H.R. 5078, TRID Improvement Act of 2018

Floor Situation

On Tuesday, February 27, 2018, the House will consider H.R. 5078, the TRID Improvement Act of 2018 under the suspension of the rules. The bill was introduced on February 23, 2018, by Rep. French Hill (R-AR).

On February 14, 2018, the House passed H.R. 3978, the TRID Improvement Act of 2017 by a vote of 271-145. The House-passed version of H.R. 3978 included the texts of the House Committee on Financial Services passed versions of H.R. 3978, H.R. 1645, H.R. 4546, H.R. 3948, H.R. 2948, and H.R. 4061. H.R. 5078 includes only the text of H.R. 3978 and H.R. 435, as passed by the Committee.

Summary

H.R. 5078 modifies requirements related to mortgage disclosures and offers clarification to consumers and regulatory relief to financial institutions. In addition, this bill creates a reporting environment that leads to more accurate credit scores, which delivers increase access to stable and more affordable credit for consumers. Specifically, the bill does the following:

TRID Improvement of 2017 (H.R. 3978)

This bill amends the Real Estate Settlement Procedures Act (RESPA) to require the CFPB to allow for the calculation of the discounted rate title insurance companies may provide to consumers when they purchase a lenders and owners title insurance policy simultaneously.

The Credit Access and Inclusion Act of 2017 (H.R. 435)

This bill amends the Fair Credit Reporting Act (FCRA) to allow the Department of Housing and Urban Development as well as public utility and telecommunications companies to report on-time payment data to consumer reporting agencies (CRAs). H.R. 435 also amends the Consumer Credit Protection Act to clarify that the bill’s civil liability provisions are inapplicable to credit reporting agencies but applicable to credit furnishers. Finally, H.R. 435 requires the GAO to study, in a one-time report, the impact of furnishing on-time payment data to consumer reporting agencies.

Background

TRID Improvement Act of 2017:

When an individual purchases a home, they receive a deed, which shows the seller transferred legal ownership, or the “title”, to the home.  Title insurance provides protections to homebuyers if they are sued for a claim against the home before purchase – for example, a previous owner’s failure to pay taxes or a contractor who claims they were not paid for work done on the home before purchase.  Lenders often require the purchase of title insurance to protect the amount lent.

If a borrower purchases both a required lender’s title policy and an optional owner’s title policy simultaneously (referred to as “simultaneous issuance”) they may receive a potential discount in total cost. Many state regulators require settlement agents to disclose the actual costs, often times in an itemized list of fees at closing, for each fee the homebuyer is responsible for paying. However, the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID) rule requires that the lender’s title insurance policy listed on the disclosures that consumers receive when they apply for and close on a residential mortgage loan (referred to as the Loan Estimate and Closure Disclosure Form) equal the regular costs of the total title insurance premium without any adjustments. As a result, the title insurance premium on the Loan Estimate and Closing Disclosure received by a buyer is different from the premium listed on the paperwork received from the title insurance company.

The bill resolves these disparities and requires the CFPB to allow the accurate and complete disclosure of title insurance premiums and discounts to homebuyers.

The Credit Access and Inclusion Act of 2017

Furnishers typically report full account payment information, both positive, such as an on-time and in-full payment, and negative, such as a missed or delayed payment. However, some types of accounts are reported only when the payment history turns negative, such as when the debt is transferred to a debt collector. Owing primarily to regulatory uncertainty at the state level, utility and telecom companies only report negative information, such as late payments, if they report on a consumer’s payment activity at all. A consumer may make dozens or more on-time and in-full payments, but due to the nature of the reporting mechanism under current law, the consumer will receive no benefit from those “good” payments to utilities and telecom companies.

Credit reporting is crucial to the efficient functioning of the economy. In order to lend, creditors must calculate the risk a borrower represents in a loan transaction. The more likely the borrower is deemed to fully repay the loan, the more favorable the loan terms are likely to be. As the financial journalist Martin Wolf has pointed out, the “close monitoring of the behavior of borrowers and compilation of detailed credit records not only direct credit to reasonably honest and responsible borrowers, but should encourage them to stay that way.”[1] At the same time, however, borrowers may be penalized for inaccurate, incomplete, misleading or unreliable information in their credit histories. And according to some observers, consumers whose credit histories lack enough information to calculate a credit score are often excluded from the financial mainstream.

By requiring the GAO to study, in a one-time report, the impact of furnishing on-time payment data to consumer reporting agencies, lenders may more assess exposure and risk when it extends credit to a consumer. Moreover, the lender is able to make additional loans it may not otherwise make because of incomplete risk-assessment information. For consumers, more positive information furnished to consumer reporting agencies mean increased access to stable and more affordable credit.

Ultimately, this bill will create a furnishing and reporting environment that leads to more accurate credit scores. When a lender is able to accurately assess exposure and risk when extending credit to a consumer, it is able to make additional loans it may not otherwise make due to incomplete risk-assessment information. For consumers, more furnished positive information delivers increased access to stable and more affordable credit.

Cost

A Congressional Budget Office (CBO) estimate for the Rules Committee Print is not currently available. However, individual cost estimates are available for some of the Titles.

H.R. 3978, CBO estimates direct spending would increase by less than $500,000.

H.R. 435, CBO estimates implementation would cost less than $500,000 over the 2018-2022 period, subject to the availability of appropriated funds.

Staff Contact

For questions or further information please contact Ashley Gutwein with the House Republican Policy Committee by email or at 6-1828.