09/03/2015

Realtors Confident in Title Companies’ TRID Preparedness

Realtors have a high degree of confidence that the title companies they work with are prepared for implementation of the TILA-RESPA Integrated Disclosures (TRID), which go into effect Oct. 3.

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According to a survey by the National Association of Realtors, 75 percent of the 1,432 Realtors surveyed are confident that title companies will avoid issues that trigger a delay under the new TRID rules. Those surveyed rated confidence on a scale from one to five. Realtors’ confidence in lenders was 65 percent.

The distribution for title companies was skewed more toward a five rating, or high degree of confidence, for title companies with 41 percent of respondents giving their title partners this rating. Meanwhile, only 27 percent of Realtors gave the highest rating to lenders, according to the survey.

“Results of this survey reinforce the dedication to quality service that title professionals provide to their business partners and consumers every day,” said Michelle Korsmo, ALTA’s chief executive officer. “For more than two years, we have encouraged our members to initiate conversations and collaborate with their Realtor and mortgage lender partners to ensure the implementation of the new forms is seamless. ALTA and its members have been engaged in the conversation and attending conventions, forums and webinars to learn how TRID will change the closing process. It will take a collaborative effort from all of the stakeholders who participate in the transaction to help consumers better understand their terms when they buy a home or refinance their mortgage.”

When asked about their own preparedness, Realtors only 23 percent gave themselves a five rating, while 71 percent rated their readiness a three or better.

When asked about their plans to deal with TRID, 56 percent of Realtors indicated they plan to alter purchase agreements to reflect a longer timeline, while 31 percent will add contingencies to the contract. Additionally, 37 percent indicated they have developed plans with their lenders and title company to help smooth the process.

According to the survey, a quarter of Realtors plan to complete inspections earlier in the process while 31 percent plan to share contracts and amendments earlier in the process with lenders, title insurers and closing agents. This is something ALTA members have encouraged leading up to implementation.

09/01/2015

Survey Shows Consumer Demand to View Closing Documents in Advance, Sign Electronically

While consumer satisfaction with the real estate process is strong overall, homebuyers are interested in receiving updates about progress in their transaction and want the option to sign documents electronically, according to a survey from the Houston Association of Realtors (HAR). Nearly 1,100 homebuyers participated.

“The survey offers some very telling measures and provides guidance for the title industry on what is important to the consumer,” said Stewart Morris Jr., vice chair of Stewart Title Guaranty Co. and a member of ALTA’s Board of Governors. “With the new integrated mortgage disclosures and owner’s title insurance labeled as ‘optional,’ it will be vital for the title industry to get information to the consumer earlier in the home-buying process.”

Esigning graph

According to the survey, 40 percent of those who participated said they did not feel educated about the closing process. Of those who felt they did not receive enough information, two-thirds would have liked to know more about the closing process before hand. The survey found that 93 percent of the homebuyers were interested in receiving and/or signing documents that don’t require a witness in advance of the closing. As far as timing, the survey found that 90 percent of all transactions closed less than two months after an offer was accepted. The length of time to close a transaction was either as expected or shorter than expected, according to 74 percent of those polled.

 

For those who believed the closing took too long, the top causes were:

  • Mortgage company not cooperative
  • Some of the documents were incorrect and had to be redone
  • Other real estate agent was not organized
  • Title company was not cooperative
  • Inspection identified issues that had to be rectified

To improve the process, HAR provided the following suggestions:

  1. Make the documents available electronically, with the ability to sign some in advance
  2. Provide clear communication and updates on the process
  3. Properly explain documents and fees early in the process
  4. Complete documents accurately and on time
  5. More follow up and involvement from the title agent is needed

08/20/2015

Key TRID items to Discuss with Real Estate Agents

During a TRID Townhall ALTA held last month on Facebook, three Board members provided advice on key messages title professionals should discuss with real estate agents regarding the TILA-RESPA Integrated Disclosures. Because TRID requires different timelines, it's important for real estate agents to understand the need to build more time into contracts.

