Register for a RESPA-TILA Integration Forum and Network With Lenders

ALTA and the Mortgage Bankers Association are hosting five RESPA-TILA Integration Forums to help prepare for the Aug. 1, 2015 implementation date of the CFPB's new Loan Estimate and Closing Disclosure. At each Forum, a panel of legal, title, technology and operation experts will review the rule and offer guidance to help prepare you for the implementation deadline.

These one-day sessions will provide up-to-date information on how title and settlement agents, attorneys, lenders and software providers are navigating the new RESPA-TILA requirements.

Join us and network with lenders from across the country.

Register for a Forum Near You

Forums will be held around the country at convenient locations, including:

Several discounts are available to ALTA members. Register two weeks prior to a Forum date and receive a 10 percent discount. Register at least five people for a Forum and receive a 15 percent discount. Register at least 10 people for a Forum and receive a 20 percent discount.

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

12/09/2014

Conquering the Loan Estimate Part 2: Disclosing Points and Fees

In part one of this blog, we addressed the disclosure of interest rates on the Consumer Financial Protection Bureau’s Loan Estimate, which starting will replace the current GFE and early Truth-in-Lending Disclosure for loan applications received on or after Aug. 1, 2015.

Today in part two, we address disclosure of points and fees. Generally, the creditor decides how it wishes to itemize the origination charges section on the Loan Estimate. However, some charges are required to be itemized, including points and Loan-Level Price Adjustment (LLPA). To the extent the consumer will pay for these charges, they should be disclosed under the Services You Cannot Shop For section. (§ 1026.37(f)(2)).

When disclosing points and fees, creditors should determine whether the charge is associated with origination costs or whether it is a form of interest. If the charge is not intended to reduce the interest rate, then it is not a point and cannot be disclosed as such. This is the case even if the charge is a portion of the loan amount. Only points charged in connection with an interest rate reduction may be disclosed as points on the Loan Estimate. (§ 1026.37(f)(1)(i)). This requirement prohibits creditors from identifying origination fees as points as a means of preserving its tax deductibility for the consumer. Any charges other than points require clear and conspicuous terminology that describes the service. (Comment 37(f)(1)-3). If there are no charges that reduce the interest rate, creditors should leave the points line on the form blank rather than mark the line “N/A”. (Comment 37-1).

When a creditor pays a LLPA to the secondary market purchaser, the creditor may have to disclose the charge in certain situations. If the creditor does not charge the consumer an upfront fee, but rather passes the cost of the LLPA to the consumer through interest, the creditor does not need to disclose this charge as it is not considered a settlement charge under the rule. (See § 1026.37(f)).

However, if the creditor charges an upfront fee for the LLPA, the creditor should disclose the fee based on how it is charged. If the LLPA is charged at closing as a flat origination charge, the charge should be labeled an origination charge. Alternatively, if the creditor includes the cost of the LLPA in the interest rate, and then allows the consumer to pay a point to reduce the interest rate, the charge would be disclosed as a point on the Loan Estimate.

11/25/2014

CFPB Provides Analysis on How to Complete Closing Disclosure

The Consumer Financial Protection Bureau on Nov. 18 hosted its fourth in a series of webinars addressing frequently-asked questions regarding the RESPA-TILA integrated mortgage disclosures. This webinar focused on the details of the Closing Disclosure form, which will take the place of the current HUD-1 and final Truth in Lending disclosure. The rule goes into effect Aug. 1.

Click here to listen to a recording of the webinar and download a copy of the presentation.

This webinar gave a detailed analysis of how to complete the Closing Disclosure form. Here are some points the CFPB discussed that may be particularly pertinent to members of the title insurance and settlement industry.

What date should be listed as the “Closing Date” under the rule?

