Yes, we believe that you should include the owner’s title insurance premium on the Loan Estimate. Regulation Z requires the Loan Estimate to include the owner’s optional title insurance charges under “Other” (assuming 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.

The owner’s policy premium should be disclosed at the discounted amount. Even with a simultaneous issuance discount, Regulation Z requires the disclosure of the lender’s premium at the full, undiscounted rate, with the simultaneous issuance discount applied to the owner’s premium.

We are aware that some title insurance companies apply their simultaneous issuance discount to the owner’s policy, while others apply this discount to the lender’s policy. If the title company applies its discount to the owner’s policy, then both policy premiums should be disclosed as-is, with the lender’s policy premium reflecting the full amount, and the owner’s policy premium reflecting the simultaneous issuance discount. However, if the title company applies its discount to the lender’s policy, the disclosures still must state the premium for the lender’s policy at the full amount, with the owner’s policy premium reflecting the simultaneous issuance discount (in which case neither disclosure will reflect the actual premium amounts). In other words, either way, the lender’s premium should be disclosed at the full, undiscounted rate.

The CFPB explained in its final TRID rule why Regulation Z always requires the lender’s premium to be shown at the full, undiscounted rate, even if that is not always the case. These disclosures are intended to show the borrower the true cost of the lender’s policy, whether or not the borrower chooses to purchase an owner’s policy — avoiding the potential for sticker shock if the borrower chooses not to purchase an owner’s policy and loses the simultaneous discount. At the same time, the simultaneous issuance discount must be applied to the owner’s policy, which results in an accurate disclosure of the total cost of title insurance, even if the individual premium amounts are purposefully inaccurate. For this reason, the CFPB’s “Your Home Loan Toolkit” booklet explains to consumers that a title company’s list of fees “may be different from what you see on your Loan Estimate or Closing Disclosure.”

For resources related to our guidance, please see:

• 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.’”)

• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 37(f)(2), Comment 4 (“ . . .the creditor must quote the amount of the lender’s title insurance coverage pursuant to § 1026.37(f)(2) or (3) as applicable based on the type of lender’s title insurance policy required by its underwriting standards for that loan. The amount disclosed for the lender’s title insurance policy pursuant to § 1026.37(f)(2) or (3) is the amount of the premium without any adjustment that might be made for the simultaneous purchase of an owner’s title insurance policy.”)

• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 37(g)(4), Comment 2 (“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: (i) 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). (ii) 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.”)

• Final Rule, Integrated Mortgage Disclosures, 78 Fed. Reg. 79730, 89964 (December 31, 2013) (“To address these issues, proposed § 1026.37(g)(4) and its accompanying commentary would have required the calculation of owner’s title insurance and lender’s title insurance premiums to ensure that the lender’s title insurance premium would not increase if the consumer declined an owner’s title insurance premium. The calculation would have required that the lender’s title insurance premium be disclosed at its full rate, and the owner’s title insurance premium be disclosed as the difference between the owner’s title insurance premium plus any additional flat simultaneous issuance rate, and the disclosed lender’s title insurance premium. For approximately 25 States, this calculation methodology would result in disclosure of owner’s title insurance and lender’s title insurance premiums that would not be in accordance with the actual pricing; that is, the owner’s title insurance and lender’s title insurance premiums listed on the integrated disclosures always would be different than the actual rates charged. However, the calculation would result in providing every consumer in the United States with an accurate reflection of the incremental additional cost associated with obtaining an owner’s title insurance policy at consummation.”)

• CFPB, Your Home Loan Toolkit (Special Information Booklet), printed page 17 (“Depending on the state where you are buying your home, your title insurance company may give you an itemized list of fees at closing. This itemized list may be required under state law and may be different from what you see on your Loan Estimate or Closing Disclosure. That does not mean you are being charged more. If you add up all the title-related costs your title insurance company gives you, it should match the totals of all the title-related costs you see on your Loan Estimate or Closing Disclosure. When comparing costs for title insurance, make sure to compare the bottom line total.”)