30 posts categorized "Consumer Financial Protection Bureau"

01/22/2016

Compliance Webinar: What You Need to Know About Gramm-Leach-Bliley


Having trouble viewing this? Go to alta.org for a better viewing experience.

Register and Learn About the Liability of
Protecting Sensitive Customer Information

Passed in 1999, the Gramm-Leach-Bliley Act provides the basic legal framework governing title and settlement companies' duty to protect their customers' non-public personal information (NPI).

With the increase in data breaches and reports of identity theft, regulators are focused more than ever on the processes companies take to safeguard NPI. To help you understand when it's legal to share customer information with or without their explicit permission, register for ALTA's "Protecting Sensitive Customer Information: The Basics of Gramm-Leach-Bliley." The webinar will be held from 1:00-2:00 p.m. ET, Thursday, Feb. 11.

The webinar will:

  • provide an overview of the core requirements of the law
  • address the latest government and regulatory actions regarding customer data
  • review recent court cases and liability for protecting NPI
  • help you understand whether you should share customer information
  • highlight ways NPI should be shared

The featured presenter will be Richard Andreano, a partner of the law firm Ballard Spahr. Andreano, the practice leader of Ballard Spahr's mortgage banking group, has devoted more than 25 years of practice to financial services, mortgage banking and consumer finance law.

Cost is $100 for ALTA members and $250 for non-members.
Register today!

Webinar sponsorship still available! Contact Claire Mitchell for more information.

12/17/2015

TRID Myth Busters: What You Need to Know When Sharing Closing Documents

The implementation of the CFPB’s Know Before You Owe regulation has brought up a number of questions regarding who is permitted to receive copies of closing documents, including the Closing Disclosure and alternate settlement statements, such as the ALTA Settlement Statements. It is important to note that the Know Before You Owe regulation did not implement any changes on data privacy; however, ALTA encourages title insurance and settlement companies to take this opportunity to review your company’s privacy policies to ensure they match your data-sharing practices.

Refresher on Governing Law

The Gramm-Leach-Bliley Act (GLBA) was passed in 1999 and remains the predominant authority on how to protect data. GLBA requires financial institutions, including title insurance companies and agents, to disclose their data-sharing practices to their customers and to safeguard private and sensitive customer information. To meet these new requirements, GLBA imposed three basic obligations:

  1. a privacy notice requirement
  2. a requirement that all consumers be provided the opportunity to opt-out of certain information disclosures
  3. a requirement that measures be instituted to maintain the "security and integrity" of all nonpublic information.

The GLBA tasked the Federal Trade Commission (FTC) and other government agencies that regulate financial institutions to implement regulations to carry out the Act's financial privacy provisions. The CFPB is not included in the list of government agencies that regulate data privacy, and thus the implementation of the Know Before You Owe regulation did not affect the longstanding data-security requirements that title insurance companies and agents have been subject to.

Npi_doc

With the implementation of GLBA, the FTC released guidance regarding the type of information companies should be safeguarding. The FTC is responsible for enforcing its Privacy of Consumer Financial Information Rule, which protects a consumer's "nonpublic personal information" (NPI). NPI is any "personally identifiable financial information" that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is otherwise "publicly available. The Privacy Rule applies to ALTA members that provide real estate settlement services.

ALTA members should note that the FTC considers NPI to be any information obtained about an individual from a transaction involving a company’s services. This could include a person’s name, address, income, Social Security number or other information on an application. This also includes any information from court records or from a consumer report. The FTC said NPI does not include information that is believed to be lawfully made "publicly available." In other words, information is not NPI when steps have been taken to determine: (1) that the information is generally made lawfully available to the public; and (2) that the individual can direct that it not be made public and has not done so.

Applying Standards to Today’s Real Estate Transactions

The implementation of the CFPB’s Know Before You Owe regulation has required lenders, real estate settlement agents, and title insurance professionals to radically change the way they conduct business. The new regulation’s disclosure requirements have also generated a greater need to use additional settlement statements, such as ALTA’s model Settlement Statements, to ensure that settlement agents can continue to meet their state disclosure requirements. With the use of these new forms comes the question, “Who is allowed to receive a copy of the Closing Disclosure and settlement statement?”

