
    is great testimony. We appreciate it.
        I am a small business owner. I am from Texas. And I can
    tell you that regulations are killing Main Street. You all are
    Main Street. I am Main Street. The CFPB, as I believe you have
    heard some of my other colleagues say, is not a friend of Main
    Street and is doing a lot of harm in America. And in full
    disclosure, I am a car dealer. So I feel your pain.
        My question for Ms. Lowman is, in your testimony you
    discussed third-party compliance systems and that vendors will
    deliver these in stages, and many of them will not be ready by
    the August 1st deadline, which we have talked about.
        As a result, these lenders, especially the smaller
    financial institutions, will have to halt their mortgage
    lending business, as we have heard. And I can tell you in some
    of the rural parts of my district in Texas, the CFPB is already
    regulating them out of the mortgage market.
        Personally, I think you are starting to see what I would
    call a forced consolidation of these banks. I know it is
    happening in Texas because in Texas alone, where we think we
    have the greatest economy in the world, we have still lost 115
    community banks since 2012.
        Look, that is what it is all about. I really think
    protecting these small institutions who can barely afford to
    comply with this new law and can't afford to be held liable
    should they get it wrong, we hear all the time that community
    banks and lenders are hiring more compliance officers than they
    are lending officers, and that is just wrong.
        So going back to my question, Ms. Lowman, what might the
    fact that the products that are not going to be ready, how will
    they affect the bank as a whole? You have talked a little bit
    about that, but tell us again.
        Ms. Lowman. Part of my market in west Michigan, and we feel
    we have a very strong market as well, is the service of zero
    lending to low- and moderate-income folks. Rural development is
    one of those very good products that we use which comes from
    the USDA. And we will not have those documents ready. I have
    already been told by my software partner that is on the last
    part of their upgrades. If I can't do rural development, I
    can't do 100 percent on lending for the low- and moderate-
    borrower.
        Mr. Williams. So who is affected? The customer again.
        Ms. Lowman. The customer.
        Mr. Williams. By big government getting involved.
        Second question, how might a bank make up for the lost
    business? You are going to have lost business because you can't
    sell the product, right, because you are not ready for it. How
    are you going to make up for that lost business, those lost
    profits?
        Ms. Lowman. We are all in business, and we are a for-profit
    business, but I have done some studies just since the Dodd-
    Frank Act. It takes me 3 hours longer for every applicant. I
    think the customer is the one who is suffering in the long run.
    We can't get to all of them, which means that some folks are
    not going to be able to do their mortgage with their local
    lender.
        Mr. Williams. Because of the overreach of the heavy hand of
    government, you are going to lose some profits probably because
    of your inability to reach out to everybody.
        Now, would the same lenders have to raise costs on
    consumers to make up for the mortgages they couldn't make until
    their systems were in place?
        Ms. Lowman. We have done some studies on that through the
    ABA, and 5 years ago it cost about $5,000 all-in cost to do a
    mortgage. We have anticipated that by the end of 2016, it is
    going to be over $9,000 to do that same mortgage for the
    consumer.
        Mr. Williams. So there again, the consumer is affected.
        I still have some time. My question would be for you, Ms.
    Evans. It is nice to see you again. Thank you for being here.
    What are you seeing in the overall title insurance market as a
    result of this legislation? For example, I would say, do you
    see consolidation in the market or are small businesses
    thriving in this regulatory environment?
        Ms. Evans. They most certainly are not thriving. They are
    struggling. And there is discussion of consolidation. There is
    discussion of some closures because of the simple inability to
    comply with overregulation and the burdens placed upon them.
        Mr. Williams. So it affects competition?
        Ms. Evans. It absolutely affects competition, which
    directly affects the consumer.
        Mr. Williams. The consumer, again, is affected by the
    heavyhanded overreach of government?
        Ms. Evans. Yes.
        Mr. Williams. Ms. Lowman?
