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.
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