The basic answer is that the Know Before You Owe regulation does not address who may or may not receive a copy of closing documents. Many lenders, however, are refusing to share a copy of the Closing Disclosure with real estate agents or other third parties. Additionally, some lenders are including provisions within their closing instructions that prohibit settlement agents from sharing the Closing Disclosure with third parties. These lenders are stating that the consumer may provide a copy of Closing Disclosure to real estate agents if he or she chooses.

A concern remains about how to get necessary information about the transaction to outside parties, including real estate agents, who need certain information to document their involvement in the transaction. One of the primary reasons real estate agents are interested in receiving the Closing Disclosure is because they have to report certain data fields to MLS to close the listing. These requirements vary by state, and there is not a uniform set of data fields that will satisfy MLS. Reporting these data fields is a requirement for participating in the MLS system, so it is crucial that real estate agent receive this information.

What Now?

Settlement agents and title insurance professionals should contemplate the requirements and limitations of their privacy policies and contemplate whether any of these policies need to be revisited. The GLBA continues to set a strong standard for protecting NPI, despite going into effect 16 years ago. The ALTA Title Insurance and Settlement Company Best Practices reiterate the importance of privacy policies and include guidelines for companies to protect against data theft to help meet GLBA requirements. Pillar 3 of the ALTA Best Practices provides procedures on physical and network security of NPI, how to properly dispose of NPI, developing a disaster management plan, employee training to ensure compliance, and oversight of service providers.

When revisiting your privacy policies, consider the following questions:

  • Why did you initially implement this policy?
  • What was your rationale in implementing this policy? Does that rational still apply?
  • Does this policy continue to provide adequate protection to sensitive data in today’s marketplace?
  • What information do you need to share with your real estate partners?
  • How are you sharing this information?

After re-examining your privacy policies, you should compare these policies with your company’s data-sharing practices to ensure that you are only sharing information in conformity with your policies.

If your lender prohibits you from sharing the Closing Disclosure with third parties, you may consider using an alternative settlement statement, such as ALTA’s Settlement Statements, to document the transaction. The ALTA Settlement Statements were designed to be model forms based on the settlement statements that have been in use prior to the implementation of Know Before You Owe. These statements may be modified as appropriate to reflect the terms of the transaction and to prevent any disclosure of the buyer’s or seller’s NPI. Four versions of the ALTA Settlement Statement are available: the buyer statement, the seller statement, the combined statement, and a statement for cash transactions.

Lastly, if you plan on sharing a closing document, such as a settlement statement, to a third party, consider whether you are sharing any information that would be considered NPI under the FTC’s guidelines and whether you have met the GLBA’s requirements for sharing such data. Also consider why you feel the need to share this information and how you would anticipate your customer would feel about you sharing that information. By keeping GLBA requirements and ALTA Best Practices in mind as you adapt to the Know Before You Owe regulation, you can ensure that your customer remains protected and that you continue to have compliant real estate closings.

Compliance Webinar: What You Need to Know About Gramm-Leach-Bliley


Having trouble viewing this? Go to alta.org for a better viewing experience.

Register and Learn About the Liability of
Protecting Sensitive Customer Information

Passed in 1999, the Gramm-Leach-Bliley Act provides the basic legal framework governing title and settlement companies' duty to protect their customers' non-public personal information (NPI).

With the increase in data breaches and reports of identity theft, regulators are focused more than ever on the processes companies take to safeguard NPI. To help you understand when it's legal to share customer information with or without their explicit permission, register for ALTA's "Protecting Sensitive Customer Information: The Basics of Gramm-Leach-Bliley." The webinar will be held from 1:00-2:00 p.m. ET, Thursday, Feb. 11.

The webinar will:

  • provide an overview of the core requirements of the law
  • address the latest government and regulatory actions regarding customer data
  • review recent court cases and liability for protecting NPI
  • help you understand whether you should share customer information
  • highlight ways NPI should be shared

The featured presenter will be Richard Andreano, a partner of the law firm Ballard Spahr. Andreano, the practice leader of Ballard Spahr's mortgage banking group, has devoted more than 25 years of practice to financial services, mortgage banking and consumer finance law.

Cost is $100 for ALTA members and $250 for non-members.
Register today!

