46 posts categorized "Integrated Mortgage Disclosures"


ALTA TRID Townhall Provides Answers to Industry Questions

More than 500 title professionals, lenders and real estate agents attended ALTA’s first-ever Facebook TRID Townhall to hear what companies should be doing now to be prepared for implementation of the integrated disclosures. The CFPB’s TILA-RESPA Integrated Disclosures (TRID) rule goes into effect Oct. 3 for most consumer mortgages.

Participants in the townhall included:

  • 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.
  • Michelle Korsmo, ALTA chief executive officer


 Here’s a recap of many of the questions that were answered during the hour-long townhall:

How should companies best prepare to disclose title insurance premiums in states with simultaneous issue rates?

Through regulation or rate filing, title companies in about half the states offer discounts on the loan policy when an owner’s policy is simultaneously purchased. Despite the common practice, the CFPB’s TRID rule prohibits settlement agents or lenders from disclosing the discounted simultaneous issue price for the lender’s title insurance policy on the Loan Estimate and Closing Disclosure forms.

To address the problem, Burding said ALTA created model Settlement Statements.

“Hopefully, someday, this issue can be fixed on the Closing Disclosure, but for now, ALTA’s Settlement Statement will be an addendum to agreements and make corrections so the consumer knows exactly what discounts they will receive,” Burding said.

How are you providing fees to lenders?

It’s important for the fees that lenders disclose on the Loan Estimate to be as accurate as possible to the fees disclosed on the Closing Disclosure. This makes it important for title professionals to provide accurate fee estimates.

Evans pointed out that the rule says companies should make a good effort to provide the best information available.

“We will give lenders the best information that we possibly can give them,” Burding said. “When the actual documentation comes in regarding the specific transaction, fees will be modified. The best we can do is provide the full amount for lender’s and owner’s title policies and all the fees we would include in a typical closing.”

For title fees, Mennenoh said it’s best to provide lenders with the full costs of polices that the rule requires to be disclosed and then also provide the correct information, which shows what the discount will be when policies are issued simultaneously. “You need to provide the calculation for them,” he added.

There are three main models for sharing data needed for the integrated disclosures. The first is the traditional method in which orders are transmitted via phone, fax, email or delivered in person. The other two main methods are through a third-party online portal or integration with the lender origination software (LOS) and title production system (TPS). Several technology vendors have developed solutions to share and combine loan-centric information stored in lenders’ loan origination systems and property-centric data found in title/settlement agents’ systems.

Additionally, Burding pointed out that title companies must make sure they quote fees for the appropriate underwriter that will issue the policy.

How should we work with lenders to standardize fee names?

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 CFPB wants consumers to be able to compare fee estimates with what’s actually charged at consummation, the rule requires fee terminology to be consistent between the two forms.

Evans said title professionals need to have conversations with their lenders and agree on common fee naming. It’s also important for companies to ensure their software recognizes the fee names and can populate the disclosures appropriately.

Burding said that in western states, the nomenclature of the information will be different.

“You may be used to the term escrow fee but may now see settlement fee. Closing is consummation. Buyer is borrower,” he said. “There are other terms, so you need to train your staff about the new nomenclature under TRID.”

Who sets expectations for how the Closing Disclosure is prepared?

All the panelists agreed that it’s the lenders’ role to determine which entity will produce and deliver the Closing Disclosure.

“The lender is driving the bus,” Evans said.

Burding said it’s important to communicate with lenders to understand how each one will handle the Closing Disclosure.

“Each lender will be slightly different,” he said. “We have lenders that will control every aspect to those who are not prepared and need us to help them through. Talk with your lending partners—including Realtors—is vital during this period to determine expectations.”

What are lenders’ plans to comply with the three-day rule?

The rule requires that the borrower receive the Closing Disclosure at least three days before consummation. Mennenoh said that he’s heard that some local lenders will require the borrowers to physically come into the bank to pick up the Closing Disclosure. Others will use the mailbox rule and send via regular mail while others will overnight the form.

“And then we have some lenders that are not sure their software will be ready and will want us to deliver the Closing Disclosure,” Mennenoh said. “So it’s all over the board.”

Mennenoh said title professionals may need to provide lenders the needed information for the Closing Disclosure a minimum seven days in order to meet the mail box rule, but that this can vary by lender. The mailbox rule assumes the consumer received the Closing Disclosure three days after it was mailed.

