06/24/2015

CFPB Indicates How to Disclose Title Insurance Premiums in Seller-Pay Scenarios

Since announcing the TILA-RESPA Integrated Disclosure rule in 2013, the Consumer Financial Protection Bureau has hosted a series of webinars to guide to address frequently-asked questions regarding the new rule’s requirements. On May 26, the CFPB hosted its fifth TILA-RESPA Integrated Disclosures webinar. Click here to listen to a recording of the webinar and to download a copy of the presentation.

In this webinar, the CFPB addressed implementation challenges and questions, including a question that many ALTA members have been struggling to understand: how to disclose the owner’s and lender’s title insurance premiums on the Closing Disclosure form in a simultaneous issue scenario. Below is the text of the rule addressing how to disclose simultaneous issue rates:

Simultaneous Title Insurance Premium Rate in Purchase Transactions. The premium for an owner's title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender's and an owner's policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows:

  1. The title insurance premium for a lender's title policy is based on the full premium rate, consistent with § 1026.37(f)(2) or (f)(3).
  2. The owner's title insurance premium is calculated by taking the full owner's title insurance premium, adding the simultaneous issuance premium for the lender's coverage, and then deducting the full premium for lender's coverage.” § 1026.37(g)(4)-2.

During the webinar, the bureau emphasized its rationale behind its mandated calculation method for disclosing title insurance premiums when there is a discounted title insurance premium. The CFPB realizes that its calculation method will render inaccurate disclosures of the lender’s and owner’s title insurance premiums on the disclosure forms. However, the bureau feared that by disclosing the discounted rate of the lender’s policy and showing the owner’s policy at the full premium, consumers would not understand the incremental cost of purchasing an owner’s title insurance policy. Additionally, if the consumer opted not to purchase an owner’s title insurance policy, the cost of the lender’s policy would then increase substantially, resulting in a higher cost to close than anticipated by the lender and the consumer. However, despite the inaccurate disclosures of the individual costs of the premiums, the sum of the premiums under the rule’s mandated calculation will equal the sum actually charged to the consumer when the consumer pays for both the owner’s and lender’s title insurance policies.

The CFPB recognized that in situations in which the seller pays for the owner’s title insurance policy on behalf of the buyer, the Cash to Close figure on the Loan Estimate and Closing Disclosure form will be inaccurate. In this webinar, the bureau addressed how to allocate the seller’s contribution for title insurance the when the seller has agreed to pay for the owner’s title insurance cost as part of the purchase and sale contract with the consumer. In a seller-pay situation, the bureau indicated that there are at least three ways in which the additional credit between the seller and the consumer may be disclosed on the Closing Disclosure:

  1. The remaining credit could be applied to any other title insurance cost, including the lender’s title insurance cost. (See § 1026.38(f)&(g))
  2. 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))
  3. 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.

The bureau stated that any one of these three methods for disclosing the remaining amount of the seller’s credit for the owner’s title insurance premium is permissible under the final rule.

04/30/2015

ALTA Survey Finds 92% of Title Professionals will be Ready for TRID Implementation

The overwhelming majority of title professionals will be prepared for the Aug. 1, 2015, implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures (TRID) rule, according to a survey conducted by ALTA.

The survey showed that 92 percent of respondents indicated that their companies will be prepared to handle the new forms and comply with the regulation. The survey polled more than 500 title professionals, including title agents, underwriters, attorneys and abstracters.


Prepared

CLOSING DELAYS

While most title professionals will be prepared for implementation, 87 percent believe TRID will delay closings or result in closings taking longer to complete. Only 5 percent believe the disclosures won’t affect closings, while 8 percent are unsure. The top reasons given as to why closing delays will occur include:

  • 3-Day Delivery Rule
  • Changes at the closing table
  • Walk-through issues
  • Issues with small lender/credit union readiness
  • Lender/Realtor Communication issues

  Delayed_closings


According to one person who took the survey, “lenders I've spoke with seem to have a timeline already in place for when the order comes in. The three-day rule cuts down a lot of the time lenders have to work on things. With the way business has always been conducted in this industry, a dramatic change like this will not happen overnight. There are too many hands in the cookie jar to make this go smoothly and to complete the assigned tasks on time.”

Some who took the survey believe the new regulations will cause transactions to take up to 60 days to close. Others believe the new forms will tack on an additional two or three weeks to the closing process. One person pointed out how this will impact REO sales and the strict closing deadlines. “The three-day rule will lengthen the lender's process, most likely delaying the closing from the seller's close-by date. This means the agents will need to get an addendum to extend the closing date, which takes additional time to get the seller's approval and signature. This could potentially become a vicious circle of delays,” the respondent said.

