In our market, the Owner's Title is a seller paid fee and is not required by the bank. I know it needs to be listed on the LE at Title - Owner's Policy (optional) but can we list a seller credit to offset this fee?

Also, we also have deep discounts for lenders title when there is an owners policy purchased. I know we must disclose on the LE the undiscounted premium for lenders title as if there wasn't an owner's policy. What about on the CloD? Do we only list what the actual premium is for the lenders title and list the actual premium for the owner's policy? A national title co is saying that the undiscounted premium must appear on both. To me that is harming borrowers because they are now paying more for their lenders policy than they were previously.

Can anyone shed light on these two questions?

Thanks!

What they actually pay and how it is disclosed under TRID are two separate issues that needs to be haggled out between the buyer and seller and title company. In Texas, the department of insurance has issued a form that title companies must use to disclose actual costs to the buyer and seller.

For the 2nd part of your question - They would only pay (and the bank disclose) the actual cost that is being paid but you have to disclose it differently than most title companies will bill it as. There is a formula for how you must disclose the title insurance - for the split between an owners and lenders policy. You have to show the owners policy as the one with the discount and the lenders at the full price. The formula is: Full owner's title policy premium + simultaneous issuance Lenders policy premium(and any endorsements) - full lender's title policy premium(and any endorsements) = owners title policy premium (itemized in loan estimate section H). As I understand it, this is how you disclose on both the loan estimate and closing disclosure.

It is very confusing and hard to explain....

rrush - Yes that is correct. But the issue is if the seller agrees to pay for the owner's title policy, that charge is not what is shown on the LE or CloD. So the bank is going to have to show the additional credit from the seller to the buyer in some manner to offset the lender's title policy charge that is shown as it is inflated by the discount.

I'm going to step on the soapbox here for a moment! smile

I'm not disagreeing with what you say but why would they write a requirement that had some convoluted formula to calculate what to disclose for discounted title insurance instead of what the actual fee would be on the closing disclosure? I understand why you would possibly want to on the LE, since there could be purchases where an owner's policy would not be purchased so you don't want to severely undershoot the lenders. However.....if the owner's is purchased, how does it not make sense to disclose the ACTUAL cost of owner's along with the ACTUAL cost of the lenders?

Ask the CFPB.

It's their way of trying to indirectly regulate the title insurance industry. CFPB doesn't think it's fair to the consumer to give the simultaneous discount to the lender, so if lenders have to start disclosing it differently then there would be pressure on the title companies to change their fees.

That's a little cynical, don't you think? The simple explanation is that if you disclose the discounted cost for the simultaneous issuance of the lender policy and the actual cost of the owner's policy (which isn't discounted), the borrower is led to believe he can save a bundle by not getting the OTI. Then at closing the undiscounted price of the LTI policy gets into the settlement and suddenly the borrower is short.

I wanted to circle back around to this...

In a couple of our markets the standard sales contracts state something along the lines of "Owner's title policy, in the amount of the purchase price for the property, will be paid for by the Seller and issued to the Buyer after delivery of the deed."

I've read in another thread that if Owner's Title is agreed to be paid for by the seller in the contract then it doesn't go on the LE at all. Is this correct?

I want to know, too. It seems there were two different opinions on this. I'm thinking that if we know from the contract that the seller will purchase it, it should be on the LE as optional. Is the fee for this included in the closing cost total and then shown as a seller credit?

I am of the opinion that, if the buyer/borrower won't pay for it per the loan contract, you don't include it on the LE.

This amount is

Randy do you have an opinion on the best way to do this?

1.Seller credit under N for the full amount
2.Seller paid under H for the owner's title amount listed on the LE and the remainder as seller credit under N
3.Seller paid under H for the owner's title amount listed on the LE and the remainder as seller paid next to the title - lenders title

What about seller paid settlement fees? In our area the borrower and seller customarily split the fee 50/50.

1.If we don't have the purchase agreement should disclose 100% or 50% of the fee on the LE

If we do have the purchase agreement (prior to making the LE) and it shows the seller will pay 50%,
2.do we disclose 100% of the fee on the LE with a Seller Credit of 50%.