        Ms. Lowman. Can I share one thing on that title insurance
    piece? One of the comments that Ms. Evans made earlier about
    how TRID is regulating how we disclose that, right now we have
    what we call a simultaneous issue policy, where borrowers get
    to have a savings when we do the owners policy and mortgage
    policy with the same company.
        Under the new rules, because we have to disclose the full
    cost and we can't disclose simultaneous issue, most companies
    now are stopping simultaneous issue. I did some studies on a
    $100,000 loan, which costs the borrower $200 on a $250,000
    loan. That costs almost $300 in that savings they will not be
    able to experience because the title industry is saying we
    can't offer it.
        Mr. Williams. The American Dream gets further and further
    away.
        Thank you, Mr. Chairman. I yield back my time.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we will go to the gentlelady from Wisconsin, Ms.
    Moore, for 5 minutes.
        Ms. Moore. Thank you so much.
        And I want to apologize to the panel for not being able to
    attend earlier so that I could hear some of your testimony and
    some of the other questions. So you must forgive me if I am
    redundant in any way. Thank you for joining us.
        I have a couple of concerns. We could start out with the
    August 1st, 2015, deadline for the new real estate settlement
    procedures and truth-in-lending forms, the merged form. I am on
    a letter with Mrs. Maloney to delay implementation of this
    because there is a concern on the part of many of us that this
    is just not enough time in the real estate season to give them
    time to really comply with the new requirements.
        Now, Mrs. Maloney is one of the more strident supporters of
    the CFPB, so I know that she is not suggesting that, to stop
    the CFPB from this activity. But I just wanted the panel's
    opinion on whether a delay was possible and what impact do they
    see that this would have?
        Ms. Evans. Thank you for your question. I actually had the
    opportunity to meet Director Cordray yesterday afternoon, and I
    posed that very question and urged him to consider a delay in
    enforcement, a hold harmless period, because we really do need
    to test this process, test these forms, and make sure that
    consumers aren't harmed in the transaction.
        He told me, as I think he presented in front of the
    REALTORS organization earlier this week, that he is still
    listening. So I think any encouragement from all of you helps
    further the case that consumers need to be assured that their
    transactions will move forward as we implement these new forms
    in this new process.
        Ms. Moore. Okay. Thank you for that.
        The other question I had, and maybe Mr. Polychron might be
    the best person to ask this question, is in regard to FHA
    loans. Many modest-income borrowers and low-income borrowers
    find themselves needing to go to the FHA for their financing
    because they don't have the 20 percent downpayment.
        And we have heard concerns from some realty groups,
    including the REALTORS, that the requirement that borrowers
    amortize the mortgage insurance payment over the entire life of
    the loan means that the poorest borrowers will be paying much
    more for the loan. And it doesn't seem to have any nexus with
    added risk factors versus the private mortgage insurance that
    would phase out earlier and be less expensive.
        What are your thoughts are on that?
        Mr. Polychron. Are you speaking in reference to the
    downpayment being high? Because you started off with the
    downpayment.
        Ms. Moore. What I am saying is, if a person is getting an
    FHA loan and the FHA mortgage insurance is amortized over the
    entire length of the loan versus being phased out at some
    point, it prevents a borrower from developing any equity in the
    property. And this is a rule that has been put in place, and I
    am wondering if this is an unintended consequence, in your
    opinion.
        Mr. Polychron. Yes. Some other things happened to perhaps
    offset that. The mortgage premium was reduced from 1.35 down to
    0.85, which lowered the average home that sold through FHA
    approximately $90 a month. So even though some other things
    changed that might affect it negatively, I think overall with
    the downpayment being lowered again to 3.5 percent on FHA
    loans, I think the product has become much more attractive to
    all--
        Ms. Moore. Any other observations about this in my 4
    seconds from the other panelists?
        Ms. Lowman. I deal with conventional primarily because of
    that. We are regulated on the requirement to reduce or take the
    entire PMI premium out of the transaction at 78 percent. The
    FHA, the new rules do have a 100 percent MI coverage for the
    life of the loan.
        Ms. Moore. My time has expired. I don't know that I got the
    answer, but thank you.
