Five Things You Need to Know Before August 2015 1.What Transactions Types Are Affected 2.What...

Five Things You Need to Know Before August 2015

1. What Transactions Types Are Affected

2. What Transaction Types Are Exempt

3. The New Forms – Loan Estimate (LE) & Closing Disclosure (CD)

4. Title Fees - Explaining CD Requirements & Actual Fees

5. Closing vs. Consummation & Transaction Timeline

Five Things to Know:

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The new rules and the new forms apply to all closed-end consumer credit transactions secured by real property, other than reverse mortgages, which include the following types of loans:

• Purchase money• Refinance • 25 Acres or less• Vacant-land • Construction-only • Timeshare

1. What Transactions Types Are Affected?

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Consumer loans exempted from the new rules and the new forms are as follows:

• Reverse Mortgages• Home Equity Lines of Credit (HELOCs)• Chattel-Dwelling/Mobile Home Only Loans• Creditors who originate less than 5 loans in a calendar year

2. What Transaction Types Are Exempt?

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The portions of TILA and RESPA governing Reverse Mortgages are not being replaced or deleted. Creditors will be required to issue a TILA disclosure and Good Faith Estimate (GFE) on these types of loans.

Settlement agents will be required to use a 2010 HUD-1 settlement statement to close these types of loans. Loans in progress (applications submitted prior to August 1, 2015) are not subject to the new rules or the new forms.

2. What Transaction Types Are Exempt? Cont.

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New Terms

• Creditor = A Loan Originator, Lender or Mortgage Broker

• Consummation = The day the borrower becomes legally obligated to repay the debt – the date of the signing of the loan documents

• Business Day = A day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions

• For purposes of rescission under TILA – all calendar days EXCEPT Sundays and Legal Public Holidays

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Closing Disclosure

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Know before you close.

• The new form is 3 pages long

• New form replaces the GFE and Early TILA

• The creditor is not allowed to revise and re-disclose if charges go up or down prior to the closing

• Creditor errors are not legitimate reasons for revising Loan Estimates

Loan Estimate| At-a-Glance

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• Lender must deliver within three business days of the lender’s receipt of an “application”

• Application – automatically occurs when lender receives six pieces of information:

• Borrower(s) Name(s)• Income• Social Security Number(s)• Property Address• Estimated Value of Property• Mortgage Loan Amount

Receiving the Loan Estimate

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The Loan Estimate

• Basic Information

• Loan Terms

• Projected Payments

• Costs at Closing

Loan Estimate | pg.1

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Basic Transaction Information

Basic Loan Terms

The Loan Estimate

Information about the New Monthly Mortgage Payment

Estimates amount borrower will need at closing

The Loan Estimate

• Loan Costs

• Other Costs

• Calculating Cash to Close


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© 2015 Fidelity National Title Group

Alphabetical Order- Cost descriptions in each section must be listed in alphabetical order

Title Insurance and Settlement Charges- The description of each fee related to title insurance or settlement (escrow) must be preceded by “Title –”

Lender’s Title Insurance – Purchase Transactions- Must show the full Loan Policy Rate, NOT the simultaneous issue rate often charged when an Owner’s policy is also issued

The Loan Estimate

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© 2015 Fidelity National Title Group

Owner’s Title Insurance Rules- If to be paid by borrower, must show “(optional)”

in description

- Actual Charge not shown - for simultaneous issue, owner’s rate = Owner’s Rate + Simultaneous Issue Loan rate – Full Loan rate

The Loan Estimate

Any simultaneous issue discount must be applied to the owner’s policy premium (and not the loan policy premium).

Owner’s Coverage + Simultaneous Issue Loan Premium – Full Loan Premium = Owner’s Rate

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Owner’s Title Insurance

On the purchase of a $300,000 residence with a $240,000 loan closed simultaneously, an approximation of actual costs and the redistributed disclosure “costs” would be:

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Example

Owner’s Policy Premium: $1,090.00

Lender’s Policy Premium (Full-Premium Rate): $928.00

Lender’s Policy Premium (Simultaneous Issue Rate): $469.00

Seller’s Cost per Contract

Buyer’s Cost per Contract

Seller’s “Cost” per Disclosure

Buyer’s “Cost” per Disclosure

“Cost” Difference – Seller

“Cost” Difference – Buyer

Owner’s Policy $1,090 $0 $631 ($1,090 +$469 $928)‐

$0 $459 less ($1,090 $631)‐

$0

Lender’s Policy $0 $0 $928 $0 $459 more ($928 $469)‐

• Comparisons

• Other Considerations

• Confirm Receipt


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Various specific Loan calculations, including APR, required under TILA, RESPA or Dodd-Frank

The Loan Estimate

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The Loan Estimate

• Except for credit report, no fees chargeable until after Loan Estimate is provided

• Lender must attach separate Provider List similar to that currently used with the GFE

• Must include all services which the borrower may need for the transaction (not just items for loan)

Receiving the Loan Estimate

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The Loan Estimate

The Loan Estimate

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The Provider List

The creditor can only reissue a Loan Estimate based on six events which qualify as a “Changed Circumstance.”

• Changed Circumstance Affecting Settlement Charges – changes that cause the sum of all estimated charges to increase by more than 10%.

• Circumstances Affecting Eligibility – borrower creditworthiness or value of the collateral causes charges to increase.

• Revisions Requested by the Consumer - if borrower requests changes to the mortgage loan that change the settlement charges or terms of the loan.

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Re-Disclosure

(continued) “Changed Circumstance.”

• Interest Rate Dependent Charges – if the interest rate has not been locked or a locked interest rate has expired, the charge or credit for the interest rate chosen, the adjusted origination charges, per diem interest, and loan terms related to the interest may change.