Webinar sponsorship still available! Contact Claire Mitchell for more information.

TRID Q&A: Who Handles Preparation and Delivery of Seller’s Closing Disclosure?

Question: We have been told by a couple of lenders that they would prepare a joint buyer and seller Closing Disclosure and deliver the same to both the buyer and seller for “signature.” Can the lender elect to take on the role of the settlement agent with regard to preparation and delivery of the Seller Closing Disclosure?

Answer: To comply with the TILA-RESPA Integrated Disclosures rule, both the buyer and seller must receive Closing Disclosures that provide details of the transaction. In sale transactions, the rule places the responsibility on the settlement agent to provide the seller with a Closing Disclosure relating to the seller’s transaction. See § 1026.19(f)(4). However, the rule also recognizes that in some instances the settlement agent may meet this obligation by either providing the seller with a seller-only Closing Disclosure or a combined buyer/seller Closing Disclosure. This can be done by either the lender or the settlement agent depending on the agreement between those parties. You should collaborate with your lender partners to determine who will prepare this document so you can ensure you meet your obligations under the Know Before You Owe regulation. 

Similar to lenders being liable for delivery and accuracy of the buyer’s Closing Disclosure, settlement agents are liable for delivery and accuracy of the seller’s Closing Disclosure. If a lender decides to provide the seller’s Closing Disclosure, the settlement agent must be aware of this process and ensure accuracy.

Fee Names on Loan Estimate and Closing Disclosure Must Match

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 Consumer Financial Protection Bureau wants consumers to be able to compare fee estimates with what’s actually charged at consummation, the TILA-RESPA Integrated Disclosures (TRID) rule requires fee terminology to be consistent between the two forms. This is a challenge because fees for services are not called the same thing across the country. Lenders and settlement agents need to communicate and come to an agreement on standardized fee names for the Loan Estimate and Closing Disclosure.

Examples of variances in naming include valuation services versus appraisal. Some states require a specific terminology for fees. As an example in Texas, the fee for termites must be called "wood destroying insect fee."

 Here’s the portion of the TRID rule addressing fee naming:

  1. Consistent terminology and order of charges. On the Closing Disclosure the creditor must label the corresponding services and costs disclosed under § 1026.38(f) and (g) using terminology that describes each item, as applicable, and must use terminology or the prescribed label, as applicable, that is consistent with that used on the Loan Estimate to identify each corresponding item. In addition, § 1026.38(h)(4) requires the creditor to list the items disclosed under each subcategory of charges in a consistent order. If costs move between subheadings under § 1026.38(f)(2) and (f)(3), listing the costs in alphabetical order in each subheading category is considered to be in compliance with § 1026.38(h)(4). See comment 37(f)(5)-1 for guidance regarding the requirement to use terminology that describes the items to be disclosed.

Lenders and settlement agents have started attempting to determine standard fee names. Below is one lender’s example of what it uses for title fees on the disclosures:

  1. Title - Closing/Settlement Fee
  2. Title - Lender’s Title Insurance
  3. Title – Title Exam/Search Fee
  4. Title – Deed Preparation
  5. Title – Closing Protection Letter
  6. Title – Courier/Wire
  7. Title – Tax Report
  8. Title – Doc/Processing Fee

 

PAGE 2 of LOAN ESTIMATE              

                 LE_2


PAGE 2 of CLOSING DISCLOSURE                                  

CD_2

09/29/2015

Questions About TRID?

Have questions or issues about TRID that you need answered? Send an email to tridhelp@alta.org. ALTA will address common questions/issues here on its blog

09/22/2015

CFPB Spotlights Mortgages in Monthly Complaint Snapshot

Consumers continue to face problems with mortgage servicing, particularly when they apply for a loan modification to avoid foreclosure, according to the Consumer Financial Protection Bureau’s latest monthly complaint report.

Some of the findings in the snapshot include:

  • Continued problems preventing foreclosure: Over 50 percent of mortgage complaints have to do with problems consumers face when they are unable to make payments. Consumers complain of delays and a lack of information when applying for a loan modification.
  • Lack of information when loans are transferred: Consumers report experiencing confusion and frustration about where to make payments when loans are transferred. When the loan transfers occur, consumers complain that payments often increase unexpectedly.
  • Trouble making payments: Nearly a third of mortgage complaints came from consumers saying that they have trouble making the proper payments on their mortgage loans. Consumers describe companies not accepting payments of anything less than the full balance owed, or finding that their payments were not properly applied despite instructions from the consumer.