        Chairman Luetkemeyer. Thank you.
        With that, we go to the gentleman from Pennsylvania, the
    distinguished gentleman, Mr. Rothfus, for 5 minutes.
        Mr. Rothfus. Thank you, Mr. Chairman.
        It is kind of hard to see folks from up here with the new
    setup.
        For the panel, I have talked with a popular real estate
    company back in my district a bit about the TRID rule, and they
    do expect to have technology ready to comply by the August 1st
    deadline. This particular company is going to be ready.
    However, they noted that the large number of settlement service
    providers they work with also need to be ready if they all want
    to do business together.
        Could the panel please elaborate on the interconnectedness
    of real estate transactions, what could happen if one component
    in the process is not ready with the needed systems and
    technology?
        Ms. Lowman, would you like to start?
        Ms. Lowman. I will start out, only because the closing
    disclosure, which is the new part of TRID, is 100 percent our
    responsibility. In the past, settlement done by the title
    company, we collaborate the numbers, they can change right up
    until minutes before closing. And under TRID, that cannot
    happen anymore. It is locked down 3 days before, which means we
    have to collaborate with our title companies about 5 days
    before closing. And when you buy a home, there are expenses and
    things that happen in that week before closing that we can no
    longer allow to happen.
        So that is going to be one of the biggest challenges of the
    new TRID rule, the lockdown of that closing disclosure. We have
    spent the last several months sitting down with our vendor
    partners, including the title company and the REALTOR
    community, asking, ``How can we do the best job to be where we
    have to be on August 1st?'' We don't have all those answers
    yet.
        Mr. Rothfus. Anybody else want to comment on the
    interconnectedness and the impact of one entity not being
    ready?
        Ms. Evans. Thank you. And that absolutely is true. It is
    critically important that we all are able to share data
    directly with one another and to make those changes and make it
    very timely and seamless so that the timeframe set forward in
    the new rule can be met so that the loans can close without
    delay. But that last-minute change, that need to prorate the
    gas that is in the propane tank or adjust the homeowners
    association dues, all those last-minute issues that come up are
    going to be much more difficult to do, and that integration
    will be critical to accomplish that.
        Mr. Rothfus. Thank you.
        Mr. Polychron. And if I may, ultimately, my client, my
    couple who is sitting at that closing table, when they find out
    they are not going to be able to close, has to provide
    themselves for more perhaps rental payments, higher interest
    payments, moving vans that are sitting there full of furniture
    that is going to cost more. So there are going to be incurred
    costs that they wouldn't normally have as well.
        Ms. Goodman. Just to add one more thing, and that is the
    sheer number of vendors that has to be coordinated is just
    incredible. It is mortgage brokers, the title insurance agents,
    attorneys, closing or settlement agents, and pest inspectors.
    It is incredible.
        Mr. Rothfus. Thank you.
        Ms. Lowman, have there been other regulations that you
    recall where technology hasn't been ready at the deadline for
    implementation and where Federal regulators provided some
    relief to industry to ensure that they were not going to be
    adversely harmed?
        Ms. Lowman. Do I understand the question to say the
    technology piece?
        Mr. Rothfus. Yes, to comply with a certain regulation by a
    certain deadline, if technology wasn't ready. Do you recall
    other instances where the technology just wasn't ready yet and
    the Federal regulators provided some relief?
        Ms. Lowman. In my 30-year career, in just the mortgage
    business, there has never been an issue with the technology
    piece. It has usually been about processes.
        Mr. Rothfus. Thank you.
        There will be glitches when TRID goes into effect on August
    1st, especially since there currently is no testing phase. What
    are some challenges industry participants will face that might
    have been unaccounted for by the CFPB? Anybody on the panel
    want to address that?
        Ms. Evans. Sir, thank you. I think that is a really good
    question, and I think that is part of the reason why the
    delayed enforcement is so important, is because we don't
    necessarily know exactly what those issues may be.
