IBA Compliance Connection

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We do not require borrowers to purchase owner’s title insurance. On our Loan Estimates, we disclose the owner’s title insurance premium under the heading for “Other.” Because this is paid by the seller, we also list it as a “Seller Credit” in the “Calculating Cash to Close” section. However, on the borrower’s Closing Disclosure, we do not include the owner’s title insurance premium; we include it only when providing a separate Closing Disclosure to the seller. Is that correct?

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We believe that you should include the owner’s title insurance premium on the borrower’s Closing Disclosure. Regulation Z requires the Closing Disclosure to include optional title insurance charges, even if they are paid by the seller, under “Other,” in the “Seller-Paid” column.

We believe that your bank is correctly disclosing the owner’s title insurance premium on the Loan Estimate. Regulation Z requires the Loan Estimate to include the owner’s title insurance charges under “Other” (provided — as you indicated — that your bank does not require the borrower to purchase owner’s title insurance). It also is appropriate to list the owner’s title insurance premium as a seller credit on the Loan Estimate.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.38(g)(4), Closing Disclosure (“Under the subheading ‘Other’ and in the applicable column as described in paragraph (g) of this section, an itemization of each amount for charges in connection with the transaction . . . . (i) For any cost that is a component of title insurance services, the introductory description ‘Title —’ shall appear at the beginning of the label for that actual cost.”)
  • Regulation Z, 12 CFR 1026.38(g), Closing Disclosure (“Other” closing costs must be disclosed “with columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others . . . .”)
  • Regulation Z, 12 CFR 1026.37(g)(4), Loan Estimate (“Under the subheading ‘Other,’ an itemization of any other amounts in connection with the transaction that the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts. (i) For any item that is a component of title insurance, the introductory description ‘Title —’ shall appear at the beginning of the label for that item.”)
  • Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 37(f)(2), Comment 4 (“Section 1026.37(f)(2) and (3) requires disclosure of the amount the consumer will pay for the lender’s title insurance policy. However, an owner’s title insurance policy that covers the consumer and is not required to be purchased by the creditor is only disclosed pursuant to § 1026.37(g).”)
  • Regulation Z, 12 CFR 1026.37(h)(1)(vi), Loan Estimate (“The total amount that the seller will pay for total loan costs as determined by paragraph (f)(4) of this section and total other costs as determined by paragraph (g)(5) of this section, to the extent known, disclosed as a negative number, labeled ‘Seller Credits.’”)