TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 11

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 11

QUESTION: What are the procedures when something changes after closing?

If a fee to the consumer becomes inaccurate within 30 days of consummation and that inaccuracy results in a change to the amount actually paid by the consumer the Creditor must deliver or place in the mail a revised CD within 30 days of knowledge of the inaccuracy.

If a clerical non-numeric error is discovered the Creditor must deliver or place in the mail a revised CD within 60 days after consummation.

If a tolerance level is violated the Creditor must refund the required amount to the consumer within 60 days of consummation and the Creditor must provide a revised CD reflecting the refund within the same 60 day time period.

QUESTION: Does a new three day review period get triggered if the APR becomes “inaccurate” (up or down) as is stated in the Rule or only if the APR “increases” as is stated a CFPB fact sheet?

Confusion has occurred over whether a new three-day review period is triggered if the APR decreases. We reached out to the CFPB and received a phone call from one of the staff attorneys who actually answered the phone. Of course the response was that the Rule (which states “inaccurate”) is actually correct when it references Regulation Z section 1026.22(a)(2). However, we were told to read further into 1026.22 to get to the heart of the issue. The attorney pointed me to three sections: “1026.22 Determination of annual percentage rate. Link to an amendment published at 78 FR 80112, Dec. 31, 2013. (a) Accuracy of annual percentage rate.

(2) As a general rule, the annual percentage rate shall be considered accurate if it is not more than1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.” Notice the words “above or below.” However, we are then directed to 1026.22(a)(4) which further clarifies the accuracy of the APR if it is in conjunction with a mortgage on real property:

“(4) Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:

(A) The disclosed finance charge would be considered accurate under§ 1026.18(d)(1);

“ And then to determine accuracy for an APR connected with real property 1026.18(d)(1)(i) and (ii) which state:

“(1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

(i) Is understated by no more than $100; or (ii) Is greater than the amount required to be disclosed.

“ Therefore, if the original quote is more than the final APR, it is deemed accurate. However, the CFPB attorney reminded us that if the APR is lower at the time of consummation it is deemed accurate only if the reduced APR is due to a reduction in interest rate or fees. If the math was wrong at the original quote and the creditor corrected it at the time of consummation, the creditor can not avail itself of the protection by simply saying, the APR decreased so I am compliant.

QUESTION: 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 closing entity 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 a great deal of NPPI (Non-Public 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.

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? Publically, Wells Fargo has said we may NOT give a copy of this loan form to the third parties involved in the transaction.

Recognizing this issue and many other issues created by the provisions of the Rule, ALTA created a shareable closing 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.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 10

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 10

Is the charge for an Owner’s Title Insurance Policy from an affiliated provider subject to tolerance category?
The Rule contains conflicting information; first, the misleading part of the Rule is found in the preamble at pages 364-365 which states: “With respect to the question whether proposed § 1026.19(e)(3)(iii) would have included fees paid to lender affiliates for an optional settlement service, charges for third-party services not required by the creditor (other than owner’s title insurance) are not subject to a tolerance category, even if a lender affiliate provides them.” [Emphasis added.]
However, an attorney from the CFPB shared that minute 32 of the August 26, 2014 webinar addressed the question directly. The webinar can be heard by visiting the CFPB website: https://consumercomplianceoutlook.org/outlook-live/2014/FAQ-on-TILA-RESPA-Integrated-Disclosures-Rule/.
During the webinar, the presenter is asked the question about whether or not the Owner’s Title Insurance Premium is subject to any tolerance categories, then answered with a qualified “no” and went on to include that his answer also reflected the Rule’s direction “even if it is paid to an affiliate of the creditor.” The qualification in his answer included:
1) as long as the Owner’s Title Policy was not REQUIRED by the creditor;
2) as long as the fee is disclosed with the modifier “optional”; and
3) as long as the creditor acted in good faith when it disclosed the fee on the LE.
The above leads us to read 1026-19(e)(3)(iii) in the Rule: “Good faith requirement for non-required services chosen by the consumer. Differences between amounts of estimated charges for services not required by the creditor disclosed pursuant to §1026.19(e)(1)(i) and the amounts of such charges paid or imposed on the consumer do not constitute lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time disclosure was provided.”
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.

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 more likely will affect the APR and if the adjustment is significant enough it may cause a triggering of a new three-day review period.
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. Have the conversation now.
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.” 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.

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 9

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 9

Data Exchange

With the TILA-RESPA Integrated Disclosure (TRID) Rule comes a greater need for communication and exchange of information. Old Republic Title wants to make sure you’re not only prepared for the changes ahead but that you’re equipped to engage in discussions on this topic. It’s important to be knowledgeable and conversant about the various means of communication as well as the terminology so that you can have conversations with your lenders and other partners in the transaction. Settlement agents will likely have to connect to multiple portals depending on specific lender requirements.

Options for Data Exchange

1) Third-Party Integrations: e.g. RealEC Closing Insight. Many large lenders are requiring integration with these types of platforms; however, 40% of lenders say they are not yet prepared for implementation and exchange of data is a big reason why.

2) Portals: The user will log into websitename and key their portion of information (or data) to produce a collaborative Closing Disclosure (CD). Agents and lenders can participate in multiple portals and even host their own portal.