        Under the current rule, the buyer/borrower risks losing
    their earnest money if closing doesn't occur in a timely
    manner. And the CFPB has acknowledged through their statements
    that they don't believe that a loss of earnest money is a
    financial crisis for a buyer. I have to tell you, in my world,
    as I close transactions, whether that earnest money is $1,000
    or $10,000, the loss of that to a buyer/borrower is huge, and
    the consequence is a financial--
        Mr. Rothfus. That is a significant number.
        Ms. Evans. Yes.
        Mr. Rothfus. Thank you.
        I yield back.
        Chairman Luetkemeyer. Thank you.
        With that, we go to the gentleman from Texas, Mr. Green,
    for 5 minutes.
        Mr. Green. Thank you very much, Mr. Chairman, and I thank
    the ranking member as well.
        Not having been here for the entirety of the hearing
    because of other duties, I may ask a question that has already
    been answered, so please tolerate me to the extent that you
    may.
        Integrated disclosure, is there anyone among you who is
    opposed to the integrated disclosure? If so, would you kindly
    extend a hand into the air or simply say so. Anyone? All right.
        Now, the time period that we are discussing is about 5
    months. Is that enough time to make the transition?
        Ms. Goodman. It is clearly not. I think you can argue that
    lenders really had 21 months, but they didn't, because every
    system was dependent on every other system. So the systems that
    are being delivered to Ms. Lowman were in turn dependent on
    MISMO, which is the mortgage information and data system. That
    was in turn dependent on Fannie and Freddie with their uniform
    disclosures, which required updating. There are 899 data
    elements in that, some of which had to be updated. So there was
    sort of a sequencing.
        We are getting to the end and the timeline is very, very
    tight. So while systems may be mostly in place, they won't be
    fully integrated. There is going to be a huge manual element.
    And the people at the end of the line who are going to suffer
    are going to be consumers with delayed closings.
        Mr. Green. I think, Ms. Lowman, you were about to give a
    comment as well?
        Ms. Lowman. I would echo her comments completely.
        Mr. Green. Well, permit me to ask, what would be
    reasonable, in your opinion?
        Ms. Lowman. From my perspective, working with my software
    company is the most strategic part of implementation right now.
    I am still waiting to get to that stage.
        Once we have the software in place and we start testing, I
    have to pull people out of the field, which means consumers
    can't get to their mortgage person for an application, and
    spend the time training them. And I was looking towards about a
    60-day training period, and I won't be able to start that until
    the end of June at this point.
        Mr. Green. Moving to another topic, Ms. Lowman, Mr. Ellison
    was asking questions about affiliates and you were about to
    make a comment about 100 percent zero tolerance. I didn't quite
    get the gist of what you were going to say. Would you kindly
    explain?
        Ms. Lowman. If a bank is working with an affiliated title
    company that they may own, TRID says that we have no tolerance
    for error. So the dollar amount that we put on the early
    disclosure to the customer, primarily because it is an
    affiliate of the bank, we cannot have any number other than
    what we close with. There is no ability to change that.
        Mr. Green. And the final question that I would ask has
    simply to do with the utilization of the time if we have a hold
    harmless period. Would you care to explain to me how this time
    would be effectively used?
        Ms. Evans. Thank you, sir. That time would be used to use
    these new forms, use the new process in real-life transactions
    to make sure that we all have it right and that we are able to
    timely close consumers' loans and make sure that there aren't
    unintended consequences as a result of this new process.
        Mr. Green. Anyone else?
        Mr. Polychron. I kind of like to compare it to the NFL.
    They play preseason games that don't count against them, and
    then all a sudden when the day gets there, they play for real,
    and that is what I would kind of like to see happen as well.
        Mr. Green. Thank you very much. I appreciate your analogy.
        Thank you, Mr. Chairman. I will yield back.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we go to the gentleman from Kentucky, Mr. Barr,
    for 5 minutes.
        Mr. Barr. Thank you, Mr. Chairman.
        Ms. Evans, I appreciated your testimony regarding your
    conversation with Mr. Cordray yesterday, and I am happy to hear
    that he said that he would be listening and continuing to
    listen in advance of August 1st.