Participating in the TRID Townhall were:

  • Diane Evans NTP, ALTA president; vice president, Land Title Guarantee Co.
  • Dan Mennenoh, ALTA Board member; president, H.B. Wilkinson Title Co.
  • Bill Burding, ALTA Board member; EVP/general counsel, Orange Coast Title Co.
  • Michelle Korsmo, ALTA chief executive officer

 

08/13/2015

How to Disclose Survey Fees on TRID

The proper placement and naming convention for a survey related charge is one of the most complex in the new TILA-RESPA Integrated Disclosures (TRID) rule. Lenders and settlement agents should work closely together to understand the reason a survey is being ordered to ensure its proper placement on the new disclosures. Here are some examples of different circumstances and how they could impact the placement of the survey charge.

  1. Lender instructions require removal of survey exception on title policy: In this scenario, the most likely course of action is that the survey charge will appear in the “Services you did/did not shop for” bucket and the fee should use the title related naming convention. Under the rule, any fee “required for the issuance of title insurance policies to the creditor in connection with the consummation of the transaction or for conducting the closing” must be proceeded by “Title – ”. The comment to 1026.37(f)(2) lists a number of examples of costs that must be listed per this requirement including any costs for the “resolution of underwriting issues and taking the steps needed to satisfy any conditions for the issuance of the policies.” In this example, the reason the survey is being obtained is to serve as a basis for an underwriting decision on whether to provide survey related coverage under the title policy and it would most likely be a title related fee.
  2. Buyer requests for personal reasons or required under real estate sales contract: In this scenario, the most likely course of action is that the survey charge will appear in the “other” bucket since it is not a loan related cost. On the disclosures, loans are broke down into loan and other costs depending on whether the fee is required as a condition of receiving the loan. When fees are “part of the real estate closing but not required by the creditor,” they are disclosed as “other” costs. In this example, the buyer (or the buyer and seller through their negotiations) is requesting the survey and thus it is not a cost the lender is requiring as a condition of the loan.
  3. Buyer requests to obtain coverage under the owner’s policy: A tricky scenario occurs when the lender does not require a survey, but the buyer requests one. Since the buyer is the instigator of purchasing the survey, it is reasonable to include the survey charge in the “other” bucket with the “Title – ” designation since the buyer is obtaining survey for a title related purpose.
  4. Lender requires survey for non title insurance related reason: While it is extremely rare, a lender may require a survey for purposes not related to title insurance such as appraisal, homestead or loan program reasons. In these instances, the survey would likely appear in the “Services you did/did not shop for” bucket and not include the “Title – ” label since it is a lender-related charge and is not required for purposes of making a title-related determination. The CFPB suggests this possibility in its comment to 1026.37(f)(3), where it lists “survey fee” as an example of a fee separate from title related fees.  

Since the facts of the situation will influence the appropriate placement and naming protocol of the survey fee, it is important for lenders and settlement agents to get on the same page about the reason the survey is being purchased and the proper placement on the disclosure. It is better to have the conversation before closing then to resolve a mistake post closing during the quality review process.

08/06/2015

Completing TRID Old School: Can Disclosures Be Completed By Hand?

The Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures (TRID) rule significantly impacts the closing process and how data will need to be exchanged to complete the forms. While new online platforms and software programs have been developed to aid data sharing, the rule does allow for the Loan Estimate and Closing Disclosure to be completed by hand if specific requirements are met. Seller CD page 1

Answering common TRID questions during a webinar earlier this year, CFPB staff indicated that under the rule there is no requirement that the settlement agent or creditor use a computer, typewriter or other word processor to complete the forms. The rule says that information and amounts required to be disclosed may be hand printed, “provided the person produces clear and legible text” and complies with the required formatting, including replicating bold font where required.

CFPB staff said there is no specific font size requirement, but noted that the rule requires the disclosures be completed “clearly and conspicuously.” The font sizes and labels on the Loan Estimate and Closing Disclosure may not be changed, however.

Here’s what the rule specifically says about manually filling out the forms:

Comment 37(o)(5)-2 (for Loan Estimate)

Section 1026.37(o) does not require the creditor to use a computer, typewriter, or other word processor to complete the disclosure form. The information and amounts required to be disclosed by § 1026.37 on form H–24 of appendix H to this part may be filled in by hand printing or using any other method, provided the information is clear and legible and complies with the formatting required by form H–24, including replicating bold font where required.