How do we provide proof of delivery of the Closing Disclosure?

This will vary from lender to lender, according to the panelists, but could range from sending electronically to hand delivering the documents to the consumer.

“I think an electronic receipt is probably the best way,” Burding said. He pointed out, however, that if email with electronic receipt is used and the consumer fails to click the received box, then the mailbox rule goes into effect. “Checking the box is critical,” he added.

Also, if the Closing Disclosure is sent via FedEx and the package is delivered without obtaining a signature, Burding said the three-day delivery requirement would default back to the mailbox rule.

“It’s not going to surprise me—at least at the outset—to see redundant delivery where the Closing Disclosure will be mailed and sent electronically,” Burding said.

Korsmo said title companies should consider keeping a log of when and how the Closing Disclosure was delivered.

“We need to recognize that the lender is driving the bus and look to the instruction they give us,” Evans said. “Whether it’s in the closing instructions early on or if it’s through the collaboration as to what the process will be.”

Can fees be aggregated together on the Loan Estimate and then itemized on the Closing Disclosure?

Burding said that fees can be lumped together, but that state law dictates fees must be broken out on the Closing Disclosure. Evans added that some states have bundled rate filing and that title professionals must use the rates “appropriate and filed in their state.”

It should be noted that if the number of fees exceed the number of available lines, the TRID rule provides flexibility for cost buckets to expand and contract as needed. It also allows for the use of additional pages to ensure all itemized cost items are disclosed. See 1026.38(t)(5)(iv). One of the underlying principles around TRID is the forms are meant to be dynamic and flexible to fit the specific transaction. In the instance where one cost bucket will exceed the default number of lines, lenders can delete unused lines from other sections and add those extra lines to the section needing more space. If after borrowing lines form other sections, there is still the need for more line items, the rule allows the lender to split the closing cost details into two pages, a “loan costs” page and an “other costs” page.

What are the most important questions I should ask lenders?

  • How do you want data? Delivered through a portal, by email, walking across the street?
  • If the settlement agent is preparing the Closing Disclosure, how will you get information from the lender?
  • How do you plan to deliver the Closing Disclosure to the consumer?
  • How soon do you need information for the Closing Disclosure in order to meet the three-day delivery requirements?
  • What is your process to send the completed Closing Disclosure to the closing/escrow company for approval before delivery to the consumer?
  • How will changes be made to the Closing Disclosure after its provided to the borrower?

What should I be talking about with real estate agents?

Mennenoh said the key message to real estate agents is that there’s a much different timeline to comply with TRID. Once contracts are signed, he said Realtors “need to share that information with us as quickly as possible.”

Evans said that it’s important for Realtors to build longer timeframes into contracts and set the stage early on with their clients.

“When a Realtor is listing a property and then walking the seller through the transaction, they need to understand that after Oct. 3 things change dramatically,” Evans said. “We are finding that many states are taking a look at whether real estate contracts need to be modified to make sure there isn’t increased liability for the buyer if their loan gets delayed and they can’t close by the contract date.”

Burding advised that real estate agents build extra time into their contracts. As opposed to setting a 30-day escrow requirement, he recommends having a “do not exceed 60-day escrow.”

“You will see expanded rate locks and transactions taking longer,” he added. “Build extra time into the transaction. Because if you don’t, you could have contracts expire and rate locks expire, which could have a detrimental impact on the closing. Realtors that understand this will be the ones setting the expectation level with the consumer. If you put in a 30-day escrow and it takes 35 days, then it turns into a negative escrow. But if you put in not to exceed 60 days and you close in 35 days, you are a hero.”

What are some tips when communicating with real estate agents?

Burding said real estate agents will want to do walkthroughs with their customers earlier in the process and may want to consider doing two walkthroughs.

 “The walkthrough is going to have a measurable effect on what the final Closing Disclosure will look like,” Burding said. “This will be a change in how Realtors do business, but being able to do the walkthrough earlier will make transaction much more easier when it gets down to the signing.

“A second walkthrough will change what the Realtor is used to doing and adds more to the Realtor’s plate, but if you’re not looking at this as an opportunity to grow your business, you are looking at it incorrectly. Real estate agents that do an initial walkthrough and then do a secondary walkthrough are going to be the ones who grow their business because they close on time,” Burding added.

What happens if a transaction does not close due a lender delay and a rate lock expires? Is the lender obligated to extend?