3) Manual Entry: Similar to the current process, the settlement agent and the lender each enter the information into their respective systems then send out the form(s) via emails, fax etc. You may want to consider having an encryption system in place.

Electronic Collaboration Milestones

• When key milestones occur on the manual side, there may be outreach/customer contact to help with the overall process.

1) Order start

2) Search completion

3) Exchange of information

Seller-Only Disclosure

• Settlement agents continue to be responsible for the seller’s side; therefore, the data exchange between settlement agents and lenders needs to be two-way.

• Seller- paid Owner’s Title Insurance and adjustments that need to be made in both the settlement systems and the lender’s Loan Origination System (LOS). The inaccuracies of the disclosure of the title premiums on the Loan Estimate (LE) and on page two of the CD will need to be adjusted with either an allocation of the Lender’s Title Insurance Policy premium between the buyer and seller columns or debits and credits on Page 3. Creditors will need to be informed as early as possible about the financial responsibilities of the consumer and seller.

Separate Settlement Statements

• The ALTA Settlement Statement (ALTA SS) and other similarly formatted closing/settlement statements serve as a disbursement worksheet and have been embraced by many lenders. The ALTA SS will:
• Include signature lines for the borrower and seller which will serve to acknowledge their approval of the figures and to authorize disbursement,
• Allow for the accurate disclosure of the title insurance premiums to the party or parties responsible, in accordance with state or underwriter filings and any contractual agreements,
• Allow for the itemization of recording fees for all documents being recorded,
• Allow the settlement agent(s) and the title companies to distribute copies to the appropriate third parties involved in the transaction, and
• Eliminate the non-public personal information (NPPI) contained in the CD.
• The ALTA SS and other closing/settlement statements do NOT replace the need for the CD; rather, it should be used in addition to and in concert with the CD. Creditors will require that the borrower’s and seller’s bottom lines on the ALTA SS or other closing/settlement statements match the bottom lines of the CD and may require a copy for approval prior to consummation.

Other Considerations

• Not all loans will be subject to the new forms. From a systems standpoint, both the current forms (GFE and HUD-1) and the new forms (LE and CD) will be maintained and used and settlement systems should be prepared for this.

• Many lenders have added a new component to require new levels of security, data privacy and assessment under ALTA’s Best Practices or other compliance requirements. New and more robust security and privacy requirements should be expected from lenders.

• The third party portal model also handles security, privacy and evidence of compliance.

Training

• Training and change management are very important considerations. Mastery of the CD is critical to move ahead with the training on the various systems. It will also be key to stay in tune with what’s happening (i.e. what your lender partners want, etc.).

Glossary

Below is a Glossary to help you become fluent in the language of technological communication.

ALTA SS ALTA =  Settlement Statement

CD  = Closing Disclosure

LE  = Loan Estimate

LOS   = Loan Origination System

NPPI =  Non-public Personal Information

TPS  = Title Production Software

TRID – Understanding the TILA-RESPA Integrated Disclosure (“TRID”) Volume 8

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 8

CFPB TRID Rule Implementation Date Finalized: October 3, 2015

On July 21, the Consumer Financial Protection Bureau (CFPB) released its Final Rule regarding the delayed implementation date. The TILA-RESPA Integrated Disclosure (TRID) Rule will take effect on October 3, 2015.

Summary

In addition to finalizing the implementation date, the CFPB made technical corrections to two provisions. The Final Rule is amended so that the Calculating Cash to Close table on the Closing Disclosure (CD) accurately reflects the total amount of cash or other funds the consumer must provide at closing or consummation. The CFPB feels this will facilitate the alignment of the disclosure of Adjustments and Other Credits between the CD and the Loan Estimate (LE). The Final Rule also includes an amendment regarding the requirement for creditors to disclose the basis for any difference between the Adjustments and Other Credits disclosed on the LE to the Adjustments and Other Credits disclosed as “Final” on the CD (only exception is rounding).

In its Final Rule, the Bureau said it received feedback on a number of issues outside the scope of rulemaking and did not address those comments. The CFPB explained why it decided to keep the October 3, 2015 implementation date vs. changing to later in the year, citing it would “impose unnecessary costs on both those segments of industry that have worked hardest to implement on time and on consumers and would be inconsistent with the underlying intent to aid consumer understanding of mortgage loan transactions.”

The CFPB further explained in the Final Rule that a Saturday effective date ““may allow for smoother implementation by affording industry time over the weekend to launch new systems configurations and to test systems. A Saturday launch is also consistent with existing industry plans tied to the Saturday August 1 effective date.”

Relaxed Enforcement Not Addressed

A grace period or relaxed enforcement was not addressed in the Final Rule; however, Director Cordray provided more clarity regarding the “sensitivity” that the CFPB will give lenders for several months on TRID compliance in his recent semi-annual report to the Senate Banking Committee, when he noted that early examinations of the rule “will be diagnostic and corrective,” and that “if we see errors, we will point out what they are and how they should be corrected. We will not be looking to be punitive to people.”

What Does This Mean?

Stay the course! Continue to develop and execute on a plan including:

• be a true partner in change,

• communicate not only with your staff but with your business partners about your level of preparedness, questions you may have for your lender(s), real estate agent(s) and others in the transaction, and

• help find ways in which you can all work through any process