Topic: CFPB TILA-RESPA Integrated Disclosure (TRID) Rule
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On the service provider list included with a Loan Estimate (LE), does each charge for title services need to be itemized (“lender policy,” “settlement fee,” “closing protection letter fee,” etc.), or can we simply list “Title Services”?
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We believe that each settlement service the consumer can shop for should be itemized on your service provider list. If a consumer is permitted to shop for a settlement service, Regulation Z requires you to provide a written list “identifying available providers of that settlement service” (with a disclosure stating that the consumer may choose…
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We extend loans in Missouri and Illinois, and we charge a document preparation fee. We believe that Missouri law requires us to refer to this fee as an “origination fee.” For consistency, can we call this fee an “origination fee” in Illinois?
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Any fees you charge must be disclosed clearly and conspicuously and agreed to by your customers. We believe that switching to an “origination fee” label has some potential to confuse customers, unless your disclosures otherwise make it clear that the fee is being charged for the service of preparing loan documents. As explained below, we…
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Can we disclose title fees under Section C (“Services You Can Shop For”) of the Loan Estimate (LE) if we do not disclose a corresponding service provider on our service provider list? Also, can we disclose title fees on the service provider list that are not disclosed on the LE? We only disclose one title company on our service provider list, and we do not include the amounts of the title fees.
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No, we do not believe you may disclose settlement services (and their related fees) under Section C of the LE if you do not disclose at least one corresponding service provider on your written list of settlement service providers. Also, you are not required to disclose estimated fees on your service provider list, and you…
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Are we required to send the borrower a revised Closing Disclosure (CD) post-consummation if only the seller’s fees are being updated? After closings, we often receive a title company’s settlement statement reflecting changes to the seller’s fees such as additional title charges or attorney’s fees.
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No, you are not required to send the borrower a revised CD if an event occurs after consummation resulting in a changed amount only paid by the seller. Under Regulation Z, if an event in connection with the settlement of a transaction occurs during the thirty-day period following consummation that causes the CD “to become…
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If a mortgage loan applicant is scheduled to come into the bank to receive and sign their Loan Estimate (LE) on the third business day after we received their application — but is unable to do so because the bank is closed due to inclement weather — can the LE be signed on the following business day, or is the date of the closure for inclement weather considered a “business day” for purposes of the LE deadline? Should we mail the LE as a precaution instead of planning to hand deliver the LE?
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No, we do not believe a day on which your bank closes due to inclement weather would be considered a “business day” for purposes of delivering the LE — provided your bank ceases to carry out substantially all of its business functions on that day. Whether to mail or hand deliver the LE to a…
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A prospective loan customer would like to purchase a single-family home to use as an investment property. However, we believe the family will use the home as their residence within the next six to twelve months. Should we treat this loan as a consumer purpose loan and provide the required disclosures, or can we treat the loan as a business purpose loan based on the customer’s representation that the property will be used for investment purposes?
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We recommend reviewing the five factors in Regulation Z before determining whether or not this is a consumer-purpose loan subject to the TILA-RESPA Integrated Disclosure (TRID) requirements. While you are not required to further investigate the borrower’s statement of the loan’s purpose, which would be a business purpose, the borrower’s statement of purpose is just…
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A borrower has asked if we can increase the maximum loan limit on a maturing HELOC to save them the time and fees associated with obtaining a new loan. The borrower also would like to extend the maturity date and change the interest rate from variable to fixed. Is this possible?
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Yes, we believe it is possible to modify the terms of an existing HELOC before maturity to increase the loan limit, extend the maturity date, and change the interest rate from a variable rate to a fixed rate — provided the borrower signs a modification agreement reflecting these terms and they receive a notice of…
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Freddie Mac Guide Bulletin 2021-16 states that effective for mortgages with settlement dates on or after August 5, 2021, “Prorated tax credits cannot be considered when determining if the Borrower has sufficient funds for the Mortgage transaction.” Does this mean we cannot take these tax credits into account? If that is the case, we will have some borrowers who are unable to qualify for loans, as the amount due at closing reflected on the LE is higher than what the borrower will actually need.
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Yes, both Fannie and Freddie now prohibit lenders from considering prorated real estate tax credits when determining the funds required for a mortgage transaction. These prohibitions apply only to mortgages that will be sold to Freddie Mac or Fannie Mae or that are otherwise subject to their selling standards. Freddie Mac’s updated Single-Family Seller/Servicer Guide…
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How can prorated real estate tax credits be accounted for on the Loan Estimate (LE)? By not including this number as a debit or credit anywhere on page 2 of the LE we are having some borrowers who are unable to qualify for loans, as the amount due at closing reflected on the LE is higher than what the borrower will actually need, especially in areas where taxes are much higher.
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We believe that you may choose whether to disclose a property tax credit on the LE if the credit is for taxes that will be due before the first scheduled loan payment or within sixty days after the closing date. However, if the credit is for taxes that will not be due until more than…
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In our area, real estate sales contracts often require the seller to pay the owner’s title insurance premium. The title company typically provides a simultaneous issue discount. However, one local title company was recently purchased by an out-of-state company that does not provide simultaneous issue discounts and will not provide a TRID calculation sheet showing the fees without a simultaneous issue discount. Instead, it provides the actual amounts of the lender’s and owner’s policy premiums with no corresponding seller credits. Does Illinois law require us to reflect the seller credit on the Closing Disclosure (CD)? When we checked with the title company, they confirmed that there were no simultaneous issue discounts built into the premiums.
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We are not aware of an Illinois law requiring disclosure of seller credits or imposing particular disclosure requirements for title insurance premiums. Under the TRID requirements in Regulation Z, when a seller has agreed to pay the owner’s policy premium — and no discounts are being offered — the seller’s credit should reflect the full…