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12/03/2013

Owner's Title Described as 'Optional,' But Not Other Fees Such as Homeowner's Insurance

In an effort to help title professionals understand various parts of the CFPB's final rule and disclosures, we will post answers to questions we receive. Today, we answer why homeowner's insurance, as well as other charges for surveys and pest inspections, is not listed as optional in the same manner as owner's title insurance on the Loan Estimate and Closing Disclosure.

According to the CFPB's rule, the parenthetical description “(optional)” is required at the end of the label for items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products that are not required by the lender as a condition of the mortgage loan.

Along with Owner’s Title Insurance, other items listed as “(optional)” include credit life insurance, debt suspension coverage, debt cancellation coverage, warranties of home appliances and systems, and similar products. Homeowners insurance is not listed as “(optional)” because the mortgage or deed of trust requires the consumer to obtain and maintain this coverage.

Other items that are not loan related but that the consumer must purchase pursuant to another agreement such as the real estate agent commission, homeowners association fees and fees for inspections would not be listed as “(optional)”. See the yellow-shaded section of page two of the five-page Closing Disclosure for treatment of Owner's Title Insurance.

201311_cfpb_kbyo_closing-disclosure

ALTA has warned the CFPB that telling consumers that owner’s title insurance is "optional" will mean that homebuyers may be dissuaded from purchasing the same protection that lenders receive from a title insurance policy. ALTA will continue to work with the CFPB on this issue. CFPB staff said its testing showed that the use of the word “optional” did not impact consumers’ decision to purchase title insurance.

ALTA will continue to work with the CFPB on this issue. During ALTA’s roundtable, Horn said the use of the word “optional” did not impact consumers’ decision to purchase title insurance. - See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.RQgme9Qi.dpuf
ALTA will continue to work with the CFPB on this issue. During ALTA’s roundtable, Horn said the use of the word “optional” did not impact consumers’ decision to purchase title insurance. - See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.RQgme9Qi.dpuf

Disclaimer: This information is for your reference only and not a not a substitute for legal, financial or business advice or binding interpretation of any law or regulation. Users should consult legal counsel and subject-matter experts to obtain advice with respect to any particular issue or problem. Use of and access to the information contained on this page or any of the email links contained within the site do not create an attorney-client relationship between American Land Title Association or any of the individual authoers and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of that authors firm or any individual attorney.

 

 

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