Trid regulations presentation by H &H settlement
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Rules, regulations and new forms you need to know about when closing a new real estate transaction.
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Trid regulations presentation by H &H settlement
- 1. INTEGRATED MORTGAGE DISCLOSURE RULE H&H Settlement Services, LLC 105 E. Glenside Ave, Glenside, PA 19038 215-989-4959
- 2. New Terms • CFPB – Consumer Financial Protection Bureau • TRID – TILA RESPA Integrated Disclosure • LE – Loan Estimate • CD(F) – Closing Disclosure (Form) • Buyer – Consumer • Closing – Consummation
- 3. Liability Dodd-Frank gave power to CFPB to enforce rules and levy penalties – CFPB enforcement of consumer financial laws (incl. TILA and RESPA) – $5,000 per day per violation; $25,000 per day for reckless violations; $1M per day for knowing violations
- 4. Scope and Date Majority of closed-end mortgages except: Reverse mortgages HELOC Mobile homes Commercial loans Creditors making five or fewer loans per year Certain no-interest Subordinate special purpose loans Most provisions apply to applications received by lender or mortgage broker on and after 10/3/15
- 5. Reliance on the Real Estate Professionals Lenders only have 3 days to issue Loan Estimate Creditor may rely on third parties to obtain information for Loan Estimate: “For example, the creditor might look to ….Realtors for taxes and escrow fees.” Transfer taxes Seller credits Home warranties Personal property purchases HO Association fees Home Owner’s Insurance Flood Insurance
- 6. Change of Circumstance 1. Information provided by consumer inaccurate 2. Extraordinary event 3. Discovery of new info specific to consumer or transaction 4. Revision requested by consumer 5. On day of locking rate 6. After 10-day expiration
- 7. 3-Day Review Period of Closing Disclosure (CD) Three business days* in advance of consummation** with limited re- disclosure requirements. *business day for CD purposes: all days except Sunday and 10 Federal holidays **consummation is defined as “the time that a consumer becomes contractually obligated on a credit transaction”
- 8. Major Lenders’ Decisions 1. Why did they make the decision? 2. How will this new process work? 3. What about the day of closing changes? They will face staffing issues for day-of-closing changes: • Volume • 24/7 • Consumer Experience
- 9. Delivery of Closing Disclosure Defined Hand delivery: immediate (deliver on Monday, close on Thursday) US Mail: assumed receipt three days after placed in mail Email: with receipt confirmed by consumer after approval to use email method of delivery (if not, assumed three days to open email) Overnight Delivery: with consumer confirmed receipt
- 10. Delivery Examples Or email w/o receipt Or email with receipt
- 11. Re-disclosure Requirements Requiring additional three-day review period 1. Inaccurate APR (1/8% or ¼% depending on loan product) 2. Change in loan product 3. Prepayment penalty added
- 12. Owner’s Title Insurance Modifier • Requires inclusion of the word “Optional” after Owner’s Title Insurance on Loan Estimate and Closing Disclosure • Consumer has no protection under the lender’s policy. • Understand the importance of Owner’s Title
- 13. Seller Closing Disclosure Seller provided Closing Disclosure by settlement agent, escrow company, attorney agent at consummation. Nothing prohibits settlement agent, escrow company, attorney agent from creating a separate form for seller purposes only
- 17. Closing Disclosure Form Page 3 Similar to HUD1 Page 1 w/o line #s ©2015 ORNTIC
- 18. 18 Closing Disclosure Page 4 © 2015 ORNTIC
- 19. 19 Closing Disclosure Page 5 © 2015 ORNTIC
- 21. ©2015 ORNTIC ALTA Settlement Sheet – Combined Page 1
- 22. ©2015 ORNTIC ALTA Settlement Sheet - Combined Page 2
- 23. ©2015 ORNTIC ALTA Settlement Statement – Combined Page 3
- 25. Bifurcation Benefits • Allows agent to control preparation of the seller’s side • Allows agent to make changes at the table for seller-only adjustments • Protects NPPI of the consumer and seller
- 26. 26 Page 1 ©2015 ORNTIC Seller Only Closing Disclosure Page 1
- 27. 27 Bifurcated Seller form Page 2 Seller Only Closing Disclosure Page 2 ©2015 ORNTIC
- 28. What can we do today • Create a system to communicate changes or additional fees • Create a system to deliver invoices 8-10 days prior to closing • Talk to your buyers about responding to lender requests immediately • Talk to your staff about responding to lender requests immediately
- 29. THANK YOU!
