On June 9, 2020, the CFPB published four new TRID FAQ’s and a TRID Factsheet (“Factsheet”). While the Factsheet is focused solely on the handling of title insurance disclosures under the rule, the FAQ’s cover various topics, including the separation of data when using separate Closing Disclosures for the consumer and the seller, the Total of Payments calculation, and the optional signature lines on the Loan Estimate and Closing Disclosure.
With one exception, the four new FAQ’s published did not change or expand on existing language of the rule and its commentary. Specifically, one new FAQ confirms that the seller-paid Loan Costs and Other Costs must be shown on the consumer’s Closing Disclosure. The two FAQ’s on the topic of the Total of Payments calculation walk through the fees included in the calculation, reiterate that only amounts borrower-paid on the Closing Disclosure are included, and that negative pre-paid interest is accounted for and treated as a negative number in that calculation.
The last FAQ added, regarding the optional signature line on the Loan Estimate and Closing Disclosure, potentially requires changes in creditor procedures. The FAQ states that a creditor may, at its option, require a signature by a consumer on the Loan Estimate or Closing Disclosure, but only if the consumer receives the disclosure in a form that they may keep. That means, if a paper Loan Estimate or Closing Disclosure is provided to a consumer and required to be signed and returned, a duplicate must be provided for the consumer to keep. In the case of electronic disclosures, a consumer would have the electronic file with the Loan Estimate or Closing Disclosure that was signed.
The Factsheet begins with detailed instructions on which section of the Loan Estimate and Closing Disclosure the Lender’s and Owner’s title insurance premiums are disclosed, as well as how they are labeled. The section and label may vary depending on whether a consumer is allowed to shop for title insurance and whether the policy is required by the creditor.
Next, several pages are spent illustrating a complexity of the TRID rule that has been wrestled with since its publication – that is, how to calculate and disclose lender’s and owner’s title insurance premiums for disclosure on the Loan Estimate and Closing Disclosure in accordance with the rule. The rule requires that, when a simultaneous lender’s policy is issued, that the discounted lender’s premium not be disclosed. Instead, the full lender’s premium must be disclosed, and a discounted owner’s premium calculated. The calculation used to arrive at the required disclosure for the owner’s title insurance premium is:
Full Owner’s Premium + Simultaneous Lender’s Premium – Full Lender’s Premium
The Factsheet, next, addresses a scenario where the seller has agreed to pay the full owner’s premium for the consumer, but applying that credit to the discounted owner’s premium, where a simultaneous policy is issued, results in an excess seller credit that the Factsheet provides may be disclosed in three different ways.
- Shown as a credit towards the amount of the lender’s premium or any other title insurance costs for premiums or endorsements in the Loan Costs Table or Other Costs Table (12 CFR §§ 1026.38(f) and (g)); or
- Added to and shown in aggregate with other seller credits in the Summaries of Transactions tables as a general Seller Credit (12 CFR § 1026.38(k)(2)(vii)); or
- Disclosed as a stand-alone seller credit on another blank line in the Summaries of Transactions tables (12 CFR § 1026.38(k)(2)(viii)).
Last, the Factsheet illustrates a situation where the calculation required by the rule for disclosure results in a negative owner’s title insurance premium. This would occur if the full, undiscounted lender’s title insurance premium is greater than the cost of both full owner’s and discounted simultaneous lender’s title insurance premiums combined. The example included in the Factsheet assumes $3,175 for the full lender’s premium, $2,568 for the full owner’s premium, and $200 as the simultaneous issue rate for the lender’s premium. Using these amounts in the calculation required to disclose under TRID, $2,568 + $200 – $3,175, results in an owner’s title policy disclosure of negative $407.
A cardinal principle of the Truth in Lending Act and Regulation Z is that the disclosures reflect the legal obligation of the parties. Yet without any compelling reason, the CFPB deviated from that principle when developing the method to disclose title insurance premiums under the TRID rule. The last two examples in the Factsheet help to demonstrate the why the CFPB needs to reverse course and simply provide for the disclosure of the actual costs. Lenders and title companies should not have to explain to consumers why costs on the Loan Estimate and Closing Disclosure differ from the actual costs quoted to the consumer by the title company, disclosed on the title company settlement statement, and disbursed at closing.