March 15, 2016
NEW TITLE FEE
The Texas Title Insurance Guaranty Association (TTIGA) recently announced a new Guaranty Fee of $3 for every title policy issued in Texas, effective April 1, 2016. This fee will create a guaranty fund to pay title claims of failed title companies. Credit Unions should begin disclosing $6 ($3 for Loan Policy + $3 for Owner’s Policy) on their Loan Estimates. This new fee should be called “Title – Guaranty Fee.” Read more about this new fee here:
TRID WEBINAR RECAP
The first five months of TRID implementation have been challenging. Credit Unions want to do the right thing; they want to properly implement TRID because they understand that TRID violations can be expensive, time-consuming and embarrassing. Slowly but surely, Credit Unions and other Lenders are getting some clarity regarding TRID violations and possible cures for those violations.
Last week, the Mortgage Bankers Association (MBA) conducted a nationwide interactive seminar (“TRID Cures, Corrections and Construction Update”) for interested parties and our firm participated. The full presentation should be available shortly at www.mbaa.org. Some of the highlights of the presentation include:
- Cures for TRID violations
- The final Closing Disclosure (CD) may be used to correct non-tolerance errors on the Loan Estimate (LE). It will be the Final CD that will be scrutinized by regulators/auditors to identify TRID violations.
- If a Lender discovers a TRID error, they will be able to cure the error by notifying the borrower and correcting the mistake.
- Formatting errors on the LE and CD will not constitute violations unless the error misleads the consumer/borrower.
- Fannie Mae Seller/Servicer Guide Update
- In February, 2016, Fannie Mae updated their Seller/Servicer Guide to require Lenders to self-report errors identified in their file review process within 30 days of discovery
- Common TRID errors found on Loan Estimates and Closing Disclosures
- Seller-paid fees are not being disclosed by some lenders on the CD. The TRID rule does allow lenders to omit the Seller’s Summary of Transaction table from the CD but lenders must disclose seller-paid fees in Section A through H of the CD (e.g. Real Estate Commission, Warranty Deed preparation fee, Home Warranty, etc.).
- The LE and CD should not have the same date.
- Each of the title charges listed on the CD should have the “Title – “ designation.
- The Contact Information table on the CD is incomplete.
- The Lender switches from the standard Cash to Close table on the LE to the Alternative Cash to Close table on the CD.
- Some Lenders are failing to disclose all known fees on the LE.
- Settlement Agent and GF # information is missing on the CD.
- Simultaneous Issue rates are disclosed incorrectly on both the LE and CD.
- Optional insurance products are missing the “(optional)” designation when they are borrower-paid.
- The names for particular fees change from the LE to the CD, which is not allowed.
- Other Thoughts/Suggestions for Lenders
- Lenders should time-stamp their CDs. If a Lender issues multiple CDs in the same day, time-stamping will let the Lender know which CD is the final CD.
- There is no known correction for a timing error (e.g. not delivering LE within 3 business days of Application, not delivering preliminary CD 3 business days prior to closing)
- The CFPB will need to address this obvious problem; Lenders must have some remedy for this mistake because it is likely to happen no matter how careful and systematic a Lender may be.
- Some Title Companies will disagree on how to disclose certain fees on the CD
- One very common mistake we see title companies make is charging the Owner’s Title Policy Premium to the Buyer, even though the Seller is contractually obligated to pay for the Owner’s Title Policy. Some title companies will insist the Lender change their CD to match what they are doing.
- Remember, the CD is the Lender’s responsibility and the Lender has the liability for CD.
- Do not change how you disclose fees on your CD to appease a stubborn title agent.
- We are always happy to communicate with the title company and provide them with the regulatory support for our opinions.
- Texas Settlement Agents (usually, the title companies) are not providing the Seller’s CD. Instead, Settlement Agents are just preparing Texas Disclosure or HUD-1. Lenders should have a plan in place when the Title Company refuses to provide the Seller’s Closing Disclosure required by the CFPB.
- If the Title Company will not prepare the proper Seller’s CD, the Lender should send the Title Company a letter that sets out the legal requirement that the CFPB Seller’s CD be prepared by the Settlement Agent.
- Our office will be glad to assist in preparing a letter to the Title Company if this situation should arise.
You can access this Law Letter, or any past Law Letters at http://bairdlaw.com/law-letters/
You can also stay up-to-date on webinars, conferences and other educational events on our Events site: http://bairdlaw.com/events/
Please contact us if you would like to discuss any of these issues.
242 W. Sunset, Ste. 201
San Antonio, TX 78209