Burding said lenders are not obligated to extend, so it’s important to talk with the lender early on to determine the rate lock. If that’s an issue, it’s important to inform the consumer. Burding said the seller is not obligated to extend the contract because the buyer’s rate lock expired.

“Over time, this runway will get shorter,” Burding said. “Once everyone gets the hang of this, the time for the closing will get better over time. But we are in a one or two quarter learning process. As we get into next year’s buying season, many issues will be resolved and systems will be standardized.”

What should you do if a lending client does not use the required TRID forms?

Evans said title companies should establish policies on how to handle these situations.

“This is a discussion you need to have internally because this is an issue that will come up,” she said.

Burding said his company will not handle transactions where the lender is using incorrect forms because “I have no desire to be a defendant. This comes down to educating the lender about liability for not using the required forms.”

Will there be a line item for the Closing Protection Letter charge as well as the lender and owner policy charges?

In states where it’s a requirement, the CPL must be disclosed according to Mennenoh. State rule dictates whether fees must be itemized or aggregated.

How should settlement provider get the settlement statement to the consumer to clarify cost of title insurance premiums?

The goal of the new forms is to allow consumers to compare fees with what they were quoted to what they are actually paying at closing. Korsmo said this is a great opportunity for settlement providers to engage the consumer and explain the important role that’s provided.

“This is a great touch point to talk to the consumer earlier in the process,” Korsmo said.

If the settlement agent prepares and delivers the Closing Disclosure to the consumer, are they subject to the fines and penalties for non compliance?

 Burding said that more than likely settlement agents would be liable to meet the rule’s requirements. Korsmo said that this is why it’s important for settlement agents to read the lender’s closing instructions. Evans added that a few of her company’s lending clients have provided a list of process changes and expectations of the title company.

“This has been helpful because we can understand what their expectations will be of us,” Evans said.

What is ALTA doing to help the industry explain the use of “optional” to describe owner’s title insurance?

ALTA is developing a robust homebuyer outreach program to give members tools and specific language to describe and explain the benefits of owner’s title insurance. It’s important to communicate with consumers earlier in the process to explain the benefits, avoid using industry jargon and be specific about the benefits they receive. Title professionals should also refer consumers to ALTA’s consumer website, www.homeclosing101.org.

Evans added that it’s important for title companies to train staff on how to explain the importance of title insurance.

What tips do you have for quoting transactions?

There are many options for providing fee quotes, including rate calculators and rate cards. Lenders and consumers should be able to easily understand the information. Burding said companies should remember to update fees if a common platform to is used to provide quotes.

“One of the problems which common platforms is that companies will add information, but then let it go stale,” he said. “That’s a huge problem.”

If the lender allows the consumer to shop for a service, they must provide a written provider list. What tips do you have for a title agent to get on this list?

Communication with lenders is important here as well. Providing accurate and clear information about fees and how you will exchange data will give lenders confidence in using a particular company, according to Mennenoh. One of the goals of TRID is to promote consumer shopping. However, many of the requirements, such as tolerances and the shopping-list concept, may create hindrances to shopping or require settlement agents to market themselves differently. After 2010, many agents wanted to be on the lender’s shopping list because it was crucial to getting business, but, under TRID, it may be advantageous to be off the list. Korsmo said this is another opportunity to communicate with lenders and determine what it means to be on the list or not.

Company Develops TRID Videos for Consumer Marketing

Video content service Fast Forward Stories has developed a collection of 26 brandable videos to help companies explain the CFPB’s TILA-RESPA Integrated Disclosures (TRID).

Confusion and questions surrounding the new TRID rules, effective on Oct. 3, create a marketing opportunity for businesses providing content that explains the new rules and related changes.

The Fast Forward Stories TRID library illustrates and clarifies key TRID concepts visually, using short animated videos branded for subscribing businesses. One of the new videos, for example, clarifies the differing definitions of "business day" used for TRID Loan Estimates versus Closing Disclosures.

"Today's consumers, especially millennials, prefer video and other visual explanations to dense text, particularly for complex subjects like the new TRID rules," said Matthew Dunn, CEO of Fast Forward Stories. "Explaining concepts in concise video is proven highly effective, and answering consumer questions using video, on any device, is content marketing at its best."

