The CFPB staff held a “final” webinar on May 26, 2015, to address the Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule that becomes effective on August 1, 2015. Presumably the characterization of the webinar as “final” refers to the webinar being the last webinar on the TRID rule before the effective date and not the last webinar on the rule during the remaining span of human civilization.
The CFPB staff noted at the outset that they were only addressing questions on which the CFPB staff had already provided some form of guidance. This may reflect that many industry members had voiced concerns about the CFPB staff providing new guidance that could require changes in policies and procedures or, of greater concern, changes in programming, based on the short amount of time until the August 1, 2015, effective date.
Among various items, the CFPB staff provided informal advice on the topics addressed below.
Preapprovals and Pre-qualifications
The TRID rule removes the so-called “catchall” element from the current definition of “application,” so that only six items of information will constitute an application: The borrower’s name, income and Social Security number, the property address and estimate of the property value, and the loan amount sought. With the removal of the catchall item that allowed lenders to specify any additional information they needed to have an application, industry members wondered whether preapproval or pre-qualification programs could still exist, particularly given that the TRID rule prohibits a creditor that has received an application from requiring verification documents before providing a Loan Estimate.
The CFPB staff advised that consumers may voluntarily provide verification documents before receiving a loan estimate, so creditors can continue to provide preapprovals and pre-qualifications.
Construction to Permanent Loans
The industry has asked for guidance on how to disclose one-time close construction-to-permanent loans and, in particular, has asked for samples of completed Loan Estimates and Closing Disclosures. Although the CFPB staff did not provide any such samples, the staff advised that creditors can follow the guidance in Regulation Z 1026.17(c)(6) and the related commentary. In particular, the CFPB staff advised that the creditor can choose to disclose the construction phase and permanent phase separately, and would disclose each phase in a separate Loan Estimate and Closing Disclosure.
Settlement Service Provider List With Added Service
The CFPB staff addressed the settlement service provider list requirement when, based on changes or a borrower request, a service is added. Like Regulation X, under the TRID rule when a creditor permits a borrower to shop for a service the creditor must provide a written settlement service provider list that identifies at least one provider for each applicable service.
The CFPB staff admitted that the TRID rule does not expressly address the settlement service provider list requirement in the context of a service being added after the initial list was issued. The staff advised that a creditor may elect to (1) update the prior settlement service provider list by including the additional provider; or (2) issue a new settlement service provider list that identifies only the additional provider. The staff also advised that if the creditor elects not to provide an updated or new settlement service provider list, then the charge for the applicable service would be subject to the 0 percent tolerance (apparently on the basis that the creditor was not following the procedure to allow a consumer to shop for the provider).
HUD-1 Comparison Chart for Tolerance Assessment
The CFPB staff confirmed that the closing Disclosure does not contain a disclosure like the Comparison of Good Faith Estimate (GFE) and HUD-1 Charges disclosure in the HUD-1 to assess compliance with the tolerances. The staff advised that under the TRID rule creditors must assess compliance with the tolerances “off sheet”.
Simultaneous Title Policy Issuance Disclosure Approach
The CFPB staff addressed the approach in the TRID rule, much criticized by the industry, for the disclosure of title insurance premiums when there is a simultaneous issue rate. Under the TRID rule, the lender’s policy amount must be disclosed as the full lender’s policy without any adjustment for a simultaneous owner’s policy, and the owner’s policy amount must be disclosed as the sum of the owner’s policy and simultaneous issuance amount, less the full amount of the lender’s policy. The CFPB staff advised that the CFPB still believes this is the best approach, given that in situations in which only lender’s title insurance is purchased the approach shows the full amount of the lender’s policy.
The CFPB staff then addressed situations in which the seller has agreed to pay for the actual cost of the owner’s title insurance policy. In such cases, if the seller is shown as paying the amount of the owner’s policy as disclosed in the closing disclosure, the amount would be less than the actual cost of the policy. The staff advised that there are three methods to show the full amount that the seller actually will pay. In addition to showing the seller paying the disclosed amount of the owner’s policy:
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The remainder could be disclosed as an additional amount paid toward title costs by the seller.
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The remainder could be disclosed as a general seller credit in the summary of transactions section.
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The remainder could be disclosed as a seller credit for the remaining amount of the owner’s title policy in the summaries of transactions section.
The staff noted that the third method is a method suggested by the industry.
Your Home Loan Toolkit
The CFPB staff addressed the CFPB publication Your Home Loan Toolkit, which replaces the Settlement Cost Booklet. The CFPB staff advised that a creditor would not satisfy the requirement to deliver the Toolkit to loan applicants by posting the Toolkit on its website. The staff also advised that industry members may place their company logo on the Toolkit.
