To prove compliance with third-party oversight required by the Consumer Financial Protection Bureau (CFPB), several lenders have announced their requirements to prove implementation of ALTA’s “Title Insurance and Settlement Company Best Practices."
ALTA has compiled information it has received to help title and settlement agents understand the various lender expectations. If you are aware of other lender requirements regarding Best Practices, please share the information here on our blog. ALTA will update the list as it receives more information.
ALTA has developed several tools to help title professionals document Best Practice policies and procedures.
Several ALTA members have reported that lenders are unsure how to calculate the owner’s title insurance premium when issued simultaneously with a lender’s policy under the CFPB’s Know Before You Owe (TILA-RESPA Integrated Disclosures) rule.
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:
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).
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.
ALTA has pointed out that in the majority of states the cost of a homebuyer’s title insurance premiums will be inaccurate on the Closing Disclosure due to the CFPB’s mandatory calculation method when where the lender’s and owner’s title insurance policies are simultaneously issued. Many state regulators require settlement agents to disclose the actual costs for each fee the homebuyer is responsible for paying. ALTA developed model Settlement Statements to help settlement agents disclose the accurate costs to homebuyers.
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 will be inaccurate. In a seller-pay situation, the bureau indicated in a webinar 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:
The remaining credit could be applied to any other title insurance cost, including the lender’s title insurance cost. (See § 1026.38(f)&(g))
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))
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.
It is important to note that this information 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.
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. - See more at: http://blog.alta.org/page/2/#sthash.pTpnZLe8.dpuf
Question: I have a question about recording fees on the CD. It is my understanding that recording fees are required to be “rolled up” so to speak in line E 01 since the only two items that the regulations allow to be itemized are for the deed and mortgage and that we are not permitted to add lines for other recording fees (for example the recording fee for a municipal lien certificate or a discharge of mortgage or an assignment of mortgage). So for example, in the CFPB sample CD for a purchase transaction, if there are other recording fees other than for the deed and mortgage, those fees must be added to the box where the figure $85 is represented in the sample form.
Answer: This is a precise understanding of the rule’s requirements on disclosing recording fees. Specifically, the rule requires that all recording fees and other government fees and taxes, outside of transfer taxes, must be added together and labeled “Recording Fees and Other Taxes” under the subheading “Taxes and Other Government Fees.” § 1026.37(g)(1)(i). The bureau clearly states within the Official Interpretations of the rule that no lines can be added or deleted under the “Taxes and Other Government Fees” subheading. Official Interpretation 37(g)(1)-6.
The bureau has also specifically stated that you cannot use an addendum to itemize fees that are required to be disclosed under the “Taxes and Other Government Fees” subheading. § 1026.37(g)(8). If you are required by state law, or simply would like, to make additional disclosures for recording fees or other government fees or taxes, you may disclose those fees in a separate document, such as the ALTA Settlement Statement.
Have questions or issues about TRID that you need answered? Send an email to firstname.lastname@example.org. ALTA will address common questions/issues here on its blog.
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.
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.
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.
Several people have asked what document should be used as the settlement statement or Closing Disclosure for sellers for the Consumer Financial Protection Bureau's Know Before You Owe rule.
Because the Closing Disclosure includes non-public information about the buyer’s loan, such as interest the rate, there are concerns about how the rule affects privacy components of the Gramm-Leach-Bliley Act and ALTA’s Best Practices.
Under the rule, settlement agents must provide the seller with the Closing Disclosure reflecting the terms of the seller’s transaction. Due to privacy concerns, the bureau allows 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.
While some states have laws requiring the use of a promulgated form in cash transactions, in general the HUD-1, Closing Disclosure or any other settlement statement, including ALTA's model settlement statements, can be used in cash transactions.
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