14 posts categorized "Integrated Mortgage Disclosures"

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.

02/27/2014

What Document Should Be Used for Sellers After August 2015?

Several people have asked what document should be used as the settlement statement or Closing Disclosure for sellers after August 2015, when the CFPB’s final rule for integrated mortgage disclosures goes into effect.

Because the Closing Disclosure includes non-public information about the buyer’s loan, such as interest the rate, there have been concerns about how the final rule affects privacy components of the Gramm-Leach-Bliley Act and ALTA’s Best Practices.

When the rule goes into effect Aug. 1, 2015, sellers will also  receive a copy of the Closing Disclosure. Under the rule, settlement agents will provide the seller with the Closing Disclosure reflecting the terms of the seller’s transaction. Due to privacy concerns, the Bureau will allow settlement agents to provide buyers and sellers with separate versions of the Closing Disclosure only showing information relevant to their transaction. These seller and buyer specific forms would be completed in accordance with 12 CFR § 1026.38.

To help illustrate the point, the Bureau produced a sample of a seller only Closing Disclosure at appendix H-25(I), which can be found on page 1,545 of the final rule. As a side note, if the transaction is an all cash sale or a business or investment sale not subject to RESPA, then the buyer, seller and settlement agent are free to agree to their choice of forms or state mandated forms as required.

02/18/2014

When Does the Three-day Rule Start to Run?

According to the Consumer Financial Protection Bureau’s final rule for integrated mortgage disclosures, the borrower must RECEIVE their Closing Disclosure at least three business days prior to the date of consummation of the transaction. This means that if the closing is set for Thursday, the Closing Disclosure can be hand delivered on Monday. You could also deliver the disclosure by courier or other shipping or postal service so long as you get a signature from the borrower showing receipt on Monday. If a company does not use a service that provides evidence that the disclosure was received on Monday (ie: US Postal Service first class mail), then it must send the disclosure by the prior Thursday.

Some quick definitions can be helpful when understanding this rule. First, the starting point for determining when the three-day period starts is the day of consummation. Consummation is the day the consumer becomes contractually obligated on the loan (i.e., the day they sign the note). This is typically the same day as closing (12 C.F.R. §§ 1026.2(a)(13) & 1026.38(a)(3)(ii)). Once you have the right starting point then you need to count backwards. The three-day rule requires the counting of “business days,” which are “a day on which the creditor’s offices are open to the public for substantially all of its business functions.” (12 C.F.R. § 1026.2(a)(6)). It is not a 72-hour requirement, but rather a day requirement so you do not need to know the time that closing will take place.

Lastly, while the examples the CFPB provides in the rule all focus on physical delivery of the disclosure, electronic delivery is allowed in accordance with the E-SIGN or Uniform Electronic Transaction Act laws. The timing requirements are the same as for physical delivery and would require obtaining some evidence of receipt (i.e., an email confirmation, system log or other indicia) or complying with the mailbox rule for presuming receipt three days after placing the documents in the mail.

For more information about the integrated disclosures, go to www.alta.org/cfpb.

12/05/2013

May a Borrower Waive His/Her Right to View Closing Disclosure 3 Days Before the Loan Closes

According to the Consumer Financial Protection Bureau's final rule, the creditor must give the Closing Disclosure to the consumer at least three business days before the loan closes. As an example, if settlement is scheduled for Thursday then the consumer must receive the disclosures by Monday.

Generally, if changes occur between the time the Closing Disclosure form is given and the closing, the consumer must be provided a new form. When that happens, the consumer must be given three additional business days to review that form before closing.

The CFPB listened to ALTA concerns here and limited the instances that would require issuance of a new Closing Disclosure. Limiting the instances of delays in real estate transactions will help to ensure a positive experience for the consumer at the closing table.

Changes that require creditors to provide a new Closing Disclosure and an additional three-business-day waiting period after receipt include:

  • changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)
  • changes the loan product
  • addition of a prepayment penalty to the loan

In addition, consumers may waive their right to receive the Closing Disclosure three days prior to consummation only if they have a bona-fide personal financial emergency.

Bona-fide personal financial emergencies are extremely rare. Determining whether one exists is fact intensive. The only example provided by the Bureau is the imminent sale of the consumers home through foreclosure where the proceeds of the new mortgage can save the home from foreclosure.

Remember, follow our blog for more analysis of the CFPB's final rule for integrated mortgage disclosures.

 

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.

According to the regulations, the creditor must give the Closing Disclosure to the consumer at least three business days before the loan closes. As an example, if settlement is scheduled for Thursday then the consumer must receive the disclosures by Monday.