Besides the 26 new TRID videos, Fast Forward Stories offers 125 more covering a broad range of mortgage, title and real estate topics. Subscribing businesses can brand their own library, ranging from 26-151 videos. Embedding and delivery are included for use across web, mobile, email and social media channels. Advanced marketing features include lead capture, view metrics and co-branding options for business partners, built on a state-of-the-art online video distribution system. All of the videos are captioned in English and Spanish, providing ADA-compliant content for marketing and consumer education.


ALTA to Host TRID Townhall on Facebook

TRIDTownhall 2

ALTA will host a TRID Townhall on its Facebook page beginning at 11 a.m. ET on Tuesday, July 28, to share what industry participants should be doing now to prepare for the implementation of the TILA-RESPA Integrated Disclosures rule.

Participating in the live event will be:

  • 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.

During the townhall, the participants will offer advice on what TRID readiness looks like, how ALTA members can keep employees energized for implementation and the small details that may fall through the cracks leading up to Oct. 3.

The TRID Townhall will be livestreamed exclusively on ALTA’s Facebook page. To attend, simply “like” ALTA on Facebook. Also, make sure you "join the event" on ALTA's Facebook page so you receive a reminder to attend the townhall.

If you have questions about the ALTA TRID Townhall, email Wayne Stanley, ALTA’s director of public affairs.

Following the conversation, the panel will answer questions live from Facebook and Twitter. Use the hashtag #ALTAtownhall to follow the conversation on Twitter and Facebook. 


Is Owner’s Title Insurance Subject 10 Percent Tolerance?

Is owner’s title insurance not required by the creditor subject to the 10 percent cumulative tolerance?

According to the CFPB, owner’s title insurance that is not required by the creditor is not subject to the 10 percent tolerance.  The CFPB said it is aware that the preamble to the final rule contains potentially conflicting language, but advises that the final rule text is what should be followed.

The 10 percent tolerance category includes recording fees and charges paid to unaffiliated third-party service providers when the consumer is permitted to shop for a settlement service provider, but chooses a provider from the creditor’s written list of providers (§ 1026.19(e)(3)(ii)).

Owner’s title insurance is not a charge that is assigned to a particular tolerance category.  Therefore, the applicable tolerance category depends on other factors, including whether the creditor requires the insurance and, if so, whether the consumer may shop for the provider of the insurance.

To the extent owner’s title insurance is not required by the creditor and is disclosed as an optional service, under the rule the insurance is not subject to any percentage tolerance limitation, even if paid to an affiliate of the creditor.


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.


ALTA Survey Finds 92% of Title Professionals will be Ready for TRID Implementation

The overwhelming majority of title professionals will be prepared for the Aug. 1, 2015, implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures (TRID) rule, according to a survey conducted by ALTA.

The survey showed that 92 percent of respondents indicated that their companies will be prepared to handle the new forms and comply with the regulation. The survey polled more than 500 title professionals, including title agents, underwriters, attorneys and abstracters.



While most title professionals will be prepared for implementation, 87 percent believe TRID will delay closings or result in closings taking longer to complete. Only 5 percent believe the disclosures won’t affect closings, while 8 percent are unsure. The top reasons given as to why closing delays will occur include:

  • 3-Day Delivery Rule
  • Changes at the closing table
  • Walk-through issues
  • Issues with small lender/credit union readiness
  • Lender/Realtor Communication issues


According to one person who took the survey, “lenders I've spoke with seem to have a timeline already in place for when the order comes in. The three-day rule cuts down a lot of the time lenders have to work on things. With the way business has always been conducted in this industry, a dramatic change like this will not happen overnight. There are too many hands in the cookie jar to make this go smoothly and to complete the assigned tasks on time.”

Some who took the survey believe the new regulations will cause transactions to take up to 60 days to close. Others believe the new forms will tack on an additional two or three weeks to the closing process. One person pointed out how this will impact REO sales and the strict closing deadlines. “The three-day rule will lengthen the lender's process, most likely delaying the closing from the seller's close-by date. This means the agents will need to get an addendum to extend the closing date, which takes additional time to get the seller's approval and signature. This could potentially become a vicious circle of delays,” the respondent said.



According to the survey, more than two thirds believe the TILA-RESPA forms will not help the CFPB meet its objective of helping consumers understand or be better prepared to understand the costs of buying a home. Meanwhile, only 15 percent believe TRID will help consumers better understand their transaction.

Some do believe the new Closing Disclosure will help consumers understand the costs associated with purchasing a home. According to one person, “The contents of the Closing Disclosure Form is great and I love the first page details. However, I believe the average consumer will choose to ignore the remainder. It is all about how much is my payment and how much do I bring to closing. Beyond that, most simply do not care.”

