Learn More - Click Here!

Thread Options
#2074071 - 04/14/16 04:27 PM Owner's Title - not optional
trout22 Offline
Gold Star
Joined: Nov 2004
Posts: 313
I have been told that in Texas, purchasing both Owner's and Lender's Title creates a significant discount for the borrower.
In our shop, Lender's Title is required (by policy) and Owner's Title is optional. However, due to the fact that the combined cost amounts to only a few hundred dollars difference, our borrowers always take both to fully protect themselves and their investment.

Is there anything in Texas law that would prohibit us from requiring as part of our internal policy that Owner's Title is required? Or most likely required when Lender's Title is required.

In reading the commentary [1026.37(f)(2)-4], we must disclose the full price without the simultaneous discount. This creates a significant over-disclosure of the fees involved. However, if they are both required, it would seem to make sense that we could use our best guess estimates to keep the Closing Costs at a more accurate level. This is a question for CFPB but first wanted to bounce the idea off my colleagues with some experience navigating the laws at the state level.

Thanks!

Return to Top
#2074086 - 04/14/16 04:48 PM Re: Owner's Title - not optional trout22
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
I don't think your understanding is correct.

If the borrower buys an owner's title policy, they pay the same amount whether or not the bank buys a lender's title policy.

If the borrower buys an owner's title policy, then the lender gets their policy for $100.

I'm not sure how you can force a borrower to buy something that is designed to only protect them.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2074087 - 04/14/16 04:51 PM Re: Owner's Title - not optional trout22
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
Sorry, Didn't finish answering your questions:

This creates a significant over-disclosure of the fees involved.

If that is the case, then you are not calculating the simultaneous issue discount process correctly.

There is no guessing when it comes to the cost of title insurance in Texas. The rates are set at the State level.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2074412 - 04/15/16 08:22 PM Re: Owner's Title - not optional trout22
trout22 Offline
Gold Star
Joined: Nov 2004
Posts: 313
If you could help me better understand the Texas fee structure and simultaneous issue, that would be very much appreciated!!
Maybe I have talked myself in a circle here.

I'm stuck on the fact that if the borrower purchases both simultaneously, the LENDER'S title is $100 (plus any applicable endorsements). 1026.37(g)(4) -2 covers when a special rate is given on the OWNER'S title policy.

It seems that the Form T-64 (the Texas Disclosure provided by the title company) explains that in a simultaneous purchase, the CloD will show a lower owner's premium and higher loan policy premium than the figures reflected below due to inconsistency between Texas and Federal law; but that the totals will match. Is this possibly what allows Texas to take the commentary and apply in inverse?

Thank you in advance for your assistance!




.

Return to Top
#2074432 - 04/15/16 09:30 PM Re: Owner's Title - not optional trout22
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
A. If a full Lender’s title policy is $3,000 prior to any simultaneous discounts
B. If the full Owner’s title policy is $4,000
C. If the Owner buys a title policy then the Lender gets their policy for $100 due to a $2,900 simultaneous discount offered.
Accordingly, the Lender’s policy must be disclosed as $3,000 and the Owner’s title policy has to be disclosed as $4,000 + $100 - $3000 = $1,100 for a total cost of $4,100.
So, on the LE, two different scenarios could play out.
1. If the bank is not aware that the seller is going to pay for the owner’s title policy, the bank would disclose the cost of the lender’s title policy as $3,000 in Section C (if the bank allows the consumer to shop for title insurance) and the owner’s title policy would be disclosed in Section H as $1,100 and would indicate (optional).
2. If the bank is aware that the seller is committed to pay for the owner’s title policy, such as though the review of the sales contract prior to the issuance of the LE, then the bank would disclose the cost of the lender’s title policy as $3,000 in Section C and the owner’s policy would not be reflected on the LE.
The closing disclosure would reflect the following:
1. The Lender’s title policy would be reflected as $3,000 in Section B, if the borrower selected a title insurance provider from the bank’s preferred list or in Section C if the consumer selected a title insurance provider not on the bank’s preferred list. The owner’s title insurance would be listed in Section H in the Seller-Paid (at closing) column as $1,100.

2. Since there will be an additional seller credit for $2,900 for the remainder of the actual cost of the owner’s title policy, 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). In this example, $100 could be listed in the borrower paid column and $2,900 could be listed in the seller paid column for the Lender’s Title Policy.

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). The $3,000 lender’s title policy would be reflected as $3,000 as borrower paid.

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). The $3,000 lender’s title policy would be reflected as $3,000 as borrower paid.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2074451 - 04/18/16 12:13 PM Re: Owner's Title - not optional trout22
trout22 Offline
Gold Star
Joined: Nov 2004
Posts: 313
Thank you RLC! Once you walked me through the simultaneous calc with actual numbers everything clicked into place (I know, that's exactly what the reg said in the first place but apparently I couldn't see the forest for the trees). I greatly appreciate your help.

Return to Top

Moderator:  Andy_Z