Notas do Editor
- Within the Dodd-Frank Wall Street Reform Act the CFPB was instructed to take the four disclosure forms received by Consumers when financing a home and combine them into one form in order to achieve better understanding and transparency. The CFPB’s goals were to help Consumers avoid costly surprises at the closing table; allow them to achieve easier comparisons of the estimated and final loan terms and fees; give them more time to consider choices and to put limits on closing cost increases. The CFPB had to take various existing Acts, including RESPA and TILA, then reconcile differing timing requirements in order to create one disclosure form that would replace the 1) Early TILA 2) GFE 3) Late TILA 4) HUD1 Settlement Statement. One thousand, eight hundred and eighty eight (1,888) pages later we had the final rule on 11/20/2013.
- Violating the provisions of the Rule brings with it the wrath of two serious Acts; TILA (Truth in Lending Act) and RESPA (Real Estate Settlement Procedures Act). Combining the liability aspects of the two Acts with the power given to the CFPB by Dodd-Frank, requires that we all understand the Rule and take it very seriously. At this point you may want to mention something like, “I know none of you would ever ask a settlement person to handle something “off the sheet” but you might want to tell others in your offices that there are serious consequences for breaking the law.”
- No-interest subordinate loans for down payment assistance, buyer assistance, rehab, energy efficiency or foreclosure avoidance. The Rule covers virtually all Consumer mortgages with the exception of those shown on the screen. The last exception covers certain no-interest loans secured by subordinate liens such as down payment assistance, buyer assistances, rehab of property, energy efficiency or foreclosure avoidance loans. The Rule goes into effect with loan applications taken on or after 8/1/2015 however just because the implementation date is a number of months away does not mean we should sit back and do nothing, there are processes to create and test to insure smooth and timely closings.
- The Creditor will have three days after receipt of a loan application to deliver the first half of the new combined disclosure form or the Loan Estimate. The lender may rely on third parties to provide estimated fees and this is where you will talk about how your company is set up to assist them. Remind Realtors and attorneys about the importance of their rapid response time when a lender calls for fees and charges.
- Examples: Incorrect salary War, hurricane Boundary line dispute shown on title commitment Higher loan amt The Creditor will continue to have the opportunity to protect itself from tolerance violations if there are changes in circumstances after the initial Loan Estimate is delivered. However, there are only 6 instances that will allow the Creditor to revise the Loan Estimate and in addition, the Creditor may only change those fees on the Loan Estimate that the change effects – it does not give the Creditor license to fix errors on an earlier Loan Estimate. You really only need to emphasize Change #3 as the others are self-explanatory and do not originate from the title or real estate industry. Change #3 is when the real estate professionals can play an important role. This is your opportunity to talk about the importance of communication with you and the lender when anything occurs that will add, increase or change a fee at the time of closing (consummation). Encourage the real estate professionals to create a system that will trigger a call to discuss the changes and assure them your company has a similar system in place. .
- Definition of “business day” for CD delivery (and rescission) is different from definition of “business day” for delivery of LE. The final Closing Disclosure with the final settlement numbers with the final bottom line calculation for the Consumer must be in the hands of the Consumer 3 business days prior to closing or WE DO NOT CLOSE. Your audience will giggle and roll their collective eyes at this point but you need to stress the seriousness of this new condition. Systems and communications between the title industry and Creditors will have to change.
- Many of the national lenders have determined that since the liability for the accuracy of the form rests with them, they will take the process of completing the Closing Disclosure in-house. This will create a tremendous challenge to the coordination of the closing process in that the title industry, escrow companies and real estate professionals will need to have all of their invoices, calculations and adjustments reported to the lenders at least 7 days in advance. However, the overwhelming problem with this decision is the day-of closing changes that we currently make instantaneously will now have to be reported to the lenders and we will have to wait for their approval and wait for them to revise the sheet. Impress upon your real estate audience that they need to change their processes to the point that they have everything for the sheet a week in advance. AND REMIND THEM THAT THEY CANNOT MAKE ANY ADJUSTMENTS “OFF THE SHEET” AS IT IS A CRIMINAL OFFENCE AND THERE IS A NEW SHERIFF IN TOWN – THE CFPB.
