Diane Evans, NTP President American Land Title Association Enter - PowerPoint PPT Presentation

NEW PARADIGM TO CLOSINGS Title Industry Prepares Diane Evans, NTP President American Land Title Association

Enter Congress “Sweeping overhaul of the United States financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.“ – President Barack Obama Major Components • Created Financial Stability Oversight Council • Reformed mortgage, securitization and derivative markets • Established Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Purpose: “ Protect consumers by carrying out Federal consumer financial laws. ”

CFPB’s Goals – Improved consumer understanding • Risk factors • Short-term and long-term costs • Monthly payments – Better comparison shopping • Comparisons of competing loan offers • Shopping for closing costs – Avoiding costly surprises at the closing table • Easier comparisons of the estimated and final loan terms of the loan • More time to consider choices • Limits on closing cost increases

Empowering the Consumer Protecting the Consumer is Everything CFBP Complaint Process Complaint Portal on www.consumerfinance.gov Homepage

The New Forms

The New Forms • Loan Estimate • Three pages long • Combines early two-page TIL and three-page GFE – Who provides? • Two options: lender or mortgage broker – When? • Within three days of application – Still subject to tolerances

The Loan Estimate • No change in Settlement Agent processes? • Lender will contact settlement agent after loan application to get fees to generate the Loan Estimate - round up doc fee? • Lender completes the Loan Estimate and delivers. • Settlement Booklet • Link to Settlement Booklet Information

Consumer Shopping • A creditor permits a borrower to shop for third party settlement services when they: – Inform borrowers on Loan Estimate – Provide them with a written list of settlement service providers • What if the consumer elects not to shop? – The fee is still included in the bucket of costs subject to a 10% tolerance. – Unless the chosen provider is affiliated with the creditor (0% tolerance) • The creditor may still impose reasonable qualifications for providers. – Example: Provider must be licensed

Written Provider List • When allowing consumers to shop, the creditor must provide the consumer a written list of potential providers for each service. The written list must identify: • – At least one available provider of that service – Include a clear statement that the consumer may choose a different provider for that service – Provide sufficient information for the consumer to contact an identified provider such as the name under which the provider does business and the provider's address and telephone number. • A creditor does not allow a consumer to shop when the written list consists of only settlement service providers that are no longer in business or that do not provide services where the consumer or property is located.

Evaluating the Rule Title Industry Concerns • Key issues – Three Day Rule – Who will provide the Closing Disclosure – Standard vs. Model form – Consumer Shopping – Disclosure of Title Fees – “Optional” owner’s title insurance

Role of Settlement Agents/Attorneys • Lenders can work with settlements agents to prepare and provide Closing Disclosure. – “The final rule acknowledges settlement agents’ longstanding involvement in the closing of real estate and mortgage loan transactions, as well as their preparation and delivery of the HUD-1. The final rule avoids creating uncertainty regarding the role of settlement agents.” • However, the creditor retains ultimate responsibility – and liability – for ensuring that the disclosure is provided in accordance with the rule.

Who will provide the disclosure Shared Responsibility • Like what happens today • Option 1 Process stays the same Lenders send figures to • the settlement agent Lender and settlement agent agree to divide responsibility for gathering data for the closing disclosure • Consumer must get ONE completed disclosure

Approaches to completion of Closing Disclosure • Option #1 • The process stays the same - Lenders send figures to the settlement agent • Settlement agent inputs figures and sends back to lender for approval

Approaches to completion of Closing Disclosure • Option #2 • Settlement agent completes pages 2 and 3 of Closing Disclosure and sends to lender • OR • Four Column Worksheet • OR • Other shared format

Loan figure questions? Reasonable turn around time for figures? ● One hour? ● Have night crews? ● Uniform closing instructions? ● We are open for suggestions and solutions.

Three-Day Rule Policy: Consumers must receive their Closing Disclosure at least three business days before closing . – Business day = Every day but Sundays and Federal Holidays Proposal: Must re-disclose and restart three business day clock if something changes. Some limited exceptions. Final: Only have to re-disclose and restart clock in limited circumstances. – APR changes – Product changes – Addition of prepayment penalty

How to Count the Three Days

Three-Day Rule • Can a consumer waive the three day period? – Only if they have a Bona-Fide Personal Financial Emergency – Very fact intensive – Consumer must provide a written statement for the explaining the need for the waiver. • Example: – The imminent sale of the consumer’s home at foreclosure

Disclosure of Title Fees • Lenders policy: – Services you can shop for category – How to calculate: Full premium without any adjustment that might be made for the simultaneous purchase of an owner’s title insurance policy. – Can use enhanced policy or endorsements if the lender knows that these products will be purchased. • Owners policy – Other category – Must be listed as “ optional ” – How to calculate: 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.

Seller Disclosures • Seller must receive Closing Disclosure reflecting the actual terms of the seller's transaction. • Seller only form allowed – In case of privacy concerns – Includes only information relevant to seller – Model H-25(i)

Our Realtor Friends ● Educate! Educate and then educate again!! ● Make sure they all know about the new rules regarding delivery and the time frames. ● Timing of that education? ● Focus on amend/extends, inspection resolutions, insurance and that this is info that needs to be provided to the lenders well before the closing date. o 7 days? 14 days if known?

It Doesn’t End at the Closing Table • Quality Assurance • Corrected disclosures • Recording documents • Title policy delivery

Role of Due Diligence • Both lender and settlement agent due diligence – Documentation checklists – Review of closing instructions – Final closing package/documentation Due diligence is necessary for the sale of loans on the secondary market.

Post-Closing Activity • If Closing Disclosure become inaccurate within the 30-day period following closing the creditor/settlement agent shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to determine inaccuracy • 60 days for non-numerical clerical errors • Proposed 60 days for cures related to Qualified Mortgage standard

Lender Concerns Financial Enforcement Reputational

Why Best Practices • Uniformity and standardization – Standard expectations for lenders – Standard requests/process for title companies • Evolving marketplace – Industry solution that can easily change to meet market demands • Flexible – Designed to be achievable for title companies, settlement companies and lenders of all sizes

Title Insurance and Settlement Company Best Practices 1. Comply with All State and Local Licensing 2. Procedures and Controls Regarding Escrow Trust Accounts – Reconciliation 3. Physical and Network Security—Protecting Confidential Customer Information and Trust Accounts 4. Recording and Pricing Procedures 5. Title Policy Delivery, Premium Reporting and Remittance 6. Errors and Omissions Insurance / Fidelity Coverage 7. Dealing with Consumer Complaints www.alta.org/bestpractices

Disclaimer • This information is not a substitute for legal advice, is for your reference only, and is not intended to represent the only approach to any particular issue. This information should not be construed as legal, financial or business advice, and users should consult legal counsel and subject-matter experts to be sure that the policies adopted and implemented meet the requirements unique to your company.