Comment 38(t)(5)-2 (for Closing Disclosure)

The creditor, or settlement agent preparing the form, under § 1026.19(f)(1)(v) is not required to use a computer, typewriter, or other word processor to complete the disclosure required by § 1026.38. The creditor or settlement agent may fill in information and amounts required to be disclosed by § 1026.38 on form H–25 of appendix H to this part by hand printing or using any other method, provided the person produces clear and legible text and uses the formatting required by § 1026.38, including replicating bold font where required.

08/04/2015

Lender Requirements for ALTA Best Practices

To prove compliance with third-party oversight required by the Consumer Financial Protection Bureau (CFPB), several lenders have announced their requirements to prove implementation of ALTA’s “Title Insurance and Settlement Company Best Practices."

ALTA has compiled information it has received to help title and settlement agents understand the various lender expectations. If you are aware of other lender requirements regarding Best Practices, please share the information here on our blog. ALTA will update the list as it receives more information.

ALTA has developed several tools to help title professionals document Best Practice policies and procedures.

Download Lender Requirements

Lender_Requirements

08/03/2015

Tell the Senate We Need Their Help

With the CFPB's TRID rules set to go into effect Oct. 3, we need your help to encourage Congress to pass bipartisan legislation that mandates the bureau observe a hold-harmless period for enforcement of the new TILA-RESPA Disclosure (TRID) rule until January 1, 2016.

Click here to take action today and ask your senators to cosponsor S. 1711 today. 

On Aug. 29, the House Financial Services Committee voted 45-13 to advance H.R. 3192. The bill, sponsored by Reps. French Hill (R-Ark.) and Brad Sherman (D-Calif.), would provide a temporary legal safe harbor  for lenders and title professionals who make a good-faith effort to comply with the TRID through February 1, 2016.

H.R. 3192 moves to the full House of Representatives where ALTA and its coalition partners are pushing for it to be voted on under suspension of the rules (a mechanism for non controversial bills) in early Sept. This will require getting more co-sponsors on the bill especially from the Democratic side.  

07/30/2015

ALTA TRID Townhall Provides Answers to Industry Questions

More than 500 title professionals, lenders and real estate agents attended ALTA’s first-ever Facebook TRID Townhall to hear what companies should be doing now to be prepared for implementation of the integrated disclosures. The CFPB’s TILA-RESPA Integrated Disclosures (TRID) rule goes into effect Oct. 3 for most consumer mortgages.

Participants in the townhall included:

  • Diane Evans NTP, ALTA president; vice president, Land Title Guarantee Co.
  • Dan Mennenoh, ALTA Board member; president, H.B. Wilkinson Title Co.
  • Bill Burding, ALTA Board member; EVP/general counsel, Orange Coast Title Co.
  • Michelle Korsmo, ALTA chief executive officer

 

 Here’s a recap of many of the questions that were answered during the hour-long townhall:

How should companies best prepare to disclose title insurance premiums in states with simultaneous issue rates?

Through regulation or rate filing, title companies in about half the states offer discounts on the loan policy when an owner’s policy is simultaneously purchased. Despite the common practice, the CFPB’s TRID rule prohibits settlement agents or lenders from disclosing the discounted simultaneous issue price for the lender’s title insurance policy on the Loan Estimate and Closing Disclosure forms.

To address the problem, Burding said ALTA created model Settlement Statements.

“Hopefully, someday, this issue can be fixed on the Closing Disclosure, but for now, ALTA’s Settlement Statement will be an addendum to agreements and make corrections so the consumer knows exactly what discounts they will receive,” Burding said.

How are you providing fees to lenders?

It’s important for the fees that lenders disclose on the Loan Estimate to be as accurate as possible to the fees disclosed on the Closing Disclosure. This makes it important for title professionals to provide accurate fee estimates.

Evans pointed out that the rule says companies should make a good effort to provide the best information available.

“We will give lenders the best information that we possibly can give them,” Burding said. “When the actual documentation comes in regarding the specific transaction, fees will be modified. The best we can do is provide the full amount for lender’s and owner’s title policies and all the fees we would include in a typical closing.”

For title fees, Mennenoh said it’s best to provide lenders with the full costs of polices that the rule requires to be disclosed and then also provide the correct information, which shows what the discount will be when policies are issued simultaneously. “You need to provide the calculation for them,” he added.