- If the lender puts the CD in the US mail or emails it to the consumer there is an assumption in the Rule that it takes three days to get to the consumer or it takes three days to open emails. The 3-day review period doesn’t start until three days after the mail or email leaves the lender. Therefore we are talking 6 days in advance and 7 days if a Sunday or federal holiday are involved. We have not yet met a lender who will rely on the hope that the consumer opens his/her email sooner within the delivery period therefore most lenders are going to deliver 6-7 days in advance which in turn means the real estate professionals need to supply all of their invoices to the title agent 7 days in advance.
- This slides show a terrific example of what needs to be done (yellow boxes) and when it needs to be done (blue boxes) if closing is to occur on the selected day (red boxes).
- The only three instances when a new 3-day review period will be necessary are listed on the slide. All other last minute changes are allowed however we must keep in mind that any changes to the figures must be approved by the lender and if it is a lender who is preparing the CD in-house, it will take time for the lender to revise the sheet. The sooner we know of pre-settlement inspection issues, last minute utility adjustments, etc., the better. Some real estate professionals are making the determination that they need to do two pre-settlement inspections; one the week before closing and one the morning of closing.
- If the Consumer (borrower) is paying for the Owner’s Title Policy the modifier “optional” must be written on the corresponding line. As ludicrous as it seems for the Consumer Financial Protection Bureau to determine that this modifier is necessary on the only product that the consumer gets to protect them, it is a requirement. The CFPB said that they did not want to sell our product for us. The real estate professionals should be prepared, with your help, to relay the most important bullet items about Owner’s protection but caution them about saying the product is not important because if something goes wrong with the title, the real estate professional may be held accountable as the professional who told the consumer they didn’t need the protection an Owner’s Policy provides.
- When does the poor, ignored Seller get their settlement numbers… at settlement. And tell your audience not to be surprised if their closing agent
- Page 1 of the Closing Disclosure finalizes the loan terms for the consumer. The four pieces of information of greatest importance to the consumer (as indicated by the stars) are loan amount, interest rate, monthly payment and amount necessary to close.
- On Page 2 of the Closing Disclosure you will see the final fees and charges associated with the closing. You will note that though the categories of fees are similar to Page 2 of the current HUD1 the line numbers have been removed and categories created. The arrow points to the section in which the real estate commissions, reimbursements, etc will be listed (Section H).
- Page 3 of the Closing Disclosure is in two parts. The top part will show the consumer the items/fees, or group of items/fees, that are different from their latest Loan Estimate. The second part of Page 3 should look very familiar as it mimics Page 1 of our current HUD1.
- Read the provisions, terms and definitions on Pages 4 and 5 of the CD. You can show them quickly to your audience or delete them.
- Read the provisions, terms and definitions on Pages 4 and 5 of the CD. You can show them quickly to your audience or delete them.
- Page 1 of the Closing Disclosure finalizes the loan terms for the consumer. The four pieces of information of greatest importance to the consumer (as indicated by the stars) are loan amount, interest rate, monthly payment and amount necessary to close.
- Page 1 of the Closing Disclosure finalizes the loan terms for the consumer. The four pieces of information of greatest importance to the consumer (as indicated by the stars) are loan amount, interest rate, monthly payment and amount necessary to close.
- Page 1 of the Closing Disclosure finalizes the loan terms for the consumer. The four pieces of information of greatest importance to the consumer (as indicated by the stars) are loan amount, interest rate, monthly payment and amount necessary to close.
- We might decide to bifurcate the CD into two sheets; one for the consumer only and the other for the seller-only because it gives us some distinct benefits. If the lender is taking the CD prep in-house we should tell them that we will prepare the seller-only sheet giving us control over the accuracy of the seller’s numbers. It also allows us to make changes at the table that only involve the seller therefore making it possible to service the parties instantly, as we do now, as long as the changes do not affect the borrower’s side. Remember however, the lender may need to approve any last minute changes but at least we will not have to wait for the lender to revise the sheet.
- As mentioned earlier, title agents may choose to bifurcate the Closing Disclosure and issue separate sheets to buyer and seller. The last two slides show the form that may be used to show the seller’s transaction along.
- As mentioned earlier, title agents may choose to bifurcate the Closing Disclosure and issue separate sheets to buyer and seller. The last two slides show the form that may be used to show the seller’s transaction along.