In just a few weeks, the Good Faith Estimate that was created by HUD in 2010 will be replaced by CFPB’s Loan Estimate. The Loan Estimate will also replace the “Reg Z/Truth in Lending” document. When the samples of the “Loan Estimate” where first revealed, I was pretty excited. It appeared to be a significant improvement over the well intended but flawed 2010 Good Faith Estimate, which caused a lot of confusion for consumers. As I’m learning more and more about CFPB’s Loan Estimate, I can see that we are all in for a huge adjustment as we deal with not only implementing new documents and procedures, but also dealing with the flaws to the document and the procedures to the document.
Here are just a few things I’m finding that may cause confusion to consumers with regards to title fees.
The CFPB is requiring that title insurance fees not reflect any discounts. From their TRID-RESPA guide:
The amount of the premium for the lender’s title insurance coverage must be disclosed without any adjustment to the premium that might be made for the simultaneous purchase of an owner’s title insurance policy.
This means that instead of disclosing the simultaneous issue policy rate that borrowers receive when they are buying a home, they will see the “general scheduled” rate, which is higher. Per First American Title’s King County rate schedule, a loan amount of $400,000 has a simultaneous issue fee of $699. With the new Loan Estimate (LE), lenders are required to quote the general schedule rate of $1354 even though the borrower will NOT be paying that higher rate. A simultaneous issue rate is provided automatically to buyers when there is an owners policy and lenders policy, which, if you’re buying a home and you’re getting a mortgage, you will receive the simultaneous issue rate every time.
EDITORS NOTE: I’m receiving information that it might be the owners title policy (vs general schedule rate) that is required to be quoted on the LE. Either way, the fee is not accurate to what the borrower will actually pay.
The owners title policy, which is typically paid for by the Seller in Washington state, is also required to be disclosed on the Loan Estimate. HUD’s 2010 GFE also required this non-buyer fee to be disclosed, regardless of what is customarily charged. I was hopeful that with the new disclosure, CFPB would only have the owners title policy fee reported in states where the buyer actually pays for that cost.
This is putting mortgage professionals in the position to where we will have to tell our clients, “I know I’m quoting $1354 for your title, but it won’t really be that high. It’s going to be $699 plus tax…trussssssst me.”
It’s mind boggling to me that we cannot quote what the actual fee is when title fees are filed with the state. We can’t make them up! Most, if not all title companies in the greater Seattle area have online calculators to help assure that we get very accurate title fees.
October 3, 2015, when the new Loan Estimate is required, is around the corner, I’ll be sharing more information about the new disclosures… stay tuned!
[…] I would like to tell you that CFPB’s Loan Estimate is dramatically improved and will make bring a sigh of relief to consumers and lenders across the country…that remains to be seen. I already see troubling similarities between the Loan Estimate and the retired 2010 GFE, including not being able to truly disclose accurate title fees to the borrower. […]