  • The term “closing date” can refer to different times in the transaction for different regions. The bureau declared that “Closing Date” for the purpose of the rule refers to the date of consummation, meaning “the time that a consumer becomes contractually obligated on a credit transaction.” (§ 1026.2(a)(13))
  • The bureau’s Official Interpretation to the definition of “Closing Date” recognizes that “[w]hen a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; Regulation Z does not make this determination.” (§ 1026.2(a)(13)-1)
  • When completing the Closing Disclosure form, use the  consummation date where the forms request the Closing Date

CD page 1

When should an item be disclosed as “Services Borrower Did Shop For” vs. “Services Borrower Did Not Shop For” on the Closing Disclosure form?

  • The Bureau stated that an item that was disclosed as “Services You Can Shop For” on the Loan Estimate (§ 1026.37(f)(3)) will move into the “Services You Cannot Did Not Shop For” category on the Closing Disclosure form when the consumer chooses a provider on the written list provided by the creditor with the Loan Estimate for that item. (1026.38(f)(2))
  • Alternatively, if an item is disclosed as “Services You Can Shop For” on the Loan Estimate was not on the written list provided by the creditor with the Loan Estimate for that item, such item will be disclosed as “Services Borrower Did Shop For” on the Closing Disclosure form. (§ 1026.38(f)(3))

CD page 2

How should recording fees and transfer taxes be disclosed on the Closing Disclosure?

  • The Bureau recognized that in some states, there will be several transfer taxes that will be part of the real estate transaction and the loan transaction
  • Transfer taxes should be itemized on the Closing Disclosure instead of aggregated together as required for the Loan Estimate. (Review §1026.37(g)(1) and its subparts for the Loan Estimate requirements and § 1026.38(g)(1) and its subparts for the Closing Disclosure Requirements)
    • Itemization is for each tax and for each governmental entity
    • Name of government entity should be disclosed on Closing Disclosure form
  • Similarly to the Loan Estimate, the Closing Disclosure form requires recording fees to be disclosed as one item. (§ 1026.37(g)(1)(i) and § 1026.38(g)(1)(i))
  • However, the Closing Disclosure also requires that the amount paid to record the deed and mortgage be itemized separately.
    • The itemized recording fees for the deed and the mortgage only need to include the amounts needed to record each of these documents
    • Recording fees for other documents, except for the deed and the mortgage, are just included as part of the total recording fees and do not need to be itemized
  • Creditors should disclose the name of the entity assessing the transfer tax, even if that entity is different from the payee of the check cut by the settlement agent. (§ 1026.38(g)(1)(ii))

CD item 3

Are creditors permitted to include additional forms if the information required to be disclosed does not fit in the space allotted on the form?

  • The answer to this question depends on the provision of the rule under which the creditor wishes to use such additional disclosure forms
  • Creditors must look to each provision of § 1026.38 to determine whether the use of addendums are permitted by the rule
  • The rule does permit the use of additional pages “for the purpose of including customary recitals and information used locally in real estate settlements.” (§ 1026.38(t)(5)(ix)) As examples of when an additional page may be used to disclose customary recitals and information used locally in real estate settlements, the Bureau listed “a breakdown of payoff figures, a breakdown of the consumer's total monthly mortgage payments, check disbursements, a statement indicating receipt of funds, applicable special stipulations between buyer and seller, and the date funds are transferred.” (§ 1026.38(t)(5)(ix)-1)
  • The Bureau has not created a model form or sample of an addendum. The Bureau has only indicated that the additional forms should be formatted similarly to the disclosure form itself and that creditors not use any more additional pages than are necessary. Any additional pages that may be included should “not affect the substance, clarity, or meaningful sequence of the disclosure.” (§ 1026.38(t)(5)-1)

11/18/2014

Conquering the Loan Estimate Part 1: Disclosing Interest Rates

In today’s blog post, we address the disclosure of interest rates on the Consumer Financial Protection Bureau’s Loan Estimate, which starting Aug. 1, 2015, will replace the current GFE and early Truth-in-Lending Disclosure.