        My question to you is, do you expect the CFPB to make any
    changes without a congressional intervention based on your
    communications and industry's communications with the Bureau?
        Ms. Evans. I think I would be speculating if I said yes or
    no to that. But what I do feel confident in is that any kind of
    encouragement or action that you all would take to help move
    the need for that change forward would certainly go a long way.
        Mr. Barr. To that point, as you may know, I am leading a
    letter and sending a letter to the Bureau with my colleague,
    Mrs. Maloney from New York, to encourage the Bureau to give you
    all that preseason, if you will, so that you can test all of
    the new procedures.
        The goal of this new integrated disclosure, of course, is
    to simplify the process of closing. And yet we see that the
    regulation itself is a 1,888-page rule in and of itself. My
    question to anyone who would like to answer is, do you think
    that 1,888 pages of regulation is too much or too little
    guidance?
        Ms. Lowman, since you smiled?
        Ms. Lowman. There is a lot of minutiae in there that we are
    still trying to figure out how that impacts the numbers that we
    provide for our customers. And as we have read it and had our
    attorneys read it, we have spent a lot of time trying to figure
    out what that exactly means to every bit of the documentation
    that goes to the customer.
        But as we put these rules into play, I think this period of
    time that we are asking for would give us time to try it on,
    make sure it fits right, go back and forth with CFPB to try to
    get more clarification without the penalty of closing customers
    down for closing where they could lose their rate lock, they
    could lose the house that they are buying, and lose their
    downpayment.
        Mr. Barr. My understanding is that there are 10 pages of
    disclosure forms under this regulation: a 3-page loan estimate;
    a 5-page closing disclosure; and a 2-page disclosure to the
    person selling. Is this more complicated, is this a more
    voluminous amount of paper than typical closing under the
    current law?
        Ms. Lowman. We had some sweeping changes a few years ago,
    and that probably was more paperwork than what this is, and
    that locked down tolerances, which was the concern that the
    consumer would get a bait and switch, like it is going to cost
    you this much, but it really costs you this much at the closing
    table. That all changed several years ago.
        And as I said earlier, we have looked at these documents
    that HUD created and that were part of RESPA for a long, long
    time. They are not cumbersome. I think it was the training of
    people who give that disclosure at closing to make sure it is
    clear to customers. And I am not sure we fixed that yet.
        Mr. Barr. I will stay with you, Ms. Lowman, with one other
    question directed specifically to you. What do you see in terms
    of the additional costs to consumers and also just generally
    credit availability impacts as a result of the new integrated
    disclosure rule?
        Ms. Lowman. From what I have sensed so far reading it, the
    impact of credit availability should not change. The amount of
    available time to work with customers has changed. It has taken
    us much longer to do each transaction, so we can get fewer
    people through the process. That shouldn't be different from
    one shop to the next, it should be universal. I think that is
    going to be a big impact. And then just monitoring the activity
    in our shops is costing more money, and if it costs more money
    to us to do it, it is going to cost the customer more.
        Mr. Barr. And I am curious about this 3-day advance
    requirement and some of the challenges associated with the
    requirement to provide the disclosure 3 days in advance of
    closing. Can you just elaborate a little bit in my remaining
    time about some of those additional complexities that could be
    created?
        Ms. Lowman. I have a calendar, but it basically says that
    on the new rules, the last loan estimate I can issue to a
    customer, with any changes, whether the customer asks for it or
    whether the REALTOR asks for it or the title company changes
    something, is day 4. Day 3 before closing is the day we issue
    the closing disclosure. It goes to the customer. It goes to the
    title company. That is locked down.
        If something comes up like homeowners association dues that
    we didn't know about or the fuel bill that we were talking
    about earlier, then that stops the 3 days. You have to issue a
    new 4-day loan estimate for the changes and then a new 3-day
    closing disclosure, and now your closing is about 4 or 5 days
    further out.
        Mr. Barr. Thank you for your testimony.
        I yield back.
