I have a question regarding how to properly disclose a seller credit on the Closing Disclosure when a discount is given for the simultaneous purchase of an owner's title insurance premium. For example -

If a lender's title insurance policy actually costs $1,500, but is discounted to $200 for the simultaneous issuance and the owner's title insurance costs $1,900, but is disclosed as $600 per the regulation ($1,900 +$200-$1,500), how is the seller credit shown on the Closing Disclosure if the seller pays the owner's title policy? The confusion is caused because the bank will actually pay the title company $200 for the lender's policy and $1,900 for the owner's policy, but will disclose $1,500 for the lender's policy and $600 for the owner's policy and we are unsure how to disclose the specific seller's credit for each when the seller states they will pay the full owner's policy (they will expect to see a $1,900 seller credit for the owner's policy).

http://www.bankersonline.com/forum/ubbth...336#Post2018336
This is a link to a thread where we talk about disclosing the "seller paid" portion as a general seller credit on page 3.

So it should look similar to today's HUD where the charges are listed in the borrower's column, but a credit is given on page 3 (or page 1 currently). I'm not sure what other states are doing, but Texas title companies are going to issue an additional disclosure at closing that shows the ACTUAL fees & how they are split. Otherwise the seller may be confused as to why their credit is so much higher than the disclosed amount. Apparently the CFPB did not consider sellers in all their new rules however.

Thank you, @taylor!

I also found this on the ABA's website from a Q&A session they summarized -

With regard to the question of how the creditor shows the allocation of costs when the seller has agreed pay for the owner’s title insurance cost as part of the purchase and sale contract with the consumer—Because the rule provides that the incremental cost of the owner’s title insurance is to be disclosed on the LE and CD, simply shifting the incremental cost of the owner’s title insurance to the seller on the CD may not completely reflect the amount that the seller has agreed to pay for the owner’s title policy. If there is an additional amount on the seller’s credit, there are at least three ways in which the additional credit between the seller and the consumer may be disclosed on the CD.
· First, the remaining credit could be applied towards any remaining title insurance costs, including the lender’s title insurance costs. See § 1026.38(f) & (g).
· 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 CD. See § 1026.38(k)(2)(vii).
· Third, some in the industry have suggested providing a credit specifying the remaining amount for the owner’s title insurance cost again in the summaries of transactions table on page 3 of the CD. See § 1026.38(t)(2)(viii).
Any one of these three methods to disclose the remaining amount of a seller’s credit for an owner’s title policy is permissible under the final rule.

Oh thanks, that makes sense! Personally I like the general credit method, but it may make sense to use the other methods in different states. I did not realize how different each state is when it comes to title insurance!

Anyone is welcome to use our free online CFPB Simultaneous Issue Owner and Lender Title Premium Calculator:
http://www.ppdocs.com/Tools/TRIDTitleins.aspx

Mike Patterson

Mike, I am not sure how I missed your response back in July, but THANK YOU so much!! Your calculator is awesome! I had actually set up an Excel document that basically does the same thing, but your online calculator is much easier to use & better formatted. Wish I had seen this earlier! =)

Mike (or anyone else),

I have a question on your calculator. On the LE, it puts the amount paid by the seller as a negative number is "Adjustments and Other Credits". Wouldn't the credit go in "Seller Credit"?

Here is what is in the reg for "Adjustments and Other Credits" and it says seller paid items don't go here:

(vii) Adjustments and other credits. The amount of all loan costs determined pursuant to paragraph (f) and other costs determined pursuant to paragraph (g) that are paid by persons other than the loan originator, creditor, consumer, or seller, together with any other amounts that are required to be paid by the consumer at closing pursuant to a purchase and sale contract, disclosed as a negative number, labeled “Adjustments and Other Credits”;

I don't disagree, but many lenders tell me they are concerned with Fannie's current "Interested party contributions (IPCs)" limit e.g. 3% for principal residence loans over 90% LTV. The "37(h)(1)(vi) Seller credit" definition could fit, but placing it in "Adjustments and Other Credits" is less punitive to the borrower.

Additionally, the Texas Land Title Association (TLTA) is circulating samples that indicate that is where they expect to see it.

I don't think it is going to matter to the CFPB once they understand the possible cost to the consumer.
___________
My head hurts too...

Has anyone dealt with a title policy reissue credit yet?
(If a previous policy had been written within the last three years for the subject property there is a reissue credit.)

Full Owners Policy = $1206
Simultaneous Iss = $40
Full Lenders Policy = $1094

Disclosed as Lenders = $1094 and Owners = $152

If there is $241 reissue credit would this affect any of the above?

fyi Fannie Mae Releases TRID FAQS

October 20, 2015, FNMA releases a TRID FAQ, as an accompaniment to LL-15-06. This is in effort to assist with understanding FNMA requirements on TRID transaction compliance.

https://www.fanniemae.com/content/faq/trid-faqs.pdf
https://www.fanniemae.com/content/announcement/ll1506.pdf

"Q12. Are discounts for a simultaneous title policy considered an interested party contribution (IPC)?
No. In instances where there are state-mandated or -authorized discounts for simultaneous
issue of lender and owner title insurance policies, the discount in the premium would not be
considered in the interested party contribution calculation under the Selling Guide."

Yes, a reissue credit may affect this. If you use the Tool on the PPDOCS website it shows you exactly how it should show on the LE and the CloD!!! An awesome tool and much better than the one I came up with. It actually figured a very complicated one we had last week that we were stumped until we did the calculator.

Resurrecting this thread with a related question -- Has anybody heard that if the Owners policy is paid by the seller according to an agreement, then the LE and CD would not have the label "Optional" beside it?