There are three main models for sharing data needed for the integrated disclosures. The first is the traditional method in which orders are transmitted via phone, fax, email or delivered in person. The other two main methods are through a third-party online portal or integration with the lender origination software (LOS) and title production system (TPS). Several technology vendors have developed solutions to share and combine loan-centric information stored in lenders’ loan origination systems and property-centric data found in title/settlement agents’ systems.

Additionally, Burding pointed out that title companies must make sure they quote fees for the appropriate underwriter that will issue the policy.

How should we work with lenders to standardize fee names?

In addition to preparing for new timing requirements and tighter fee tolerances, settlement agents and lenders must develop standardized fee names or descriptions for the Loan Estimate and Closing Disclosure. Because the CFPB wants consumers to be able to compare fee estimates with what’s actually charged at consummation, the rule requires fee terminology to be consistent between the two forms.

Evans said title professionals need to have conversations with their lenders and agree on common fee naming. It’s also important for companies to ensure their software recognizes the fee names and can populate the disclosures appropriately.

Burding said that in western states, the nomenclature of the information will be different.

“You may be used to the term escrow fee but may now see settlement fee. Closing is consummation. Buyer is borrower,” he said. “There are other terms, so you need to train your staff about the new nomenclature under TRID.”

Who sets expectations for how the Closing Disclosure is prepared?

All the panelists agreed that it’s the lenders’ role to determine which entity will produce and deliver the Closing Disclosure.

“The lender is driving the bus,” Evans said.

Burding said it’s important to communicate with lenders to understand how each one will handle the Closing Disclosure.

“Each lender will be slightly different,” he said. “We have lenders that will control every aspect to those who are not prepared and need us to help them through. Talk with your lending partners—including Realtors—is vital during this period to determine expectations.”

What are lenders’ plans to comply with the three-day rule?

The rule requires that the borrower receive the Closing Disclosure at least three days before consummation. Mennenoh said that he’s heard that some local lenders will require the borrowers to physically come into the bank to pick up the Closing Disclosure. Others will use the mailbox rule and send via regular mail while others will overnight the form.

“And then we have some lenders that are not sure their software will be ready and will want us to deliver the Closing Disclosure,” Mennenoh said. “So it’s all over the board.”

Mennenoh said title professionals may need to provide lenders the needed information for the Closing Disclosure a minimum seven days in order to meet the mail box rule, but that this can vary by lender. The mailbox rule assumes the consumer received the Closing Disclosure three days after it was mailed.

How do we provide proof of delivery of the Closing Disclosure?

This will vary from lender to lender, according to the panelists, but could range from sending electronically to hand delivering the documents to the consumer.

“I think an electronic receipt is probably the best way,” Burding said. He pointed out, however, that if email with electronic receipt is used and the consumer fails to click the received box, then the mailbox rule goes into effect. “Checking the box is critical,” he added.

Also, if the Closing Disclosure is sent via FedEx and the package is delivered without obtaining a signature, Burding said the three-day delivery requirement would default back to the mailbox rule.

“It’s not going to surprise me—at least at the outset—to see redundant delivery where the Closing Disclosure will be mailed and sent electronically,” Burding said.

Korsmo said title companies should consider keeping a log of when and how the Closing Disclosure was delivered.

“We need to recognize that the lender is driving the bus and look to the instruction they give us,” Evans said. “Whether it’s in the closing instructions early on or if it’s through the collaboration as to what the process will be.”

Can fees be aggregated together on the Loan Estimate and then itemized on the Closing Disclosure?

Burding said that fees can be lumped together, but that state law dictates fees must be broken out on the Closing Disclosure. Evans added that some states have bundled rate filing and that title professionals must use the rates “appropriate and filed in their state.”

It should be noted that if the number of fees exceed the number of available lines, the TRID rule provides flexibility for cost buckets to expand and contract as needed. It also allows for the use of additional pages to ensure all itemized cost items are disclosed. See 1026.38(t)(5)(iv). One of the underlying principles around TRID is the forms are meant to be dynamic and flexible to fit the specific transaction. In the instance where one cost bucket will exceed the default number of lines, lenders can delete unused lines from other sections and add those extra lines to the section needing more space. If after borrowing lines form other sections, there is still the need for more line items, the rule allows the lender to split the closing cost details into two pages, a “loan costs” page and an “other costs” page.

