TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 19

Volume 19

The lender insists on preparing the seller’s Closing Disclosure. What do I do?

The Rule requires that the settlement agent provides the seller’s side of the Closing Disclosure (“CD”). If a lender is challenging the settlement agent’s right to provide the seller’s CD, are they defining “provide” as handing it to the seller rather than preparing it? One would think that the lenders would prefer to transfer the work involved to the settlement agent rather than do it themselves.

If you are challenged with a lender insisting on preparing the seller’s CD, here are the pertinent sections in the Rule beginning on page 1740. 19(f)(4)(i) Provision to seller: 1. Requirement. Section 1026.19(f)(4)(i) provides that, in a closed-end consumer credit transaction secured by real property that involves a seller, other than a reverse mortgage subject to § 1026.33, the settlement agent shall provide the seller with the disclosures in § 1026.38 that relate to the seller’s transaction reflecting the actual terms of the seller’s transaction.

19(f)(4)(ii) Timing Requirement. Section 1026.19(f)(4)(ii) provides that the settlement agent shall provide the disclosures required under § 1026.19(f)(4)(i) no later than the day of consummation.

Have the conversation with the lender early in the transaction.

This information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 18

Volume 18

Now that the TRID Rule is in effect, can the borrower and the seller still be in the same room at closing?

This question is being asked in the areas of the country where conference-style settlements occur. That is when the buyers, sellers, title professionals, real estate agents, attorney and sometimes the lender, arrive at an appointed place and time and are together during the settlement or closing to review the documents and figures. It is the time when last-minute negotiations take place and the keys are passed. Many times, there are children (and pets) running up and down the hallway.

Not having anything to do with TRID but having everything to do with protecting the Non-Public Personal Information (“NPPI”) of the parties, the question arises “can everyone be in the same room while information is being reviewed?”

Asking permission and getting authorization to continue the practice of discussing the details of the transaction in a room full of third parties is the prudent approach. Some issuing agents, after receiving an order, have added wording to the confirmation letter to the buyers and sellers asking them if they prefer a private area to discuss the terms of their transaction. Another issuing agent schedules the buyers 30 minutes prior to the seller so that the loan documents can be reviewed in private. Still, other issuing agents are adding authorization language to the closing documents and are getting those signed first, before anything else.

If you haven’t already done so, now is a good time to evaluate your company’s privacy protection policies and procedures. We encourage you to consult with your own legal counsel and develop a system that works best for your organization.

This information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice.  Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 17

Volume 17

Simultaneous Issue, Reissue Credits and Correcting the Title Insurance Premiums

The dilemma that we have when disclosing the title insurance premiums can be daunting, especially in simultaneous or reissue credit jurisdictions. If the borrower is paying all premium fees, the CFPB’s required formula – in accordance with the TILA-RESPA Integrated Disclosure (“TRID”) Rule regarding how to list on the Closing Disclosure, will total properly but that same required formula most likely will not coincide with state rate filings (if any). However, in borrower-pay areas, the math will work and the ALTA Settlement Statement, if used, will reflect the proper rates to illustrate actual numbers for the consumer and for audit purposes.

It is when the seller pays any portion of the premium(s) that the TRID Rule’s required method is a challenge. The best way to figure out how to fix the inaccurate way we are required to disclose the premiums is to do the following:

1. Write down what the borrower should pay in accordance with the contract and/or custom.

2. Next, write down what the seller should pay.

3. After that, write down what the Rule requires us to show on borrower’s side in Section B or Section C.

4. Finally, calculate the differential amount required to be shown on the seller’s side in Section H as the Owner’s Title Premium.

Following is an example to provide a clear picture of who is paying too much and who is paying too little:

1. Buyer should pay a $300 simultaneous issue rate for the loan policy.

2. Seller should pay $1,800 for the owner’s policy totaling $2,100.

3. The Rule requires that $1,000 is shown in Section B or Section C in the borrower’s column as the stand-alone loan policy premium labeled “Title – Loan Policy Premium.”

4. The differential of $1,100 is placed in the seller’s column in Section H and is labeled “Title-Owner’s Title Premium.”

In the example, the borrower has been charged $700 too much and the seller has been charged $700 too little. The easiest way to fix this is to give a credit to the borrower from the seller on page 3 in Sections N and L as the “Title Insurance Premium Correction” or some wording to that effect.

Borrower                     Seller

Total Should Pay         $300                            $1,800                     $2,100

Rule:                               $1,000                        $1,100                      $2,100

$700 too high               $700 too low

The wording used for the adjustment to correct the net effect of the premiums is important to the lender so check first before you put the labels in Sections N and L.