Although the rule has specific requirements for disclosing interest rates, it does not address how interest rates should be disclosed under certain circumstances. For example, the rule does not specify how a hybrid loan should be disclosed. A hybrid loan would be a loan that is a combination of products, such as a Step Rate loan and an Adjustable Rate loan. The rule requires a creditor to select one loan product type from the following: Step Rate, Adjustable Rate, or Fixed Rate. (§ 1026.37(a)(10). When disclosing a hybrid loan, a creditor should disclose the loan as an Adjustable Rate loan. Although the interest rates during the step periods are known, the loan features periods where the interest will be adjusted, and such rates are not known at the time of consummation. Due to this uncertainty, hybrid loans more closely resemble Adjustable Rate loans and should be disclosed as such.

Additional confusion arises when disclosing the loan interest rate when the initial rate calculation differs from subsequent calculations. Since the rule requires creditors to use the best information available at the time of the loan consummation, the creditor should disclose the initial interest rate applicable at the date of consummation (§ 1026.37(b)(2)). Both Section 1026.37(b)(2) of the rule and the preamble to this section clearly state that the disclosed interest rate should be the rate at consummation. This requirement does allow creditors to disclose an interest rate that is a composite of different interest rates that are applicable when a transaction features multiple interest rates for different portions of a loan’s principal balance in a precomputed transaction. However, the allowance stems from the overarching rule that the disclosed interest rate should be the rate that applies at the consummation of the transaction.

Watch for the second part of this blog post as we address the disclosure of points and fees.

10/02/2014

Title Action Network on the Front Line Advocating for the Industry’s Future

The real estate and mortgage finance industries continue to be under intense scrutiny. From the Consumer Financial Protection Bureau (CFPB) to state regulators, business practices are being examined. This is why active participation is needed in the Title Action Network (TAN), the title industry’s grassroots organization. Launched in 2012, TAN promotes the value of the land title industry at the state and federal level. Over the past two years, TAN members have sent more than 4,400 communications to 380 policymakers in response to the network’s calls to action. Members have weighed in on the CFPB, RESPA/TILA reform, mortgage interest deduction, GSE reform, flood insurance and many other topics.

On the national front, TAN members have been crucial in building support for a bill that would create an advisory board for small businesses at the CFPB. Because of alerts sent by TAN members to their representatives, this important bill now has 37 co-sponsors in the House of Representatives.

TAN members have been just as active and successful at the state level as well. State victories are just as important. In my home state of Minnesota, our governor had proposed a budget that would have created an additional sales tax on real estate services. This would have included closing services and other professional services provided by the land title industry, as well as brokers’ commissions and appraisal services. In conjunction with the Minnesota Land Title Association, TAN members convinced the governor to drop his pursuit of taxes on most additional services, including real estate service taxes.

Earlier this year, our colleagues in Michigan partnered with the state land title association to drum up support for legislation to address recording issues. Most recently, members in New York worked with the New York State Land Title Association to convince legislators to pass an agent licensing bill. Meanwhile, members in Colorado used TAN to encourage regulators to hit the pause button on amending industry regulations.

As you can see, TAN is an essential piece in ALTA’s advocacy efforts to connect title professionals with members of Congress. The ability to systematize and fuse participation on federal and state issues makes TAN an effective tool for everyone involved. Through August, TAN had more than 8,000 members. We are pushing to eclipse 10,000 by the 2014 Annual Convention.

Now more than ever, it is critical to showcase a cohesive and energized voice when advocating for the value of the land title industry. Joining TAN is simple. Please go to www.titleactionnetwork.com to enroll. Membership is free. The more people involved, the stronger our voice. What’s holding you back? Get involved today!

 

09/30/2014

Endorsement Fees: To Include or Not to Include?

As title professionals handling closings become more familiar with the CFPB’s integrated mortgage disclosure forms, some questions have come up regarding disclosing endorsement charges. Since the final rule does not address endorsement charges and only speaks to disclosing the policy premium, there is no specific guidance as to how to disclose endorsements.