What are the most important questions I should ask lenders?

  • How do you want data? Delivered through a portal, by email, walking across the street?
  • If the settlement agent is preparing the Closing Disclosure, how will you get information from the lender?
  • How do you plan to deliver the Closing Disclosure to the consumer?
  • How soon do you need information for the Closing Disclosure in order to meet the three-day delivery requirements?
  • What is your process to send the completed Closing Disclosure to the closing/escrow company for approval before delivery to the consumer?
  • How will changes be made to the Closing Disclosure after its provided to the borrower?

What should I be talking about with real estate agents?

Mennenoh said the key message to real estate agents is that there’s a much different timeline to comply with TRID. Once contracts are signed, he said Realtors “need to share that information with us as quickly as possible.”

Evans said that it’s important for Realtors to build longer timeframes into contracts and set the stage early on with their clients.

“When a Realtor is listing a property and then walking the seller through the transaction, they need to understand that after Oct. 3 things change dramatically,” Evans said. “We are finding that many states are taking a look at whether real estate contracts need to be modified to make sure there isn’t increased liability for the buyer if their loan gets delayed and they can’t close by the contract date.”

Burding advised that real estate agents build extra time into their contracts. As opposed to setting a 30-day escrow requirement, he recommends having a “do not exceed 60-day escrow.”

“You will see expanded rate locks and transactions taking longer,” he added. “Build extra time into the transaction. Because if you don’t, you could have contracts expire and rate locks expire, which could have a detrimental impact on the closing. Realtors that understand this will be the ones setting the expectation level with the consumer. If you put in a 30-day escrow and it takes 35 days, then it turns into a negative escrow. But if you put in not to exceed 60 days and you close in 35 days, you are a hero.”

What are some tips when communicating with real estate agents?

Burding said real estate agents will want to do walkthroughs with their customers earlier in the process and may want to consider doing two walkthroughs.

 “The walkthrough is going to have a measurable effect on what the final Closing Disclosure will look like,” Burding said. “This will be a change in how Realtors do business, but being able to do the walkthrough earlier will make transaction much more easier when it gets down to the signing.

“A second walkthrough will change what the Realtor is used to doing and adds more to the Realtor’s plate, but if you’re not looking at this as an opportunity to grow your business, you are looking at it incorrectly. Real estate agents that do an initial walkthrough and then do a secondary walkthrough are going to be the ones who grow their business because they close on time,” Burding added.

What happens if a transaction does not close due a lender delay and a rate lock expires? Is the lender obligated to extend?

Burding said lenders are not obligated to extend, so it’s important to talk with the lender early on to determine the rate lock. If that’s an issue, it’s important to inform the consumer. Burding said the seller is not obligated to extend the contract because the buyer’s rate lock expired.

“Over time, this runway will get shorter,” Burding said. “Once everyone gets the hang of this, the time for the closing will get better over time. But we are in a one or two quarter learning process. As we get into next year’s buying season, many issues will be resolved and systems will be standardized.”

What should you do if a lending client does not use the required TRID forms?

Evans said title companies should establish policies on how to handle these situations.

“This is a discussion you need to have internally because this is an issue that will come up,” she said.

Burding said his company will not handle transactions where the lender is using incorrect forms because “I have no desire to be a defendant. This comes down to educating the lender about liability for not using the required forms.”

Will there be a line item for the Closing Protection Letter charge as well as the lender and owner policy charges?

In states where it’s a requirement, the CPL must be disclosed according to Mennenoh. State rule dictates whether fees must be itemized or aggregated.

How should settlement provider get the settlement statement to the consumer to clarify cost of title insurance premiums?

The goal of the new forms is to allow consumers to compare fees with what they were quoted to what they are actually paying at closing. Korsmo said this is a great opportunity for settlement providers to engage the consumer and explain the important role that’s provided.

“This is a great touch point to talk to the consumer earlier in the process,” Korsmo said.

If the settlement agent prepares and delivers the Closing Disclosure to the consumer, are they subject to the fines and penalties for non compliance?

 Burding said that more than likely settlement agents would be liable to meet the rule’s requirements. Korsmo said that this is why it’s important for settlement agents to read the lender’s closing instructions. Evans added that a few of her company’s lending clients have provided a list of process changes and expectations of the title company.