However, others said that while the forms may display fees in a more readable fashion, consumers will still want and need to read it and understand it.

“While the new forms are generally understandable, there will be confusion about the title premiums, just as one example. We will probably need to use a simple closing statement to help the borrower and seller understand,” according to one person who took the survey. (Read ALTA Board Approves Model Settlement Statements)



In order to prepare for the new forms and rules, 43 percent of those polled will devote at least 26 hours to training staff. Another 33 percent will spend at least 11 to 25 hours training staff to handle the disclosures.



More than half of those surveyed reported they have either viewed a test version of their software to produce the Closing Disclosure or that a demo has been scheduled. However, 39 percent indicated they have not viewed a demo of updated software and that nothing has been scheduled.



Collaborating with lenders to exchange data and meet production and delivery requirements of the three-day rule is the top concern of those who took the survey. 



Because there are many unknowns with how the disclosures will work in actual transactions, ALTA has asked that the CFPB follow a “hold harmless” period of restrained enforcement and liability through the end of 2015 following the Aug. 1 implementation of TRID. 



Requirements for Delivery of the Closing Disclosure

For loans that require a Loan Estimate, which include most closed-end mortgage loans secured by real property) and that proceed to closing, creditors must provide a new Closing Disclosure reflecting the actual terms of the transaction.

The creditor is required to provide the consumer Closing Disclosure at least three business days before consummation. The CFPB says that “business day” for purposes of the Closing Disclosure is the rescission-based business day definition, and means all calendar days except Sundays and legal public holidays.

According to the CFPB, creditors may estimate fees using the best information reasonably available when the actual cost is not available at the time the Closing Disclosure must be delivered.

“However, creditors must act in good faith and use due diligence in obtaining the information,” the CFPB states in its examination procedure manual. “The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent.”

A corrected Closing Disclosure containing the actual terms of the transaction must be provided at or before consummation. If the creditor provides a corrected disclosure, it must provide the consumer with an additional three-business-day waiting period prior to consummation if:

  • the annual percentage rate changes 1/8 of a percent
  • the loan product changes
  • a prepayment penalty is added to the transaction

The creditor is responsible for ensuring that the Closing Disclosure meets the content, delivery and timing requirements. If the Closing Disclosure is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail.

If the creditor mails the disclosure six business days prior to consummation, it can assume that it was received three business days after sending, and therefore three business days prior to consummation, according to the CFPB. Creditors may contract with settlement agents to provide the Closing Disclosure to consumers, provided the settlement agent complies with all relevant requirements.

The rule does not indicate that any specific proof is needed to show the Closing Disclosure was placed in the mail. Similar to contract law, if the sender places the Closing Disclosure in the mail, has it addressed to the consumer properly and has proper postage, it is assumed to be received by the consumer three business days later. The sender could always mail the Closing Disclosure certified or require a signature upon receipt if they wanted to have proof it was delivered properly, but that is not required by the rule. This highlights the importance of having documented policies and procedures. Title production systems should be able to create records of when the Closing Disclosure was generated. Having policies showing when a company places documents in the mail can go a long way to showing a strong pattern of compliance. Also, some postal services allow customers to generate postage (instead of stamps) and create a log of each envelope that is post marked.

Creditors and settlement agents also may agree to divide responsibility with regard to completing the Closing Disclosure, with the settlement agent assuming responsibility to complete some or all the Closing Disclosure. In these situations, the creditor must maintain communication with the settlement agent to ensure that the Closing Disclosure and its delivery satisfy regulatory requirements, The creditor is legally responsible for any errors or defects.

In transactions involving a seller, the settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction no later than the day of consummation.  

Multiple consumers

In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation. In rescindable transactions, the creditor must provide the Closing Disclosure separately and meet the timing requirements for each consumer who has the right to rescind under TILA.

The consumer may waive the three-day period if there is 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.


Tolerances with the TILA-RESPA Integrated Disclosures

Similar to existing law, the Consumer Financial Protection Bureau’s final TILA-RESPA rule restricts the circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.