        Chairman Luetkemeyer. I thank the gentleman.
        With that, we have our final inquisitor of the day, the
    distinguished gentleman from California, Mr. Sherman, who is
    also the cosponsor of H.R. 2213. He is recognized for 5
    minutes.
        Mr. Sherman. Thank you, Mr. Chairman. I served for so many
    years on this subcommittee, and I want to thank you for
    allowing me to participate in this hearing even though I am no
    longer one of your members.
        You know, I cosponsored Dodd-Frank. I think no one else in
    the room can say that at the present time, for different
    reasons, I would argue, for different reasons. I know, for
    different reasons. And the plan for the CFPB was they wouldn't
    have to listen to the appropriating committee. They are the
    only agency in government I can think of that doesn't have to
    listen to the appropriators.
        We didn't do that because we thought they shouldn't listen
    to Congress. Rather, we wanted both ears focused on the
    authorizing committee, this committee. This is where the
    expertise resides. And even if we didn't bring expertise there
    should be a certain respect. What is it, honor your father and
    your mother? We created this agency right here in this room
    before it was redecorated.
        And I like Mr. Polychron's example comparing it to the
    preseason. My own example is that this is like a shakedown
    cruise. You build the best ship you can, but you then take it
    out and see how it works. And you expect it to float, you
    expect it to work, but you don't shoot the captain if it
    doesn't work on the shakedown cruise. You don't even subject
    him to the American trial bar. You get the bugs out of it.
        And in this one, I am seeing some bugs, because if I
    understand Ms. Lowman's testimony and others that I have heard,
    the slightest little change can delay things for days. So if I
    was buying a house and I found that the water heater needed to
    be fixed, instead of getting the water heater fixed at the
    expense of the seller, which is only fair, I would just say to
    heck with it, I will fix it myself, I won't tell anybody about
    it.
        The last thing I want to do is move into the house 5 days
    after the school year begins because I want somebody else, in
    all fairness, to pay for the--so this idea to start over for
    $50 items or $200 items does not help the consumer. But as I
    understand the testimony here, you are ready to go with this
    regulation, whatever flaws it has, on January 1. Actually, you
    are going to implement it on August 1st, but you just don't
    want to get sued for the problems discovered in the shakedown
    cruise.
        I don't know why Congress has to push this hard to get that
    as the result. But we do have the Pearce-Sherman bill. We are
    looking for cosponsors. And it shouldn't take an act of
    Congress to get a 5-month period in which you do your level
    best to follow this new law, but you are not going to get sued
    or penalized during the shakedown cruise.
        Mr. Polychron, what I am hearing from REALTORS in the San
    Fernando Valley is this is already affecting planning for
    selling homes and buying homes, that people are worried if they
    can't get their escrow open by August 1st that they are going
    to have problems. People are already planning to just take the
    month of September and October off, which may be good for them
    and their families if they are REALTORS, but not good for my
    area.
        Are you seeing that around the country? Is the prospect of
    this highly litigious, people-waiting-to-sue situation already
    affecting behavior?
        Mr. Polychron. Congressman Sherman, southerners are a
    little different than people in California. But I will tell you
    that what we are seeing happen is our title companies and
    lenders are telling us to add from 15 to as much as 45 days to
    a closing to expect it to finally happen. So it is still a
    delayed period, which we don't like.
        Mr. Sherman. And right at the time of the school year where
    I have to move into the house or my kids can't go to that
    school, they can start 2 weeks late, that is--
        Mr. Polychron. All correct, sir.
        Mr. Sherman. Is everybody here--I think you have already
    said this--in favor of the Pearce-Sherman bill? I am seeing
    nod, nod, nod.
        I see, Ms. Goodman, are you nodding or--you are not shaking
    your head.
        Ms. Goodman. I am definitely in favor of the hold harmless
    period. I am not sure that you need to do it legislatively as
    opposed to by urging the CFPB to do it, because I really think
    it is--
        Mr. Sherman. I want to commend Mrs. Maloney and Mr. Barr,
    because they have sent a letter, organized a letter that many
    of us have signed that has encapsulated the wisdom of Ms.