 

CONSUMER UNDERSTANDING

According to the survey, more than two thirds believe the TILA-RESPA forms will not help the CFPB meet its objective of helping consumers understand or be better prepared to understand the costs of buying a home. Meanwhile, only 15 percent believe TRID will help consumers better understand their transaction.

Some do believe the new Closing Disclosure will help consumers understand the costs associated with purchasing a home. According to one person, “The contents of the Closing Disclosure Form is great and I love the first page details. However, I believe the average consumer will choose to ignore the remainder. It is all about how much is my payment and how much do I bring to closing. Beyond that, most simply do not care.”

However, others said that while the forms may display fees in a more readable fashion, consumers will still want and need to read it and understand it.

“While the new forms are generally understandable, there will be confusion about the title premiums, just as one example. We will probably need to use a simple closing statement to help the borrower and seller understand,” according to one person who took the survey. (Read ALTA Board Approves Model Settlement Statements)

Consumers


TRAINING

In order to prepare for the new forms and rules, 43 percent of those polled will devote at least 26 hours to training staff. Another 33 percent will spend at least 11 to 25 hours training staff to handle the disclosures.

Training
 

SOFTWARE

More than half of those surveyed reported they have either viewed a test version of their software to produce the Closing Disclosure or that a demo has been scheduled. However, 39 percent indicated they have not viewed a demo of updated software and that nothing has been scheduled.

Software


TOP CONCERNS

Collaborating with lenders to exchange data and meet production and delivery requirements of the three-day rule is the top concern of those who took the survey. 

Top_concerns

ENFORCEMENT

Because there are many unknowns with how the disclosures will work in actual transactions, ALTA has asked that the CFPB follow a “hold harmless” period of restrained enforcement and liability through the end of 2015 following the Aug. 1 implementation of TRID. 

 

04/09/2015

Requirements for Delivery of the Closing Disclosure

For loans that require a Loan Estimate, which include most closed-end mortgage loans secured by real property) and that proceed to closing, creditors must provide a new Closing Disclosure reflecting the actual terms of the transaction.

The creditor is required to provide the consumer Closing Disclosure at least three business days before consummation. The CFPB says that “business day” for purposes of the Closing Disclosure is the rescission-based business day definition, and means all calendar days except Sundays and legal public holidays.

According to the CFPB, creditors may estimate fees using the best information reasonably available when the actual cost is not available at the time the Closing Disclosure must be delivered.

“However, creditors must act in good faith and use due diligence in obtaining the information,” the CFPB states in its examination procedure manual. “The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent.”

A corrected Closing Disclosure containing the actual terms of the transaction must be provided at or before consummation. If the creditor provides a corrected disclosure, it must provide the consumer with an additional three-business-day waiting period prior to consummation if:

  • the annual percentage rate changes 1/8 of a percent
  • the loan product changes
  • a prepayment penalty is added to the transaction

The creditor is responsible for ensuring that the Closing Disclosure meets the content, delivery and timing requirements. If the Closing Disclosure is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail.

If the creditor mails the disclosure six business days prior to consummation, it can assume that it was received three business days after sending, and therefore three business days prior to consummation, according to the CFPB. Creditors may contract with settlement agents to provide the Closing Disclosure to consumers, provided the settlement agent complies with all relevant requirements.

The rule does not indicate that any specific proof is needed to show the Closing Disclosure was placed in the mail. Similar to contract law, if the sender places the Closing Disclosure in the mail, has it addressed to the consumer properly and has proper postage, it is assumed to be received by the consumer three business days later. The sender could always mail the Closing Disclosure certified or require a signature upon receipt if they wanted to have proof it was delivered properly, but that is not required by the rule. This highlights the importance of having documented policies and procedures. Title production systems should be able to create records of when the Closing Disclosure was generated. Having policies showing when a company places documents in the mail can go a long way to showing a strong pattern of compliance. Also, some postal services allow customers to generate postage (instead of stamps) and create a log of each envelope that is post marked.

Creditors and settlement agents also may agree to divide responsibility with regard to completing the Closing Disclosure, with the settlement agent assuming responsibility to complete some or all the Closing Disclosure. In these situations, the creditor must maintain communication with the settlement agent to ensure that the Closing Disclosure and its delivery satisfy regulatory requirements, The creditor is legally responsible for any errors or defects.