Generally, good faith requires the closing cost estimate on the initial Loan Estimate to equal the final amount charged on the Closing Disclosure. Here's a look at which fees can and can't change:


In today’s current practices, many providers add a cushion for costs on the HUD-1 to account for items that can vary between the signing and when the transaction is settled after recording, such as recording fees, pro-rations and prepaid interest. The overage is then refunded after the final disbursements are made. Under the new rule, lenders and settlement agents must make more rigorous good-faith efforts to provide estimates that are more accurate. However, the delay between consummation and settlement in escrow states is likely to increase the need for post-closing corrected disclosures.

If the Closing Disclosure becomes inaccurate before consummation, the creditor shall send corrected disclosures so that the consumer received the corrected version at or before consummation. The changes are still subject to good faith requirements. Once the initial Closing Disclosure is issued, all changes should be made with an updated Closing Disclosure. The creditor may not provide a revised Loan Estimate on or after the date the creditor provides the consumer with the Closing Disclosure.

Under the new rule, if a lender allows a consumer to shop for a settlement service, the lender will be required to provide the consumer with a written list identifying available providers of that service and clearly stating that the consumer may choose a different provider for that service. The CFPB has provided a blank model form for the written list of settlement service providers, a sample of written list of providers consumers can shop for and a sample of written list of providers consumers cannot shop for.

What About Title Insurance?

According to the CFPB, owner’s title insurance that is not required by the creditor is not subject to the 10 percent variance. The CFPB said it is aware that the preamble to the final rule contains potentially conflicting language, but advises that the final rule text is what should be followed.

The 10 percent variance category includes recording fees and charges paid to unaffiliated third-party service providers when the consumer is permitted to shop for a settlement service provider, but chooses a provider from the creditor’s written list of providers (§ 1026.19(e)(3)(ii)).

Owner’s title insurance is not a charge that is assigned to a particular variance category. Therefore, the applicable variance category depends on other factors, including whether the creditor requires the insurance and, if so, whether the consumer may shop for the provider of the insurance.

To the extent owner’s title insurance is not required by the creditor and is disclosed as an optional service, under the rule the insurance is not subject to any percentage variation limitation, even if paid to an affiliate of the creditor.


Home Equity Loans Excluded from Integrated Disclosure Rule

The Consumer Financial Protection Bureau’s final rule for integrated mortgage disclosures applies to most closed-end consumer mortgages secured by real property.

However, the rule does not apply to home equity lines of credit (HELOCs), reverse mortgages or chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property.

Conversely, certain types of loans that are currently subject to the Truth-in-Lending Act but not the Real Estate Settlement Procedures Act are subject to the rule’s requirements. Such loans include construction-only loans, loans secured by vacant land or by 25 or more acres and credit extended to certain trusts for tax or estate planning purposes.

Meanwhile, various disclosures may be used for cash transactions. TILA and RESPA only apply 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 for these deals.


Get Familiar with the Other Three Day Rule Related to Appraisals

A lot has been written (including by us) about the RESPA-TILA rules new three-day requirement and its potential to cause pauses and delays in the closing process. However, there is another new federally required three-day rule that settlement and real estate agents should be aware of that could make it even more difficult for you to meet your customers closing expectations.

On Jan. 18, 2014, industry implemented the Consumer Financial Protection Bureau's (CFPB) new rules for appraisals, including new requirements for consumers to receive copies of their appraisal. This rule was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and amended the Equal Credit Opportunity Act (ECOA).

Under the Appraisal Rule, creditors (aka lenders) must provide borrowers with a copy of any and all appraisals and other written valuations developed in connection with a mortgage or deed of trust. These copies must be provided to the borrower promptly upon the earlier of their completion, or three business days prior to consummation. Here in lies the rub.

Generally, an appraisal report includes comments and other scoring based on the condition of the real property and any improvements. It is also common for real estate agents and buyers and sellers to conduct a walk through of the property the day of settlement. If that walk through shows any changes to the condition of either the interior or exterior of the property, it may trigger the need for the appraiser to review the change and comment on those changes in an update appraisal report. This could trigger a new three-day waiting period under the Appraisal Rule.

Now, there is some good news. Unlike the RESPA-TILA three-day rule, the Appraisal Rule does include a waiver provision. This means that the borrower can waive this timing requirement and agree to receive the updated copy at or before consummation. In the event that an applicant waives the timing requirement and the transaction is not consummated, the creditor must provide the copies no later than 30 days after the creditor determines that the transaction will not be consummated. However, the waiver must be received by the creditor at least three days prior to consummation. This means a creditor cannot obtain a waiver after-the-fact or even at the time of discovering the need for a new appraisal report at walk through.