 The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 16

Volume 16

Top Three Most Commonly Asked TRID Questions

1. How do we fix the problem with the inaccurate disclosure of the title premiums?

Because the numbers must be adjusted to reflect accurate charges to the buyer and seller the CFPB suggested three ways to fix the problem on the Closing Disclosure (CD).

The first solution may cause additional problems. The CFPB suggested “[t]he remaining credit could be applied to any other title insurance cost, including the lender’s title insurance cost (See § 1026.38(f)&(g)).” However, changing the lender’s title insurance policy cost most likely will affect the APR and if the adjustment is significant enough it may cause a triggering of a new three-day review period, and we don’t want that.

The second solution may also cause a problem. “The remaining credit can be considered to be a general seller credit and disclosed as such in the Summaries of Transactions table on page 3 of the Closing Disclosure. (See § 1026.38 (k)(2)(vii))” A general seller credit may trigger a Qualified Mortgage (QM) disqualification which will remove the safe harbor protection for the lender. You and the lender will have to determine how the credit should be labeled in light of the QM Rule so as not to create a problem for the lender in the event this alternative is used.

The third suggestion, if carefully worded may be the only workable solution. “Use of a credit specifying the remaining amount for the owner’s title insurance cost in the Summaries of Transactions table on page 3 of the Closing Disclosure. (See § 1026.38(k)(2)(viii)). This credit could be disclosed as a “simultaneous issue credit” in the “Summaries of Transactions” section.”

Determining which alternative will require a discussion with your lender. Consider using the ALTA Settlement Statement in addition to the CD where you can accurately disclose the title premiums.

2. Is it true that the closing/settlement provider may not give a copy of the Closing Disclosure (CD) to real estate agents?

Since the CD is considered a loan document, that determination is up to the lender. Most lenders have stated that they will give a copy of the completed CD to the settlement company and the borrower and if the borrower wants their real estate agent, attorney, or CPA to have it, then the borrower will have to supply it.

Because the CD contains NPPI (NonPublic Personal Information), we should be cautious and follow the lender’s instructions. On June 9, 2015, Bank of America answered a similar question by saying “Bank of America will distribute the buyer/borrower’s Closing Disclosure to the borrower(s), while the settlement agent is responsible for preparing and delivering the seller’s Closing Disclosure. The settlement agent should continue the practice of providing the Closing Disclosure to the Real Estate Agent (s) involved in the transaction, as applicable.” Since Bank of America indicates the settlement agent is responsible for the seller’s CD it leads us to believe that their comment about sharing the CD with the real estate agents is referring to the seller’s CD only. But we do not know for certain. Publically, Wells Fargo has said we may NOT give a copy of the CD to third parties involved in the transaction.

On July 9, 2015 Bank of America advised “providers” that they should follow “state or local laws as well as any applicable provisions of the sales contract when determining how/if to share the borrower’s and/or seller’s” CD. But what if the letter of instructions from the lender contains prohibitive language?

Recognizing this issue and many other issues created by the provisions of the Rule, ALTA created a shareable settlement disbursement form called the ALTA Settlement Statement (ALTA SS). When ALTA talked about the benefits of using the ALTA SS in conjunction with the CD it said, “It is a form that can be shared with the interested parties (REALTORS®, Attorneys, CPAs, etc) as the CD is a loan form and the majority of lenders will not permit its distribution to anyone except the borrowers.” Perhaps the answer is to utilize the ALTA SS (in a bifurcated format) so that you have a form that can be shared with all parties. The ALTA SS also provides the ability to itemize recording fees beyond the deed and mortgage/deed of trust and to secure approval of the numbers as well as approval to disburse by including signature lines, none of which is included on the CD.

3. On Page 5 of the Closing Disclosure (CD) there is a box entitled “Contact Information.” Who should be listed in the Real Estate Broker and Settlement Agent sections and what License IDs should be used?

The CFPB’s goal for requiring the listing of contact information is so that the consumer has easy access to the appropriate parties with any questions they might have at the time of receipt and post-closing.

The columns labeled “Real Estate Broker (B)” (buyer) and “Real Estate Broker (S)” (seller) should contain the name and address of the brokerage house along with the state license number for the firm. If only one Real Estate Broker is involved in the transaction, the non-applicable column may be deleted. The form also requires the listing of the individual or “Contact” with whom the consumer has the most interaction, normally the individual real estate agent. The real estate agent’s state license number must also be listed along with an email address and phone number.

License number is defined in the Rule on Page 1871 as Section 1026.38(r)(3) and (5) requires “the disclosure of a license number or unique identifier for each person (including natural persons) identified in the table who does not have a NMLSR ID if the applicable State, locality, or other regulatory body with responsibility for licensing and/or registering such person’s business activities has issued a license number or other unique identifier to such person under § 1026.38(r)(3) and (5). The space in the table is left blank for the disclosures in the columns corresponding to persons who are not subject to the issuance of such a license number or unique identifier to be disclosed under § 1026.38(r)(3) and (5); provided that, the creditor or settlement agent may omit the column from the table or, if necessary, replace the column with the contact information for an additional person.”

