Topic: Title Insurance
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Is a Lender’s Closing Protection Letter fee considered a finance charge?
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We believe that a closing protection letter fee charged by a title insurance company should not be considered a finance charge under the Truth in Lending Act (TILA), based on two separate exemptions. First, Regulation Z specifically exempts certain real-estate related fees from the scope of finance charges, including fees for title insurance “and similar…
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When a title company charges a fee for a certificate of compliance with the anti-predatory lending program in Cook County, is that fee considered a finance charge?
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No, a certificate of compliance fee likely should not be included in the finance charge calculation, subject to the discussion below. Regulation Z exempts certain real-estate related fees from the finance charge calculation, if the fees are bona fide and reasonable in amount. Fees for title examination, abstract of title, title insurance, property surveys, credit…
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In our area, the seller for a real estate purchase transaction almost always chooses the title company. Our Loan Estimates do state that the borrower is permitted to shop, and we provide a written list of providers. But because the seller selects the title company, is that estimated charge subject to 10% tolerance?
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First, the Real Estate Settlement Procedures Act (RESPA) prohibits sellers from requiring a buyer to use a particular title company. However, if the seller suggests a particular title company, and the buyer acquiesces to that suggestion, the charge would be subject to a 10% tolerance as a third-party service that the borrower could shop for…
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Under Illinois law, can we require home equity line of credit (HELOC) borrowers to use a non-affiliated title company? Does it make a difference if we are obtaining only a title search (as part of our due diligence), which we pay for ourselves, without requiring the borrower to purchase title insurance?
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Yes, we believe your bank may select third parties to perform title searches for HELOC applicants as part of its due diligence when the bank pays the search fees, with the provisos discussed below. Because your institution would be paying for the costs of the title searches, as opposed to the applicants, you have a…
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Should we include a title company’s “closing fee” in the finance charge calculation? The closing fee is charged for the service of conducting the real estate closing. We thought that a closing fee should be excluded, since we do not require the imposition of the charge, nor do we require the use of a particular title company as closing agent. Moreover, cash transactions also have closing fees, and fees that are charged in comparable cash transactions are not required to be included in the finance charge.
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We believe that a separately itemized fee for conducting a loan closing should be included in the finance charge calculation if it is a required service, even though your institution permits borrowers to select the service provider. Regulation Z and the accompanying Official Interpretations include fees charged for a conducting or attending a closing in…
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For a residential mortgage loan Closing Disclosure, should we show the charge for the owner’s title insurance policy as being paid by the seller or the buyer? Some title companies are showing the charge as paid by the buyer, and then giving the buyer a credit from the seller. Is that still acceptable?
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When the seller is paying for the owner’s title insurance policy, we believe that the best approach is to disclose the policy cost in the seller-paid column (under “Other Costs” in the Closing Disclosure), although the TRID rules do not specify exactly which column to use. The TRID rules simply require you to designate title…
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Does Illinois law dictate how title charges are to be described and itemized?
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No, we are not aware of any Illinois law that addresses how you should disclose title insurance charges. When disclosing title insurance charges in Illinois, your institution should follow the TRID rules. For more information on the TRID requirements for title insurance disclosures, we recommend reading the following IBA Q&As: What is the correct way…
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What is the correct way to disclose a seller-paid owner’s title insurance policy on the Closing Disclosure?
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You should disclose the owner’s title policy under “Other Costs” in the “Seller-Paid” column. The Closing Disclosure rules require you to disclose title insurance charges, even if they are paid by the seller, under “Other.” For resources related to our guidance, please see: Regulation Z, 12 CFR 1026.38(g)(4) (“Under the subheading “Other” and in the…
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In the new Closing Disclosure, where should we disclose a seller’s payment for the owner’s title insurance policy? What if the title insurer discounts the owner’s policy when it is purchased at the same time as the lender’s policy? For example, the lender’s title policy is $300, the owner’s title policy is $400, and a $35 discount is applied to the owner’s title policy, making it $365.
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You should disclose the discounted amount of the owner’s title policy, $365, under “Other Costs” in the “Seller-Paid” column. The Closing Disclosure rules require you to disclose title insurance charges, even if paid by the seller, under “Other.” Based on informal guidance we received from a CFPB attorney, you may disclose the owner’s policy as…