TRID Q&A: Should Basic or Enhanced Rate be Quoted for Owner’s Policy?

Question: Does the TILA-RESPA Integrated (TRID) rule require that the lender disclose the basic rate for owner’s title insurance (as opposed to quoting the enhanced rate)?

Answer: As a general rule, you should disclose the basic rate for owner’s title insurance. In the Know Before You Owe rule’s Official Interpretation to § 1026.36(g)(4), it states, “The amount disclosed for an owner's title insurance premium pursuant to § 1026.37(g)(4) is based on a basic owner's policy rate, and not on an ‘enhanced’ title insurance policy premium.” However, “the creditor may instead disclose the premium for an ‘enhanced’ policy when the ‘enhanced’ title insurance policy is required by the real estate sales contract, if such requirement is known to the creditor when issuing the Loan Estimate.” Official Interpretation 37(g)(4)-1. The enhanced rate “should be disclosed as ‘Title—Owner's Title Policy (optional),’ or in any similar manner that includes the introductory description ‘Title - ’ at the beginning of the label for the item, the parenthetical description ‘(optional)’ at the end of the label, and clearly indicates the amount of the premium disclosed pursuant to § 1026.37(g)(4) is for the owner's title insurance coverage.” .” Official Interpretation 37(g)(4)-1.

Given the new definition of “application,” it is unlikely that the lender will have a copy of the sales contract available at the time the Loan Estimate is produced. Therefore, it is likely in most cases that lenders will need to disclose the cost of a basic owner’s policy. If the buyer later elects to purchase an enhanced policy rather than the basic policy, the lender can update the Loan Estimate and reset tolerances because the decision to purchase the enhanced policy would be a consumer requested change. See § 1026.19(e)(3)(iv)(C) and its accompanying Official Interpretation.

This aspect of the rule illustrates why it is so important for title agents to market directly to the consumer. The more consumers understand the value of owner’s title insurance and how it protects their property rights, the easier it will be to get them to purchase enhanced coverage. The tools in our new Homebuyer Guide are designed to help agents better connect with buyers and sell the value of an owner’s policy. You can find these tools at www.alta.org/homebuyer.