This will be the third version of this post since I started writing The Mortgage Porter in late 2009. Things have overall changed for the better for consumers when it comes to the closing procedure. Last month, two new disclosures, the Loan Estimate and Closing Disclosure, were introduced replacing the Good Faith Estimate and HUD-1 Settlement Statement effective for loan applications dated October 3, 2015 and after. This post applies to loans originated after October 3, 2015. If your loan application is dated prior to October 3, 2015, you should refer to this post instead.
I’m often asked by my clients if they can select their title or escrow provider and the answer is a big YES! Some feel that title and escrow fees are all within a close range and this simply isn’t the case. I have seen fees for these services vary by hundreds of dollars.
Here are some pointers you may find helpful if you are interested in shopping for your title or escrow provider:
Know how your rates are priced. With escrow on a purchase transaction, you will need to provide the sales price and let the escrow company know if there’s going to be a second mortgage or if a courtesy signing may be required or if it’s a short sale. It’s important to ask the escrow company for ALL of their fees. I’ve received quotes from an independent escrow company in Ballard where they try to pad their quotes with a $200 “miscellaneous fee” just in case something “pops up” during the transaction. Ask the escrow company if the fee is the “full” fee or your “half”. Typically, in Washington the buyer and seller split the escrow fee.
NOTE: If your escrow provider is a title company, most offer a significant discount on their title fees when title and escrow are at the same company with a purchase. This discount often applies to both buyer and seller. Using two different title companies for title and escrow services seems like money flying out the window to me.
If your transaction is a refinance, typically the escrow company just needs the loan amount. As with a purchase, ask for “all” their fees. Do they charge a reconveyance processing fee, wire fee or courier fees (also possible with purchase transactions).
Have the escrow company provide your quotes in writing – they should be able to easily email this to you.
With title insurance, the company will need to know your sales price and loan amount. For a refinance, they just need your proposed loan amount. They will also need to know which county the property is located. In Washington, the seller typically pays for the owners policy and the buyer pays for the lenders policy. With a refinance, the buyer pays for the lenders policy.
Ask for possible discounts. Some title companies will provide an additional discount if you title is placed electronically via their website.
Start early. You’ll want to obtain your quotes before your purchase and sales agreement is drafted. If you’re involved with a purchase transaction, real estate agents will try to direct where the title and escrow services are placed. Sometimes this is a legitimate concern where the agent has received excellent service from their escrow and title team and/or it could be that one of the real estate brokerages have an ownership interest in the title or escrow company (see below). Regardless, the consumer does have the right to select these service providers. Some title or escrow companies may insist on needing a signed purchase and sales agreement before providing a quote which is not needed if you provide the above information (sales price, loan amount and county the property is located in).
If your transaction is a refinance, let your mortgage originator know that you would like to shop for these services at your loan application.
NOTE: Mortgage companies may have ownership interest in an escrow company as well. You are not required to use them – it is your choice!
Ask for recommendations. Talk to your real estate agent and mortgage originators about who they like to work with and why. Does their company have an ownership interest in these providers? Will the escrow company do amazing back flips to make sure your transaction closes smoothly and on time? Ask your family or friends who have recently closed a transaction, who they used for title or escrow providers.
Know the relationships. A few of the big real estate brokerages have interest in title and escrow companies. In the greater Seattle area, we have the following large real estate brokerages who continue to maintain an interest in title or escrow companies:
- Coldwell Banker Bain: Rainier Title; and Escrow Professionals of Washington (EPOW)
- Windermere: CW Title (formerly known as Commonwealth of the Pacific)
According to Northwest Title Company’s website, one or more principals at Routh, Crabtree, Olsen, PS, a firm located in Bellevue which does significant REO (foreclosure) escrow business, have interest in Northwest Title Company.
Higher fees does not always equate to better service. I’ve seen some escrow companies that charge significantly more than what I would consider to be a fair market price. They may try to justify this because they have attorneys on staff or because the property is a short sale or foreclosure – ask why. I have no problem with anyone being compensated for work performed as long as it is a fair market price.
Some companies make it easier for you to shop than others with rate sheets or calculators posted on their websites. I still recommend giving the title or escrow company a friendly phone call followed up with an email to obtain your personal quote in writing. I’m amazed at the lack of service I sometimes find when I call a title or escrow company to obtain a quote for my Good Faith Estimates.
I used to have my preferred title and escrow providers listed on this blog, however DFI felt that this was a potential violation of respa since they viewed it as free advertising even though I had a link to all title and escrow companies and encouraged consumers to shop.
Bottom line: consumers are paying for these services and are free to exercise their right to shop for and select their title and escrow providers.
With more short sales taking place, many home buyers are having to wait months before their closing date is here. The same may be true for those who are buying homes that are being constructed. With a delayed closing, there are some additional risk involved that buyers should be aware of so they can take action, when possible, to protect themselves. Some risks, borrowers have more control over than others. [Read more…]
EDITORS NOTE: With the introduction of CFPB’s Loan Estimate and Closing Estimate, some of the information below may not apply if your loan application was originated October 3, 2015 or later as the 2010 Good Faith Estimate and HUD-1 Settlement Statement have been retired.
Watch for an updated post soon! Click here for the updated post.