In transactions involving a seller, the settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction no later than the day of consummation.  

Multiple consumers

In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation. In rescindable transactions, the creditor must provide the Closing Disclosure separately and meet the timing requirements for each consumer who has the right to rescind under TILA.

The consumer may waive the three-day period if there is a bona fide personal financial emergency. Bona-fide personal financial emergencies are extremely rare. Determining whether one exists is fact intensive. The only example provided by the Bureau is the imminent sale of the consumers home through foreclosure where the proceeds of the new mortgage can save the home from foreclosure.

04/07/2015

Online Tool Can Help Improve Title Shop Efficiency

Evernote Business   Evernote for your company   Evernote

Evernote Business Notebook in iOS 8

In part one, I introduced the basics of Evernote.  In part two, we will look closely at Evernote Business and the opportunities available for title industry professionals. 

Evernote Business creates a collaborative, shared workspace for an organization. Unlike Evernote Basic or Evernote Premium, Evernote Business incorporates an admin component that controls users within the account. The admin feature allows the company to maintain control of the data no matter how the team changes. Billing is also handled from a single point of contact. Evernote Business costs $10/month per user. Notes can contain 100MB of data, four times the amount allowed in Evernote Basic, allowing for high-res images and large files.  Evernote Business also comes with upgraded support designed to accelerate adoption.

One of my favorite Evernote uses is as a mobile distribution channel. Evernote allows for easy sharing of content in notes from phones/tablets to customers. Compare this to attempting to access a network marketing folder while in the field, and there’s no contest. Evernote wins.

IMG_2248

A few examples of items to distribute are marketing flyers, articles of industry interest and videos. These items do not need to be protected behind secured firewalls. This does not mean Evernote takes security lightly, however. Data is protected by industry-standard TLS/SSL encryption and two-step verification.

As Evernote becomes the resource for information storage and creation, team members will be notified of similar content in other company notes. Forget re-inventing the wheel. Evernote Business simplifies collaboration among staff. Annotation and editing are available in notes as well. Also, Evernote has a built-in presentation mode. This allows team members to share content within the team or with clients without leaving Evernote for a presentation program.

Evernote is building a one stop workspace. No more attaching documents to emails for review or revision. No more creating presentations in another program.  Evernote makes it easy to add content to new or existing notes. 


Evernote communicate

Chat is built-in to Evernote Business. Productivity goes up when more can be done within one program.  

With the cloud-based capabilities of Evernote Business, it becomes a viable solution for smaller agency operations instead of expensive, cumbersome CRM products. It does not have all of the functionality of SalesForce or InfusionSoft. It does easily share content out to the sales team in the field, control access, add reminders to relevant notes and quickly collect business card information by snapping a picture.

Finally, becoming proficient with Evernote has an added benefit for any title operation.  In my experience, many clients and potential clients are hungry for help with Evernote implementation.  Adding value to the relationship by sharing a bit of knowledge is easy and cost effective. Improving your organization’s productivity and becoming a valuable resource for your customers is a no brainer. 

For more information, visit evernote.com/business.


RisserBill Risser is vice president of new media and education for Chicago Title Agency. He can be reached at 602-667-1000 or
 billrisser@gmail.com. Risser spoke at ALTA’s 2015 Social Media Summit in Philadelphia, on how to manage your online reputation.

 

 

 

 

 

03/12/2015

Tolerances with the TILA-RESPA Integrated Disclosures

Similar to existing law, the Consumer Financial Protection Bureau’s final TILA-RESPA rule restricts the circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.

Generally, good faith requires the closing cost estimate on the initial Loan Estimate to equal the final amount charged on the Closing Disclosure. Here's a look at which fees can and can't change:

  Variances

In today’s current practices, many providers add a cushion for costs on the HUD-1 to account for items that can vary between the signing and when the transaction is settled after recording, such as recording fees, pro-rations and prepaid interest. The overage is then refunded after the final disbursements are made. Under the new rule, lenders and settlement agents must make more rigorous good-faith efforts to provide estimates that are more accurate. However, the delay between consummation and settlement in escrow states is likely to increase the need for post-closing corrected disclosures.

If the Closing Disclosure becomes inaccurate before consummation, the creditor shall send corrected disclosures so that the consumer received the corrected version at or before consummation. The changes are still subject to good faith requirements. Once the initial Closing Disclosure is issued, all changes should be made with an updated Closing Disclosure. The creditor may not provide a revised Loan Estimate on or after the date the creditor provides the consumer with the Closing Disclosure.