“This has been helpful because we can understand what their expectations will be of us,” Evans said.

What is ALTA doing to help the industry explain the use of “optional” to describe owner’s title insurance?

ALTA is developing a robust homebuyer outreach program to give members tools and specific language to describe and explain the benefits of owner’s title insurance. It’s important to communicate with consumers earlier in the process to explain the benefits, avoid using industry jargon and be specific about the benefits they receive. Title professionals should also refer consumers to ALTA’s consumer website, www.homeclosing101.org.

Evans added that it’s important for title companies to train staff on how to explain the importance of title insurance.

What tips do you have for quoting transactions?

There are many options for providing fee quotes, including rate calculators and rate cards. Lenders and consumers should be able to easily understand the information. Burding said companies should remember to update fees if a common platform to is used to provide quotes.

“One of the problems which common platforms is that companies will add information, but then let it go stale,” he said. “That’s a huge problem.”

If the lender allows the consumer to shop for a service, they must provide a written provider list. What tips do you have for a title agent to get on this list?

Communication with lenders is important here as well. Providing accurate and clear information about fees and how you will exchange data will give lenders confidence in using a particular company, according to Mennenoh. One of the goals of TRID is to promote consumer shopping. However, many of the requirements, such as tolerances and the shopping-list concept, may create hindrances to shopping or require settlement agents to market themselves differently. After 2010, many agents wanted to be on the lender’s shopping list because it was crucial to getting business, but, under TRID, it may be advantageous to be off the list. Korsmo said this is another opportunity to communicate with lenders and determine what it means to be on the list or not.

Company Develops TRID Videos for Consumer Marketing

Video content service Fast Forward Stories has developed a collection of 26 brandable videos to help companies explain the CFPB’s TILA-RESPA Integrated Disclosures (TRID).

Confusion and questions surrounding the new TRID rules, effective on Oct. 3, create a marketing opportunity for businesses providing content that explains the new rules and related changes.

The Fast Forward Stories TRID library illustrates and clarifies key TRID concepts visually, using short animated videos branded for subscribing businesses. One of the new videos, for example, clarifies the differing definitions of "business day" used for TRID Loan Estimates versus Closing Disclosures.

"Today's consumers, especially millennials, prefer video and other visual explanations to dense text, particularly for complex subjects like the new TRID rules," said Matthew Dunn, CEO of Fast Forward Stories. "Explaining concepts in concise video is proven highly effective, and answering consumer questions using video, on any device, is content marketing at its best."

Besides the 26 new TRID videos, Fast Forward Stories offers 125 more covering a broad range of mortgage, title and real estate topics. Subscribing businesses can brand their own library, ranging from 26-151 videos. Embedding and delivery are included for use across web, mobile, email and social media channels. Advanced marketing features include lead capture, view metrics and co-branding options for business partners, built on a state-of-the-art online video distribution system. All of the videos are captioned in English and Spanish, providing ADA-compliant content for marketing and consumer education.

07/14/2015

ALTA to Host TRID Townhall on Facebook

TRIDTownhall 2

ALTA will host a TRID Townhall on its Facebook page beginning at 11 a.m. ET on Tuesday, July 28, to share what industry participants should be doing now to prepare for the implementation of the TILA-RESPA Integrated Disclosures rule.

Participating in the live event will be:

  • Diane Evans NTP, ALTA president; vice president, Land Title Guarantee Co.
  • Dan Mennenoh, ALTA Board member; president, H.B. Wilkinson Title Co.
  • Bill Burding, ALTA Board member; EVP/general counsel, Orange Coast Title Co.

During the townhall, the participants will offer advice on what TRID readiness looks like, how ALTA members can keep employees energized for implementation and the small details that may fall through the cracks leading up to Oct. 3.

The TRID Townhall will be livestreamed exclusively on ALTA’s Facebook page. To attend, simply “like” ALTA on Facebook. Also, make sure you "join the event" on ALTA's Facebook page so you receive a reminder to attend the townhall.

If you have questions about the ALTA TRID Townhall, email Wayne Stanley, ALTA’s director of public affairs.

Following the conversation, the panel will answer questions live from Facebook and Twitter. Use the hashtag #ALTAtownhall to follow the conversation on Twitter and Facebook.