When I originally wrote this post back in January 2007, we didn’t have the Good Faith Estimate that HUD created and implemented in 2010. Although this GFE has caused greater confusion and has overall been a failure (a new version is should be available in 2012), the one positive feature about the 2010 GFE is that lenders are bound by what they quoted on their last Good Faith and page three of the HUD-1 Settlement Statement clearly compares what was quoted by the Mortgage Originator and what the final fee at signing is. In addition, there are certain tolerances that limit how much more a fee at closing can be for some of the lender fees.
Will Other Big Real Estate Brokerages Abandon their Joint Ventures with Title, Escrow or Mortgage Companies?
I’m hearing this morning that local real estate brokerage, John L. Scott has decided to terminate their joint venture business arrangement with Rainier Title and Escrow. After seven to eight years of touting that business arrangements like this benefit the consumer, apparently they’re singing another tune.
My stance has always been that arrangements such as this do not benefit the consumer. They can actually prevent consumers from receiving the lowest title and escrow rates and it discourages the consumer from shopping when the real estate agent does their best to please their broker and keep that title or escrow with their pre-arranged company. Typically the real estate companies who have business arrangements discourage their real estate agents from using any other company and will often make it difficult (if not impossible) for outside companies to attempt to have contact with their real estate agents.
So if the argument big companies like John L. Scott, to hold interest in title and escrow companies, like Rainier, is that it’s an advantage for the consumer – what’s changed? Could it possibly be that these arrangements are no longer the cash-cows they once were for the managing brokers?
It will be interesting to see if the other local real estate companies who have title and escrow business arrangements, like Windermere and Coldwell Banker Bain, follow John L. Scott.
This past month, I have met with more clients than "usual". A typical transaction for me has been pretty much completed over the internet via my secure on-line loan application, with email and over the phone. It was an exception for me to meet clients. This was not because I didn't want to, I simply wasn't asked to and clients opted for the convenience offered by the internet.
This month, I had a spike in face to face meetings with clients. I'm not sure if this is going to be a continued trend or if May's meetings have been some sort of fluke…I do know I really enjoy meeting my clients "IRL" when our schedules allow. Three of these meetings took place when I attended the signings at escrow offices from Federal Way to Lynnwood, and one at a restaurant near SeaTac Airport. All three were first time home buyers. I wasn't really "needed" beyond being there. With having the background of managing an escrow branch for Washington Title, it's crucial to me by the time my clients reach the signing table, their questions about mortgage have been answered. A home buyer or someone who's refinancing shouldn't have to ask their escrow officer about the terms of their mortgage…their mortgage originator should have fully educated their client well before this point. With that said, I see nothing wrong with a borrower asking the signer to explain the terms – the borrower should, however, already understand their loan program.
Regardless of if I'm attending a signing or not, I'm always available to answer any questions that may pop up. And my Processor and I always review the estimated HUD-1 Settlement Statement before my client's appointment to make sure it's as accurate as possible (assuming the escrow company provides it to us, which they do 99% of the time).
Will your mortgage originator join you at the signing table? If this is important to you, then it is something you need to ask a potential mortgage originator BEFORE you decide on which lender you're going to work with. Here are more tips on things to consider when selecting the mortgage professional who will be helping you with your next home purchase or refinance.
The Talon Group, a local escrow and title company, addresses which utilities are required to be paid at closing.
EDITORS NOTE: This is an updated version of this post which was written at a time when mortgage originators could more freely use the Good Faith Estimate as a tool to communicate with their clients. Due to HUD's 2010 GFE and the accompanying restrictions, this is no longer probable. In fact, nowhere on today's Good Faith Estimate is funds for closing disclosed! Seattle area borrowers and homebuyers can still avoid surprises at escrow…hopefully these "updated" tips will help!
Your closing date on your new home is a couple of days away, your feeling a little case of the jitters…the last thing you want to deal with is to be surprised with what funds are due at your signing appointment with the escrow company.
Here's how you can clear up the funds to close issue:
- Your Mortgage Professional can provide you with an updated worksheet atleast 5 days before closing to review your funds due at closing. The worksheet may seem similar to what was used when you were obtaining quotes from your mortgage professional prior to locking or being in contract with your purchase and sales agreement.
- Verify with your Mortgage Professional if the worksheet is factoring in your earnest money deposit, deposits with the lender and any other credits (from the seller or real estate agents, for example).
- Request your Mortgage Professional obtain an estimated HUD-1 Settlement Statement from the escrow company at least two days before closing to review it for any corrections or modifications for both of you to review.
- Bring a copy of your Good Faith Estimate with you to your signing appointment. Page 3 of your estimated HUD-1 Settlement Statement will reflect if there are any discrepancies between what was quoted on your last Good Faith Estimate (which can only be reissued under specific circumstances). Some fees have different tolerances which the mortgage company may be held responsible to "cure".
What if there are errors? Try not to panic. Depending on how much time there is prior to the scheduled funding, the lender may be able to redraft loan documents if needed. A majority of our loans are funded within our credit lines so unless it involves someone having to be re-approved for a higher loan amount, loan documents can be emailed fairly easily to the escrow company. Often times, it could just be correcting a few documents and not the entire loan package.
The closing table can be an emotional time. It's in your best interest to have as many of the details worked as far in advance as possible. If you have questions or concerns, speak up. This is not the time to be bashful. This is your mortgage and one of the largest financial transactions you will make in your lifetime…get involved and take action!