The Settlement Agent’s column follows the same set of rules. The company name, address and state license number (if applicable) is entered first and then the “Contact” should be the person the consumer can contact with questions about the transaction. The contact’s state license number (if applicable), email address and phone number must also be listed.

For attorneys who perform closing services, the Rule mentions on Page 1872 that “if the closing attorney employed by the settlement agent disclosed under § 1026.38(r)(1) has a State-issued settlement agent license number, but the consumer meets with the attorney’s assistant to fill out any necessary documentation prior to the closing and to answer questions, the closing attorney’s name is disclosed under § 1026.38(r)(4) because the assistant is only performing clerical functions.”

The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 15

Volume 15

What should we do if…?

When the 2010 RESPA Reform Rule went into effect, specific direction was given from HUD about what to do if a lender’s instructions appeared to be contrary to the Rule. At that time, HUD advised a three-step approach:

1) explain to the lender why we felt their interpretation of the Rule was incorrect;

2) request the lender’s contrary instruction in writing to document in our file; and,

3) follow the lender’s instruction so long as fraud was not involved.

Our industry asked the CFPB for guidance should a similar circumstance occur under the new TRID Rule, “What should a settlement company do if a lender directs them to do something that the settlement company feels is in violation of a provision in the TRID Rule?” To-date, the CFPB has not provided any answer on how to handle such a situation nor has the CFPB affirmed HUD’s prior instructions from 2010 as an acceptable way to proceed.

We continue to await the CFPB’s response and will immediately advise you if additional direction is given by the CFPB. As the TRID Rule is now in effect, you may want to consider consulting your state’s underwriting counsel and always be certain to document your files carefully.

 The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

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TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 14

The last installment of TRID clarifications:

The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

Volume 14

One of our agents was asked the following question from a lender (also known as creditor): What are you going to do with all of your free time now that you will not be preparing the Closing Disclosure (CD)?

The nature of this question proves that more education is needed about the impending TILA-RESPA Integrated Disclosure (TRID) requirements. The TRID Rule will require a great deal of additional work by the settlement industry. To respond to similar questions and misperceptions, here are some points that you may want to make.

1) Even though the creditor (in most cases) is going to issue the CD, the settlement professionals will need to input the exact same information into their systems so that the transaction can be balanced and disbursed.

2) Most settlement agents will have the additional role of creating the ALTA Settlement Statement (ALTA SS), or other disbursement form, to accurately disclose the title premiums as the CD does not allow for such transparency in most states. The ALTA SS will also allow the settlement industry to obtain signatures approving the figures and authorizing disbursement. This is something most creditors want for their files.

3) The settlement professionals will be looked upon to assist the creditors in gathering fees from the real estate agents involved in the transaction earlier in the process so that the creditors can meet disclosure delivery requirements. To-date, this was typically a function accomplished just prior to or at settlement where the real estate agent was present (which made it easier to obtain) and did not require multiple calls when a non-responsive party was involved.

4) The settlement industry is still responsible for gathering the figures, creating and delivering of the seller’s side of the CD.

5) The anticipated delays in closings will cost the settlement industry time and money due to the repeated bring-down/update title searches required each time a closing moves from one day to the next.

6) The anticipated delays in closings will cost the settlement industry time and money due to the required changes to tax and per-diem calculations which will have to be reported and monitored while the creditor changes and re-transmits the revised CD.

7) Closings that used to take 45 minutes are taking two hours today, before TRID implementation. How long will they take after implementation while the settlement industry waits for the creditor to make the $40 adjustment for the broken window on the CD?

8) Because the borrower (also known as consumer) will receive the CD three to seven days in advance of consummation, the settlement company may have to take the time to respond to questions from the consumer when it is delivered and then again when they sit with the consumer. The settlement industry is happy to engage with the consumer whenever they can but the reality is it will require additional time and employee expense.

Free time? We think not! We hope that our business partners understand and respect that the settlement industry will be faced with the expense of schedule challenges, additional searches when there are delays, and additional employee time due to process changes resulting from the TRID Rule, just like they will.

 

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 13

Clarifications of TRID continue….

The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

Volume 13

If the creditor/lender requires a service only because it was mentioned in the Contract for Sale, does it trigger the creditor/lender’s need to supply a list of service providers for that service?

