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2 posts from March 2014

03/24/2014

How To Show Fees on Closing Disclosure When Buyer and Seller Split a Closing Cost

We received the following question from an ALTA member:

When a seller is paying a portion of a tolerance-related settlement charge, how are the seller and buyer’s obligations shown on the Closing Disclosure Form?

Example: The Loan Estimate for Title – Settlement Agent Fee in the Services You Can Shop For section C is $502.  The consumer selects a provider who is on the creditor’s list and the final charge is $500.  The purchase contract assigns one-half of the charge to each party.

When the buyer and seller agree to split a closing cost in the sales contract, the settlement agent/attorney would split the fee between the buyer's and seller’s columns on page two of the Closing Disclosure.

The detailed breakdown of closing costs are shown on page two of the new Closing Disclosure. This form includes separate columns for costs that will be paid by the buyer, seller or other third party at or before closing.

The person filling out the Closing Disclosure can assign all or part of any one closing cost among those columns. In the instance where the buyer and seller will equally split the settlement agent's fee, the person filling out the Closing Disclosure would list half the fee in the buyers column and half in the sellers column.

03/10/2014

Listing Settlement Fees on Integrated Disclosures When Consumer Does Not Shop

As required, we currently provide a Service Providers List, listing only 2 suggested settlement agents and title agents.  We provide the GFE using fees of one of those companies.  If the member decides to let us continue with that company as the settlement and/or title agent, is that company’s fees considered Services You Cannot Shop For or Services You Can Shop For on the new Loan Estimate document?  The lender could always decide to use a different closing or title agent during the processing of the loan.

A settlement fee does not move from the “Services You Can Shop For” category to the “Services You Cannot Shop For” category when the creditor allows the consumer to shop for a service, but the consumer elects not to shop or chooses a provider that is on the creditor’s written list. This distinction is found in the Official Interpretations at 1025.19(e)(ii)-3.

For good faith or tolerance purposes, if the consumer is permitted to shop for a service but elects not to or chooses a provider identified by the creditor, the fee is included in the bucket of costs subject to a 10 percent tolerance. If the consumer elects to shop and chooses a provider not identified by the creditor than the fee would not be subject to any tolerance.

The Interpretations include the following example on the subject: “For example, if, in the disclosures provided pursuant to §§ 1026.19(e)(1)(i) and 1026.37(f)(3) [the Loan Estimate], a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to § 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of § 1026.19(e)(3)(ii).”

When allowing a consumer to shop for a settlement service provider, the creditor must identify to the consumer the service for which they are permitted to shop and provide a written list of potential providers. 12 CFR 1026.19(e)(1)(vi). The written list must identify at least one available provider of that service and include a clear statement that the consumer may choose a different provider for that service.

Further, the list must include sufficient information for the consumer to contact an identified provider such as the name under which the provider does business and the provider's address and telephone number. Lastly, a creditor does not allow a consumer to shop when the written list consists of only settlement service providers that are no longer in business or that do not provide services where the consumer or property is located.

See form H-27 of appendix H to this part for a model list, which begins on page 1,561 of the final rule.