“Despite strong protections that have been put in place to protect homeowners, this month’s complaint report shows consumers are still having problems when dealing with their mortgages,” said CFPB Director Richard Cordray. “The Bureau will continue to work to make sure that consumers are being treated fairly on their mortgage issues.”

As of Sept. 1, 2015 the Bureau has handled about 192,500 mortgage-related complaints. Overall, the bureau has received more than 702,900 complaints across all products.

The Bureau expects companies to respond to complaints and to describe the steps they have taken or plan to take to resolve the complaint within 15 days of receipt. The CFPB expects companies to close all but the most complicated complaints within 60 days.

Complaint Volume by Product

Complaint volume

Monthly Product Trends

  Complaint products

Complaint Volume by State

Complaint by state

09/18/2015

Rep. Hill: We Can't Defend Bureaucratic Intransigence at the Expense of our Home-Buying Public

During a hearing Sept. 14 before the House Financial Services Committee, U.S. Rep. French Hill encouraged Congress to pass legislation that would provide for limited liability for those who in good faith attempt to comply with the new TILA-RESPA Integrated Disclosure (TRID) requirements that go into effect Oct. 3.

On July 9, the House Financial Services Committee passed legislation introduced by Hill that would extend the hold-harmless period until Feb. 1, 2016. The Homebuyers Assistance Act (H.R. 3192) also says that no lawsuit may be filed against a person for a violation of the TRID rule occurring before such date, so long as the person has made a good faith effort to comply with the rule.

During the hearing, Hill said that some 230,000 Americans refinance or buy a new home every month and “they’re going to be the ones who are victimized by this confusing rule that doesn’t get implemented properly due to a technology reason or a misunderstanding at a real estate brokerage, or a title company, or a bank.”

“I hope we can (pass H.R. 3192) before October 3, so that our title (companies), commercial banks, mortgage bankers, real estate agents all have some confidence that they can go into this new closing regime and not be penalized, either by the federal government or through civil liability,” Hill added. “We can't defend bureaucratic intransigence at the expense of our home-buying public.”

ALTA has joined 17 other industry groups urging federal regulators to provide formal guidance on how regulators plan to enforce TRID for the initial months following implementation on Oct. 3.

The letter asks the Federal Financial Institutions Examination Council (FFIEC) “to implement a clearly articulated transition period that addresses how regulators will oversee and examine regulated institutions for TRID compliance during this transition period.”

Without clear guidance, it’s expected access to mortgage credit will be constrained due to fear of enforcement actions for errors committed in good faith. The Consumer Financial Protection Bureau has said it will be sensitive to those making good-faith efforts to comply.

“Transitioning to the new TRID regulatory framework is a sea change for every participant in the mortgage lending,” the letter stated. “Industry stakeholders have undertaken extensive efforts to comply with these rules, but, even now, they are discovering significant compliance issues. These discoveries raise liability concerns that cannot be realistically resolved before the October 3 deadline, as many will require formal authoritative guidance.”

The letter also asked the FFIEC to recognize the severe penalties that can arise under these new rules. Because of this, the groups asked that the FFIEC announce guidelines that would provide institutions making a good-faith effort to comply relief from enforcement for a reasonable period following Oct. 3.

Joining ALTA on the letter were American Bankers Association, American Escrow Association, The Appraisal Firm Coalition, Appraisal Institute, Collateral Risk Network, Consumer Bankers Association, Community Home Lenders Association, Consumer Mortgage Coalition, Community Mortgage Lenders, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Home Builders, National Association of Mortgage Brokers, National Association of Realtors and Real Estate Services Providers Council.

The Title Action Network has asked members to take action and urge their representatives to co-sponsor and vote yes on H.R. 3192.

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.

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 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. However, it is important to note that this presentation does not represent legal interpretation, guidance or advice of the bureau, and should not be used as a substitute for the rule. Only the rule and its Official Interpretations can provide complete and definitive information regarding requirements.