The short answer is that it depends on the lender. So, settlement agents should read their closing instructions carefully. Generally, when a disclosure becomes inaccurate within three days before consummation and a new three day period is not required, TRID requires the lender to correct the disclosure and ensure the consumers receives the disclosure at or before closing. 12 CFR 1026.19(f)(2)(i).
Each lender will have different requirements for how they will want to correct disclosures, the timing for sending them to consumers and the documentation they will require for compliance purposes.
It is a safe bet that if the lender requires some documentation of receipt for the original Closing Disclosure, they will likely require the same protocol for corrected disclosures.
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.
If you’re looking for last minute tips to help get your operation ready for the Oct. 3 implementation of TRID, check out a recording of ALTA’s Title Topics webinar for advice from lenders, title/settlement agents and technology experts. The webinar also addresses what your real estate partners and consumers should know about the new closing process.
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.
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.
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.”
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:
Make the documents available electronically, with the ability to sign some in advance
Provide clear communication and updates on the process
Properly explain documents and fees early in the process
Complete documents accurately and on time
More follow up and involvement from the title agent is needed
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.
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.
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.
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.
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.
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.
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.
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.
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.