CFPB’s verbal response was, “yes.” If the creditor/lender includes the requirement on their commitment, then it is deemed a loan requirement and the lender must comply with providing a list of service providers for that service. We asked, “what if the creditor/lender includes a simple requirement that the consumer must meet all of the requirements of the Contract of Sale but does not mention any specific services?” The CFPB representative said, “Nice try.” He went on to explain that it doesn’t matter how the creditor/lender learned about the service requirements or how it’s worded on the commitment, they must comply with the additional provisions of the Rule if their loan is conditioned on meeting the requirement.

Example: If the Contract of Sale requires the consumer to purchase a home inspection and then the creditor/lender mentions it directly or indirectly in the loan commitment, the creditor/lender must supply a provider list of home inspector(s).

If a creditor/lender on a commercial transaction requires a mortgage on one of the parties’ residences, does that mortgage fall under the provisions and requirements of TRID?

This was verbally answered by a CFPB attorney who said that as long as the “primary” purpose of the mortgage on the residential property is NOT for “personal, family or household purposes,” it does not fall under the provisions of TRID.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 12

We will pass along a number of questions and clarifications of TRID every day for the next several days.

The information provided is for informational purposes only and should not be used or relied upon for any other purpose. This information is not intended nor should it be construed as providing legal advice. Tradition Title Agency does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue.

Volume 12

On Page 5 of the Closing Disclosure there is a box entitled “Contact Information.” Who should be listed in the Real Estate Broker and Settlement Agent sections and what License ID’s should be used?

The CFPB’s goal for requiring the listing of contact information is so that the consumer has easy access to the appropriate parties with any questions they might have at the time of receipt and post-closing.

The columns labeled “Real Estate Broker (B)” (buyer) and “Real Estate Broker (S)” (seller) should contain the name and address of the brokerage house along with the state license number for the firm. If only one Real Estate Broker is involved in the transaction, the non-applicable column may be deleted. The form also requires the listing of the individual or “Contact” with whom the consumer has the most interaction, normally the individual real estate agent. The real estate agent’s state license number must also be listed along with an email address and phone number.

License number is defined in the Rule on Page 1871 as “5. License number or unique identifier. Section 1026.38(r)(3) and (5) requires the disclosure of a license number or unique identifier for each person (including natural persons) identified in the table who does not have a NMLSR ID if the applicable State, locality, or other regulatory body with responsibility for licensing and/or registering such person’s business activities has issued a license number or other unique identifier to such person under § 1026.38(r)(3) and (5). The space in the table is left blank for the disclosures in the columns corresponding to persons who are not subject to the issuance of such a license number or unique identifier to be disclosed under § 1026.38(r)(3) and (5); provided that, the creditor or settlement agent may omit the column from the table or, if necessary, replace the column with the contact information for an additional person.”

The Settlement Agent’s column follows the same set of rules. The company name, address and state license number (if applicable) is entered first and then the “Contact” should be the person the consumer can contact with questions about the transaction. The contact’s state license number (if applicable), email address and phone number must also be listed.

For attorneys who perform closing services, the Rule mentions on Page 1872 that “if the closing attorney employed by the settlement agent disclosed under § 1026.38(r)(1) has a State-issued settlement agent license number, but the consumer meets with the attorney’s assistant to fill out any necessary documentation prior to the closing and to answer questions, the closing attorney’s name is disclosed under § 1026.38(r)(4) because the assistant is only performing clerical functions.”

Where should premium taxes be listed on the Closing Disclosure (CD)?

Care must be taken in determining the placement of governmental premium taxes on the CD. At first blush it would seem that a governmental fee such as a premium tax would be placed in “Section E: Taxes and Governmental Fees” on the CD. However, in accordance with the Rule, only taxes/fees that are based on either the sale price or the mortgage amount and considered Transfer Taxes may be listed in Section E (along with recording fees).

Page 1798: § 1026.37(g)(1) through (3). “3. Transfer taxes – terminology. In general, transfer taxes listed under § 1026.37(g)(1) are State and local government fees on mortgages and home sales that are based on the loan amount or sales price, while recording fees are State and local government fees for recording the loan and title documents.”

If the premium tax is based on the title premium, it does not seem to fit with the allowable fees in Section E. The state of Kentucky, as an example, has a Municipal Premium Tax based on a percentage of the title premium. “The premium tax is a pass through tax. The tax must be charged to the purchaser of the title insurance policy and added to the regular premium for that policy.” OR bulletin dated 7/1/2015.

Based on this information in the Rule, it leaves Sections B or C (depending on the circumstances) for the collection and disclosure of the premium tax attributable to the Loan Title Policy premium and Section H for the collection of the premium tax attributable to the Owner’s Title Policy premium.

Please seek guidance from your lender regarding their determination for the placement of the premium taxes as defined above and if they are unsure you are welcome to share section §1026.3.7(g)(1) – (3) with them on page 1798 of the TRID Rule.