Lender's vs. Owner's Title Insurance under TRID
One thing that will be different under TRID is how title insurance is disclosed ... here are some thoughts on this issue.
August 1 ... right in one of our busiest times, as borrowers try to settle into new homes before the school year starts. Two US Congressmen (one from Massachusetts, just kidding) have made this argument in a letter to the CFPB asking for a delayed implementation date for TRID. But no one realistically expects this to be delayed.
So we might as well keep on figuring it out ...
One sticking point is with title insurance. As a matter of practice, we often think just of 'title insurance'- not separately of owner's and lender's- but as we see below, that's on thing that is going to change. Here are some other key points, based on our understanding of all this:
Owner's Title Insurance
RESPA Section 9 requires that borrowers be able to shop for this service (penalties = 3x all charges). So lenders have never been allowed to require that borrowers use a particular company for title insurance.
And that's reflected in the disclosures, because Lender's and Owner's title insurance must be disclosed as separate items (as it is now on GFE).
Owner's must be listed under "Other" on TRID forms (as opposed to "Services You Can Shop For"), and must be labeled as "optional," as shown (see page 2 of the Loan Estimate):
H. Other
Title - Owner's Title Policy (optional) $1,017
Practical Note -- The fact that we're required to call this "optional" is raising a bit of an uproar. If you've been charged with murder, technically having an attorney represent you is "optional." Similarly, title insurance is often a "no-brainer"- protection against a borrower winding up with a $200,000 mortgage and no home. It's going to fall on us to explain that to borrowers!
The lender must provide a list (with at least one company) of companies that can provide title insurance. This list must be provided within 3 days of application (same timing as Loan Estimate), and make sure to use the mandatory disclosure, which basically says the borrower can pick another company if they wish to.
There will be no tolerance limitation on owner's title insurance because this is (technically) an optional service. (As opposed to 0% or 10% with other services) (I recognize there are people who may disagree, but I believe this is the best interpretation of the rule- see here for support).
Lender's Title Insurance
The lender can pick its own title insurance company- RESPA Section 9 does not prevent this.
Lender's title insurance will either be listed under "Services You Can Shop For" or "Services You Cannot Shop For," depending on your company's decision on that. For example (see page 2 of Loan Estimate):
B. Services You Cannot Shop For
Title - Lender's Title Policy $535
If you're allowing borrowers to shop for this, you must send a list of service providers, as with Owner's (above).
But how much?
Often, borrowers get a discount if they purchase both Owner's and Lender's title insurance from the same place. So what's the real cost of each? What do you disclose?
Lender's title insurance must be disclosed at the higher amount - the amount of Lender's title insurance without any discount for simultaneous purchase of Owner's insurance. (Comments to 1026.37(f)(2)-4 and (g)(4)-2).
When the Owner's title insurance premium includes a simultaneous issuance premium, the premium is calculated by taking the full Owner's title insurance premium, adding the simultaneous issuance premium for the Lender's coverage (if any) and then deducting the full premium for Lender's coverage.
As shown in this ALTA source:
In other news:
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Now the CFPB is regulating potholes ... no kidding! American Banker reports that the CFPB "has taken its enforcement authority to the streets" in a recent enforcement action against a land developer in Tennessee that requires the land developer to maintain roadways as well as it originally promised.
Startup companies that promise to build new mortgage lending online platforms are receiving a lot of investment capital, according to this NYT article. The idea is that these startup companies are more willing to provide a better online experience through innovation and quick-thinking than existing mortgage lenders, who are hesitant to change. One such company explained that "it could be several years before many [existing lenders] use e-closings as a matter of course. Startups [like us] are better situated in that regard, he said, because 'we can build our platform based on the future and not the past.'"
How much will our lifestyle change with autonomous cars? Maybe a better question is how much our economy will change with autonomous tractor trailers ... and that's not too far in the future--the first ever autonomous (self-driving) big rig is now road legal in Nevada
Don't forget that silent treatment is a punishment. A Business Insider article calls the silent treatment a "common" response to conflicts in relationships, but also "toxic" and "one of the most destructive" to relationships. There's a lesson here for business leaders. Whether in a small veterinarian's office or a multi-billion a year mortgage lender, I think one thing a leader needs to do is just simply be available. Ray Davis of Umpqua Bank believes that, "This is even more important when times are tough. When you disappear from view, people begin to worry, and when they begin to worry, they become distracted from the work at hand." So if you have colleagues who are uncertain about the future of your company, or their future at the company, your worst possible response could simply be not having one. There are different ways to be unavailable - not being in the office, not reading e-mails, not returning calls, or just dodging "substantive" conversations ... "Hey Jim, let's talk about that later - did you see the Sox game last night??"
"It took an average of seven months for employees to build their trust in a leader but less than half that time for them to lose it."
- John Sullivan, of Manchester Consulting (1997 study)
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