[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
                           
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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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