Under the new rule, if a lender allows a consumer to shop for a settlement service, the lender will be required to provide the consumer with a written list identifying available providers of that service and clearly stating that the consumer may choose a different provider for that service. The CFPB has provided a blank model form for the written list of settlement service providers, a sample of written list of providers consumers can shop for and a sample of written list of providers consumers cannot shop for.

What About Title Insurance?

According to the CFPB, owner’s title insurance that is not required by the creditor is not subject to the 10 percent variance. The CFPB said it is aware that the preamble to the final rule contains potentially conflicting language, but advises that the final rule text is what should be followed.

The 10 percent variance category includes recording fees and charges paid to unaffiliated third-party service providers when the consumer is permitted to shop for a settlement service provider, but chooses a provider from the creditor’s written list of providers (§ 1026.19(e)(3)(ii)).

Owner’s title insurance is not a charge that is assigned to a particular variance category. Therefore, the applicable variance category depends on other factors, including whether the creditor requires the insurance and, if so, whether the consumer may shop for the provider of the insurance.

To the extent owner’s title insurance is not required by the creditor and is disclosed as an optional service, under the rule the insurance is not subject to any percentage variation limitation, even if paid to an affiliate of the creditor.

02/19/2015

Home Equity Loans Excluded from Integrated Disclosure Rule

The Consumer Financial Protection Bureau’s final rule for integrated mortgage disclosures applies to most closed-end consumer mortgages secured by real property.

However, the rule does not apply to home equity lines of credit (HELOCs), reverse mortgages or chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property.

Conversely, certain types of loans that are currently subject to the Truth-in-Lending Act but not the Real Estate Settlement Procedures Act are subject to the rule’s requirements. Such loans include construction-only loans, loans secured by vacant land or by 25 or more acres and credit extended to certain trusts for tax or estate planning purposes.

Meanwhile, various disclosures may be used for cash transactions. TILA and RESPA only apply to mortgage or credit transactions. Federal law does not require the use of the HUD-1 or the new Closing Disclosure in all cash transactions. While some states have laws requiring the use of a state promulgated form in cash transactions, in general the HUD-1, the Closing Disclosure or any other settlement statement can be used for these deals.

02/11/2015

Get Familiar with the Other Three Day Rule Related to Appraisals

A lot has been written (including by us) about the RESPA-TILA rules new three-day requirement and its potential to cause pauses and delays in the closing process. However, there is another new federally required three-day rule that settlement and real estate agents should be aware of that could make it even more difficult for you to meet your customers closing expectations.

On Jan. 18, 2014, industry implemented the Consumer Financial Protection Bureau's (CFPB) new rules for appraisals, including new requirements for consumers to receive copies of their appraisal. This rule was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and amended the Equal Credit Opportunity Act (ECOA).

Under the Appraisal Rule, creditors (aka lenders) must provide borrowers with a copy of any and all appraisals and other written valuations developed in connection with a mortgage or deed of trust. These copies must be provided to the borrower promptly upon the earlier of their completion, or three business days prior to consummation. Here in lies the rub.

Generally, an appraisal report includes comments and other scoring based on the condition of the real property and any improvements. It is also common for real estate agents and buyers and sellers to conduct a walk through of the property the day of settlement. If that walk through shows any changes to the condition of either the interior or exterior of the property, it may trigger the need for the appraiser to review the change and comment on those changes in an update appraisal report. This could trigger a new three-day waiting period under the Appraisal Rule.

Now, there is some good news. Unlike the RESPA-TILA three-day rule, the Appraisal Rule does include a waiver provision. This means that the borrower can waive this timing requirement and agree to receive the updated copy at or before consummation. In the event that an applicant waives the timing requirement and the transaction is not consummated, the creditor must provide the copies no later than 30 days after the creditor determines that the transaction will not be consummated. However, the waiver must be received by the creditor at least three days prior to consummation. This means a creditor cannot obtain a waiver after-the-fact or even at the time of discovering the need for a new appraisal report at walk through.

02/10/2015

Evernote Aids in Collaboration, Data Sharing

Bill Risser

With the impending changes in our industry, whether regulatory or technology driven, it is more important than ever to be connected as a company—important to be connected in a way that makes it easy to share and collaborate. Email and it’s “back and forth” nature is not effective enough. A simple, secure. cloud based tool is required. Evernote fits the bill perfectly.

 Evernotelogo

Evernote has been around since 2008. I first explored Evernote in 2010. Like many others, I had a start, stop, start again, stop again relationship with the green elephant. I felt like I was “forcing” myself to use Evernote because it was cool. I didn’t see the value of conquering the learning curve for a simple note taking app.

