Fee Names on Loan Estimate and Closing Disclosure Must Match

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 Consumer Financial Protection Bureau wants consumers to be able to compare fee estimates with what’s actually charged at consummation, the TILA-RESPA Integrated Disclosures (TRID) rule requires fee terminology to be consistent between the two forms. This is a challenge because fees for services are not called the same thing across the country. Lenders and settlement agents need to communicate and come to an agreement on standardized fee names for the Loan Estimate and Closing Disclosure.

Examples of variances in naming include valuation services versus appraisal. Some states require a specific terminology for fees. As an example in Texas, the fee for termites must be called "wood destroying insect fee."

 Here’s the portion of the TRID rule addressing fee naming:

1. Consistent terminology and order of charges. On the Closing Disclosure the creditor must label the corresponding services and costs disclosed under § 1026.38(f) and (g) using terminology that describes each item, as applicable, and must use terminology or the prescribed label, as applicable, that is consistent with that used on the Loan Estimate to identify each corresponding item. In addition, § 1026.38(h)(4) requires the creditor to list the items disclosed under each subcategory of charges in a consistent order. If costs move between subheadings under § 1026.38(f)(2) and (f)(3), listing the costs in alphabetical order in each subheading category is considered to be in compliance with § 1026.38(h)(4). See comment 37(f)(5)-1 for guidance regarding the requirement to use terminology that describes the items to be disclosed.

Lenders and settlement agents have started attempting to determine standard fee names. Below is one lender’s example of what it uses for title fees on the disclosures:

1. Title - Closing/Settlement Fee
2. Title - Lender’s Title Insurance
3. Title – Title Exam/Search Fee
4. Title – Deed Preparation
5. Title – Closing Protection Letter
6. Title – Courier/Wire
7. Title – Tax Report
8. Title – Doc/Processing Fee

 

PAGE 2 of LOAN ESTIMATE              

                 

PAGE 2 of CLOSING DISCLOSURE                                  

Comments

[Cliff Johnson]

How is this not becoming an issue that is drawing more attention at the state level? I've seen many cases where due to the regulatory overlays, either the lender is forced to violate regulatory requirements or the title company is, based merely on the fee descriptions. The question then becomes which side is going to give in to just be able to close. The imparity is concerning and it just seems odd that this issue seems to not be a greater priority. It is holding up closings in some cases and putting reputable lenders and title companies at risk. I would also speculate that it may only get worse too as the GSEs look to enforce Uniform Closing Dataset delivery requirements later in 2016 and in to 2017.

[Pat Hall]

Should LE and CD fees of the borrower cannot shop totals match? Is there a compliance issue if the CD fees are less than the same name items on the LE? When the CD shows additional named fees that is not listed the LE, is this a compliance issue? For example, LE shows 5 named fees =$678 and the CD shows 9 named fees = $1789?

[Deborah Morrison]

The Settlement Agent's Settlement Statement is the point of truth for the Settlement Agent and that is where, if the descriptions vary, should clearly state and match up the CD descriptions with the State regulatory descriptions. That way there is no misunderstanding between the 'generic' CD description and the actual title description.