In following with the spirit of the rule, which promotes accurate disclosures to prevent any consumer confusion, it is best to disclose any endorsement fees separately on the disclosure forms. This approach applies to endorsement fees included in the lender’s premium as well as in the owner’s title policy calculation. 

Endorsement fees should not be included in any policy premium disclosure computations to avoid consumer confusion as to the costs of their policies. Listing the endorsement fees separately from premium disclosures will better ensure that the consumer fully understands the closing transaction. Keep in mind that if the endorsement is wrapped into an enhanced policy you do not need to show the endorsement separately.

As a reminder, title fees will need to be structured this way on the Loan Estimate and Closing Disclosure: “Title – [description of fee]”.

As an example, an endorsement for the lenders policy--such as the PUD endorsement--would go under services you did or did not shop for depending on where the other title fees are appropriately disclosed:

Closing_disclosure_1

 

 

09/26/2014

ALTA Unveils New Annual Convention Website

To deliver a better experience for attendees, ALTA is proud to unveil a new website dedicated exclusively for the 2014 Annual Convention.

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Designed to adapt to any device or platform, the website provides easy access to conference information, including the schedule, tours, vendors and exhibitors, hotel information, and more.

So whether you are sitting in a session during the day or relaxing at night, information about the convention is accessible on your computer, smartphone, iPad or other device.

Click here to view the website or copy and paste this URL: http://meetings.alta.org/annual

For attendees who previously downloaded the convention app, there is no need to get an update this year. The new website includes all the information you need without the hassle of downloading or updating the app.

What Do You Think About Wells Fargo's Plan to Produce and Deliver Closing Disclosure?

Since the Consumer Financial Protection Bureau released its final rule for the new integrated mortgage disclosures, which go into effect Aug. 1, 2015, many title professionals have asked:

  • Who will prepare the Closing Disclosure?
  • Who will deliver the Closing Disclosure?
  • How will processes change to enable delivery of the Closing Disclosure to the customer for  receipt at least three business days prior to closing?

Q3_wells_fargo_Page_1

In its quarterly newsletter to settlement agents, Wells Fargo answered how it plans to handle the Closing Disclosure. The lender said that due to creditor liability of the Closing Disclosure it plans to produce and deliver the Closing Disclosure to the borrower.

Wells also stated that it values its local business partners and plans to continue collaborating with settlement agents to schedule and conduct closings. Wells Fargo is asking settlement agents to provide feedback on the information contained it is newsletter. Click here to take the survey.

Dan Mennenoh, chair of the Research Committee and president of Illinois-based H. B. Wilkinson Title Co., said Wells Fargo reached out to ALTA’s Research Committee to get feedback on which entity will prepare and deliver the Closing Disclosure. The lender also wants feedback on how processes will need to change in order to meet regulatory requirements that the borrower receive the form at least three days prior to closing.

ALTA appreciates Fargo’s initiative to get feedback from title and settlement agents and learn how the new Closing Disclosure will impact the closing process.

In its letter, Wells also stated that it values its local business partners and plans to continue collaborating with settlement agents to schedule and conduct closings. Wells Fargo is asking settlement agents to provide feedback on the information contained it is newsletter. Click here to take the survey. 

What are your thoughts on Wells' decision to handle production and delivery of the Closing Disclosure? Have you heard from other lenders on how they will handle the Closing Disclosure? 

 

09/18/2014

Top 8 Tips for Putting Your Recovery Plan into Action

With it being National Preparedness Month, Agility Recovery has created an infographic that highlights the importance of having a disaster recovery plan and the steps you can take today to put your plan into action. Check out the infographic to learn how to rate your risk, tips for creating a crisis communications plan, to get a template for creating emergency wallet cards and tips for conducting a simple disaster recovery test.

The third pillar of ALTA's "Title Insurance and Settlement Company Best Practices" encourages title professionals to develop a disaster management plan.

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