3.Or, do we disclose 50% of the fee on the LE.

The CFPB indicated in the Outlook Live Webinar from May 26, 2015 that there are at least three ways in which the additional credit between the seller and consumer may be disclosed on the Closing Disclosure. Any one of these three methods to disclose the remaining amount of seller's credit for an owner's title policy is permissible under the final rule.

a. First, the remaining credit could be applied towards any other title insurance costs including the lender's title insurance cost. See Section 1026.38(f) and (g).

b. Second, the remaining credit can be considered to be a general seller credit and disclosed as such in the Summaries of Transactions table on page 3 of the Closing Disclosure. See Section 1026.38(k)(2)(vii).

c. Third, some in industry have suggested providing a credit specifying the remaining amount for the owner's title insurance cost, again in the Summaries of Transactions on page 3 of the Closing Disclosure. See Section 1026.38(k)(2)(viii).

John, could you elaborate please?
If we're in a state where owners is the method by which the seller provides evidence of clean title to the buyer, are you saying we don't have to show the owners on the LE at all? Seller is responsible for the entire cost of the owners policy. Would we just show the discounted lenders then?

TR - What do you mean by "discounted lenders"? If you are in a simultaneous issue discount State, who pays for what does not impact how title insurance costs have to be disclosed.

Throw some actual figures at us. What's the undiscounted Lender's TI cost? What's the cost of LTI if there's a simultaneous issuance of LTI and OTI?

What's the undiscounted OTI premium? What is the seller paying?

The full lenders is 780
The full owners is 692.80
The simultaneous discount is 480
The actual Lenders is 300
The actual Owners is 212.80

So, John, if we know the seller is going to pay for the owners, how would we show this on the LE and CloD?

Further, apparently all title companies are NOT doing simultaneous discounts but rather appear to have flat fees for owners and title. Should that even be possible in what you're calling a simultaneous discount STATE, Randy?

Just when I think I have this TRID stuff down....

You only get one discount. The actual premiums on simultaneous issuance will be $300 for the lender's policy and $692.80 for the owner's. So the seller will pay $692.80.

Loan Estimate:
Disclosure of Lender's TI premium in Section B or Section C: $780.00
Disclosure of OTI in Section H $212.80
Seller credit (in Calc. Cash to Close table) $692.80

Closing Disclosure:
Lender's TI premium in Section B or C $300 borrower paid, $480 seller paid
OTI in section H $212.80, in seller column

--or --
Lender's premium in section B or C $780 borrower paid
OTI premium in section H $212.80 seller paid
Seller credit sections L and N $480 "Title - Balance of owner's title premium"

So how would you show on Closing Disclosure in the above sample if the OTP is split 50/50?

John, why would I show the Owners in H on the LE if the seller is going to pay for it?
I can't put (optional) because its' not. The offer to purchase states that the seller will provide it at their cost.
So can I just put the full cost of the lenders with a credit from the seller for the simultaneous issue discount?

Sorry to be so needy on this. It's just not clicking for me.

If you disclose the OTI on the LE at all, it has to be in Section H because it is not a cost that the lender is requiring as a condition of the loan. You should not use the "optional" description for the reason you provided -- it isn't optional. And there is only one approved way to disclose the OTI there when there will be a simultaneous discount of the LTI premium.

You do have the option of leaving the OTI off the LE altogether since it is not a cost the borrower will pay. In that case, you would list the full LTI in section B or C ($780 using the cost information provided earlier) and a seller credit in the Calculating Cash to Close table of $480.

John, how would you then prepare the CloD for this option? In the same way? Can you provide any regulatory support for this option? It is so much simpler, but doesn't follow the 1026.37(g)(4) comment 2 instructions for OTI. I'm not connecting the dots in how you are able to leave OTI off the CD entirely.

I had a conversation with a CFPB attorney in October about Owner's Title, and he said we could indeed leave OTI off the LE (since it is paid by the seller), but he said it would have to go back on the CD later regardless. I'm thinking about calling him back again to clarify that comment, so any regulatory support you can provide would be most appreciated.