• Expiration – if a borrower does not express an intent to continue with the transaction within ten business days.

• Delayed Settlement Date on a Construction Loan – when the Loan Estimate is delivered sixty (60) days prior to consummation of the transaction

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Re-Disclosure


• The new form is 5 pages long

• New form replaces the TILA and HUD-1

• One closing disclosure is required for each loan

• Charge descriptions on both the loan estimate and closing disclosure must match

Closing Disclosure | At-a-Glance

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Closing Disclosure

• The Lender is primarily responsible for the preparation and delivery of the Closing Disclosure

• The Lender may permit the Settlement agent some portions or all of the form and/or deliver the form

• Settlement Agent liability – for those portions prepared or delivered

• Lender remains responsible for all portions of the Closing Disclosure to “ensure the disclosures are provided” in accordance with the rule

Who prepares the new Closing Disclosure Form?

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• Basic Information

• Loan Terms

• Projected Payments

• Costs at Closing

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Closing Disclosure| pg.1

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Basic Transaction InformationClosing Disclosure| pg.1

Close Disclosure

Close Disclosure

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Description of Basic Loan Terms


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Information about the New Monthly Mortgage Payment

Amount includes monthly obligations on property even if not included in impound amount



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Cash to Close – shows the buyer/borrower the amount necessary for closing

• Loan Costs

• Other Costs

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Alphabetical Order

“Title –” designation on all Title and Settlement Fees

Lender’s Title Rule

Cost DescriptionsMust be substantially similar to description on Loan Estimate


34© 2015 Fidelity National Title Group

Owner’s Title Rule


• Calculating Cash to Close

• Summaries of Transactions

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Comparison Table – shows the buyer/borrower a comparison of amounts from Loan Estimate v. Closing Disclosure



Summary of Transactions – a summary of the transaction similar to page 1 of the HUD-1 Settlement form



Loan Disclosures – contains various lender disclosures required under TILA, RESPA or Dodd-Frank



Loan Calculations – Various specific Loan calculations, including Finance Charge and APR, required under TILA, RESPA or Dodd-Frank

Other Disclosures – Various lender disclosures required under TILA, RESPA or Dodd-Frank

Contact Information –

Confirm Receipt –


• The 3-day right of rescission (“3-day rescission”) under TILA• Presently applicable to most refinance transactions• Not impacted by the Final Rule

• The 3-day waiting period (“3-day waiting”) after delivery of the Closing Disclosure, the Borrower has 3 days to review before a closing may occur

• The 3-day delivery period for delivery of the Closing Disclosure (“3-day delivery”) –

• Unless the Closing Disclosure is delivered personally, the Rule “deems” it delivered three business days later

• Period may be shortened by actual confirmation of receipt

Three different three-day periods in closing

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Closing Disclosure

Disclosure Delivery Timing

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Closing Disclosure

Only a few changes will require another 3-day waiting period –

• Change in the loan programExample – moving from fixed rate to an adjustable rate loan

• Changes to Annual Percentage Rate (APR) greater than 1/8 %Applies only to increases in APR items , other increases do not trigger a new disclosure with waiting period.

Caution – other increases may still cause tolerance violationsThe addition of a prepayment penalty fee after the initial disclosure But , all changes require a new Closing Disclosure to be prepared and delivered at or before “consummation”.

Changes to initial Closing Disclosure after delivery

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Closing Disclosure

Tolerance Rule Changes• Both TILA and RESPA previously contained tolerance rules:

• TILA rules generally required a re-disclosure if finance charges or APR exceeded threshold

• RESPA actually provided penalties (“tolerance violations”) if an item, or series of items, exceeded a monetary threshold

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Closing Disclosure

Tolerance Rule Changes• Changes to tolerance rules

• Addition to “zero tolerance” category (may not change for numbers on Loan Estimate)

• Third Party Services where the provider is selected by the Lender

• Third Party Services provided by an affiliate of the Lender

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Closing Disclosure

Charges that cannot increase at closing include:

Charges that in the aggregate cannot increase by more than 10%:

Charges that can increase at closing (but which were estimated in good faith):


Tolerance Levels

Creditor or broker charges

Fees charged by an affiliate of the creditor or broker

Charges for services for which the borrower is not permitted to shop

Recording fees

Owner’s title premium

Escrow/Closing fee

Charges for services the consumer shopped for using the creditor’s provider list

Prepaid interest

Impound account set up

Homeowner’s insurance

Property taxes

Charges for which the borrower chose a service provider not on the creditor’s list

Any other non loan related charges‐

The new rules replace the Truth-in-Lending Act and sections 4 and 5 of RESPA.

Unlike TILA and RESPA, the new rules contain enforcement provisions and fines for violating any act or omission of the federal consumer financial law.

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Civil Penalties

Tier Penalty/Fine

First Tier Up to $5,000/day for each day the violation or failure to pay continues

Second Tier Up to $25,000/day for each day that a person continues to recklessly engage in a violation of a federal consumer financial law

Third Tier Up to $1,000,000/day for each day that any person knowingly violates a federal consumer financial law

Closing Disclosure to the SellerSettlement Agent is responsible for providing the Closing Disclosure to the Seller

• Closing Disclosure format for the seller may be either:

• The same format as for Borrower, but items related solely to borrower (i.e., loan disclosures) and using only seller data; or

• Use the separate CFPB seller’s disclosure form

• Disclosure must be delivered to the Seller on or before “consummation”; no 3-day waiting period

• 3-business day delivery period applies, except for personal delivery.

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Closing Disclosure

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Seller’s Disclosure

Seller’s Disclosure

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