Generally, if changes occur between the time the Closing Disclosure form is given and the closing, the consumer must be provided a new form. When that happens, the consumer must be given three additional business days to review that form before closing.

The CFPB listened to ALTA concerns here as well and limited the instances that would require a new Closing Disclosure to be issued. Limiting the instances of delays in real estate transactions will help to ensure a positive experience for the consumer at the closing table, Korsmo said.

Changes that require creditors to provide a new Closing Disclosure and an additional three-business-day waiting period after receipt include:
  • changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)
  • changes the loan product
  • addition of a prepayment penalty to the loan
- See more at: http://www.alta.org/news/news.cfm?newsID=23207#sthash.UnetWyO6.dpuf

Do the CFPB's Integrated Mortgage Disclosures Apply to Cash Transactions?

While the Consumer Financial Protection Bureau’s new integrated mortgage disclosures, which the industry must start using Aug. 1, 2015, only apply to most consumer mortgages, we've received questions about whether the HUD-1 will remain applicable for cash transactions.

The CFPB's final rule combines the disclosures required under the Truth in Lending and Real Estate Settlement Procedures acts. Both of these laws apply only to mortgage or credit transactions. Federal law does not require the use of the HUD-1 or the new Closing Disclosure in all cash transactions.

While some states have laws requiring the use of a state promulgated form in cash transactions, in general the HUD-1, the Closing Disclosure or any other settlement statement can be used in cash transactions.

Additionally, the final rule for integated mortgage disclosures, does not apply to these transactions:

  • Commercial
  • Home-equity lines of credit
  • Reverse mortgages
  • Mortgages secured by a mobile home or dwelling not attached to land

Keep following ALTA's blog for answers to other questions about the CFPB's integrated mortgage disclosures. Please share this information your own social media outlets.

 

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.

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.

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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.

 

 

11/22/2013

Watch Recording of Webinar on CFPB's New Mortgage Disclosures

We had a huge turnout of 1,000 attendees for Thursday's webinar "A New Era in Closings," which addressed the Consumer Financial Protection Bureau's final rule for integrated mortgage diclosures. Since we exceeded our attendee limit, many could not attend the webinar. Below is a recording, so please share with others. We plan to hold many more webinars over the next year to help members implement the new disclosures and educate customers and consumers.

Participating on the call were:

  • Michelle Korsmo, ALTA
  • Steve Gottheim, ALTA
  • Ben Olson, BuckleySandler
  • Ruth Dillingham, First American Title Insurance Co.
  • Mary Schuster, op2 and RamQuest
  • Leslie Wyatt, SoftPro
The webinar touched on why the CFPB created new integrated mortgage disclosures, the goals of the CFPB's "Know Before You Owe Project," basics of the final rule, the forms, impact the rule will have on the industry and next steps. The panelists answered attendee questions for about 20 minutes and discussed who provides the Closing Disclosure to the consumer and role of the settlement agent, the three-day rule, the need for clear guidance and the use of the word "optional" to describe Owner's Title Insurance on the forms.

A new Loan estimate will replace the current Good Faith Estimate and early Truth-in-Lending (TIL) disclosure, while a new Closing Disclosure will replace the HUD-1 Settlement Statement and the final TIL disclosure. The new forms go into effect Aug. 1, 2015.

You can also download a copy of the presentation.


11/21/2013

Copy of presentation from webinar titled "A New Era in Closings"

We had more than 1,400 people register for today’s webinar "A New Era in Closings," which addressed the Consumer Financial Protection Bureau's final rule for integrated mortgage disclosures. Our provider, however, has a limit of 1,000 attendees. If you could not access the webinar, please know that is was recorded. After it’s edited, you will be able to watch the prese
ntation on our YouTube channel at www.youtube.com/altavideos or on our blog.

The webinar focused on top-level analysis of the final rule, which is 1,888 pages long. This was only the first of many educational opportunities we will provide about the integrated mortgage disclosures.

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11/20/2013

CFPB Provides Seven-page Summary of Mortgage Disclosure Rule

201311_cfpb_tila-respa_detailed-summary_Page_1If you don't have time to read all 1,888 pages of the Consumer Financial Protection Bureau's final rule for integrated mortgage disclosures, the Bureau has provided this great summary document, which addresses the scope of the rule, highlights the new Loan Estimate and Closing Disclosure, limits on closing cost increases and proposals not adopted in the final rule.

The CFPB listened to ALTA concerns and gave the industry plenty of time to implement the new forms as the final rule becomes effective Aug. 1, 2015.

You can download a PDF of the summary here.