    Goodman. And nothing would please me more than throwing away
    this bill because the CFPB did exactly what Ms. Goodman
    suggested.
        I believe my time has virtually expired, and I yield back.
        Chairman Luetkemeyer. As usual, the gentleman from
    California is very articulate and has great points to make.
    Thank you for your participation in our committee hearing, and
    you are most welcome.
        With that, we have our final questioner of the day, the
    gentleman from Florida, Mr. Ross, for 5 minutes.
        Mr. Ross. Thank you, Mr. Chairman. I don't think I will
    take my full 5 minutes, but I do want to comment that, yes, I
    too am a cosponsor of the Pearce-Sherman bill and believe that
    as a lawyer, in order to address the potential causes of
    action, it probably is legislatively necessary.
        But I just want to address this, if I can Ms. Evans, to
    you, because as a law student some 30 years ago, before we had
    computers, we would do an abstractive title by going down to
    the courthouse and doing the chain of title and taking some
    painstaking efforts to find out that we had a clean title. And
    then we would look and go back to the title company to do the
    title insurance and put in our exclusions.
        If the Pearce-Sherman bill is not implemented, if there is
    not a safe harbor, I foresee some title situations that are
    going to be very painstaking that in and of itself give rise to
    litigious causes of action or maybe other exclusions that title
    companies will want to put in there. And so I guess from your
    perspective, what do you anticipate to be the impact if we are
    not able to correct this and allow for the safe harbor?
        Ms. Evans. Thank you, sir, for the question. I think the
    largest impact is going to be on the closing and settlement
    side. I think that the title insurance product, the search and
    exam, will continue to go forward. I think we will be required
    to make sure that we are able to search, examine--
        Mr. Ross. You will have a conditional acceptance--
        Ms. Evans. --and provide those products in a shortened
    period of time.
        Mr. Ross. No, you will have a conditional acceptance
    essentially or a conditional issuance of a title policy that
    then may give rise to an objection of the mortgagee because it
    doesn't protect their interest because you are not sure.
        I guess what I am suggesting is that until we get this
    cleared up, and until you--which by the way, I think, has
    probably one of the most significant impacts on a transaction
    because of the depth of the title history--that we have to have
    that cleared up. And I guess what I am concerned about is, you
    have to protect your interest, and if you don't do it through
    an exclusion or a conditional issuance, then you do so at your
    own peril.
        Ms. Evans. We want to make sure that home buyer's
    investment is protected--
        Mr. Ross. Correct.
        Ms. Evans. --and they get a product that well covers that
    commitment that they have made to purchase that home.
        Mr. Ross. I agree with you. And in order to have that
    satisfaction that you know that home buyer is protected, you
    need some sense of certainty, correct?
        Ms. Evans. Absolutely.
        Mr. Ross. Mr. Chairman, I yield back. Thank you.
        Chairman Luetkemeyer. I thank the gentleman.
        And obviously, things on the Floor have broken down,
    because we are an hour late with votes. So thankfully, and for
    your benefit anyway, that happened. Again, I thank the
    witnesses for participating today. You all did a fantastic job.
        But I do want to send a message to the CFPB. I think from
    the hearing that we had today, the forbearance period is agreed
    to by all parties, on both sides of the aisle. And I think that
    if a forbearance period is not granted, it is incumbent on this
    committee to monitor that situation. And so it is my intention
    to contact all the various lender associations and get with
    them to, if the forbearance period is not agreed to, to have
    them get with us and give us examples of extreme abuses by the
    CFPB if they pursue this and go down this road.
        Hopefully, they will be good stewards of our citizens' time
    and money and this will not happen, but should they not do
    that, we want to know about that, and we will be in contact
    with a lot of the representatives from the different lending
    groups to make sure that we monitor the situation very, very
    closely.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        With that, this hearing is adjourned.
        [Whereupon, at 3:32 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                  May 14, 2015

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