A dance with cancer in 2012 opened my eyes to the power of Evernote.  Every single scan, report, EOB, appointment reminder, etc. is still in my account in a notebook labeled “C.”

I share my story because it resonates with many people that have the same love/hate relationship with Evernote.  You are not alone. My mission is to explain the features that are useful in our industry as well one’s personal productivity.

Evernote’s motto is “Remember Everything.” It is excels at that. In the last year or so, there has been a diligent effort at Evernote to build a business tool that redefines how employees collaborate. Evernote is striving to create “one work space” instead of the multiple programs we currently navigate. Evernote Business is the latest iteration, and I will cover that in part two.

Evernote makes it drop dead simple to gather data into “notes” which are further organized into “notebooks” within the program. There are numerous ways to get information into a note. These include typing, recording audio, dictating, clipping from the web, taking photos, dragging files, emailing and even tweeting. Notes are shared via email or social networks from any device.  Notes are assigned to a notebook and can be further identified with “tags.” The final level of organization is the Note Stack, which are a collection of notebooks. The organization within Evernote may seem limited to long-time Outlook users that have folders nested within folders that are nested within folders that are ... well, you know what I mean. Evernote relies on a superb search feature  to help users find content.  

Evernoteimage1

Search in Evernote is powerful.  In the free version of Evernote, search scans all text and text within images added to notes. So, a photo of a broker sign can be found by searching for the name of the company found on the sign.  In the example below, searching through my business card notebook for Jeremy, you can see how Evernote search works.

 Evernoteimage2

Let’s discuss the types of Evernote accounts. There is a free version, and it is powerful enough for a new user. The free account allows 60 MB of data uploaded/month and a maximum note size of 25 MB.  The premium version costs $5/month or $45/year. At this level, the upload per month is 4GB/month, and maximum note size is 100MB. Each version allows 100,000 notes and 250 notebooks. One big advantage for premium is upgraded search. This allows for searches within pdf’s. Evernote Business is the last level. $10/user/month gets you even more upload capability, corporate data ownership, centralized user management and SalesForce integration.

Uses for Evernote in the title industry vary from clipping industry content from the web using the Evernote Web Clipper to recording a meeting with a potential customer. 

  Evernoteimage3

 INSERT Evernote Web Clipper

I also have all of our marketing flyers in a business account notebook, and they can be easily viewed and shared by the entire team. Travel confirmations, meeting agendas and conference schedules are easily accessed on the run. Evernote is not a tool for secure escrow/title file information storage, but it is outstanding for storing and sharing non-secure information with team members/customers.

Many smaller agents do not use an expensive CRM solution for the sales operation. Evernote is an inexpensive alternative for sharing information amongst the Sales/Marketing/Admin teams that is accessible via every platform. Windows, Mac, Android, iOS, even Blackberry’s have an Evernote solution.  The Evernote Premium account is required to make this effective. Premium allows Note and Notebook sharing, and the content is editable. 

If you found this blog informative, don’t miss Part two, which will focus on specific uses Evernote Business provides for our industry, especially smaller agencies looking for an online, collaborative solution.

RisserBill Risser is vice president of new media and education for Chicago Title Agency. He can be reached at 602-667-1000 or billrisser@gmail.com. Risser will speak at ALTA’s 2015 Social Media Summit, March 18 in Philadelphia, on how to manage your online reputation.

01/20/2015

Is Owner’s Title Insurance Subject 10 Percent Tolerance?

Is owner’s title insurance not required by the creditor subject to the 10 percent cumulative tolerance?

According to the CFPB, owner’s title insurance that is not required by the creditor is not subject to the 10 percent tolerance.  The CFPB said it is aware that the preamble to the final rule contains potentially conflicting language, but advises that the final rule text is what should be followed.

The 10 percent tolerance category includes recording fees and charges paid to unaffiliated third-party service providers when the consumer is permitted to shop for a settlement service provider, but chooses a provider from the creditor’s written list of providers (§ 1026.19(e)(3)(ii)).

Owner’s title insurance is not a charge that is assigned to a particular tolerance category.  Therefore, the applicable tolerance category depends on other factors, including whether the creditor requires the insurance and, if so, whether the consumer may shop for the provider of the insurance.

To the extent owner’s title insurance is not required by the creditor and is disclosed as an optional service, under the rule the insurance is not subject to any percentage tolerance limitation, even if paid to an affiliate of the creditor.

12/23/2014