Owner's Title Insurance & the Loan Estimate

Posted By: Puzzled

Owner's Title Insurance & the Loan Estimate - 02/11/15 08:51 PM

I am a little confused on whether we are required to disclose owners title insurance on purchase transactions. Currently we are required to do this on the GFE.

Block 5, “ Owner's title insurance. ”—In this block, for all purchase transactions the loan originator must provide an estimate of the charge for the owner's title insurance and related endorsements, regardless of whether the providers are selected or paid for by the borrower, seller, or loan originator. For non-purchase transactions, the loan originator may enter “NA” or “Not Applicable” in this Block. The charge shown in this block is subject to an overall 10 percent tolerance as described above.

But from reading Section 1026.37(g)(4) it appears that we are only required to disclose if we are aware per the contract that the customer is likely to pay the charge. In our area it is typical for the seller to pay for the buyer's owners policy so this should be reflected in the P & S contract.

Am I way off here?
Posted By: John Burnett

Re: Owner's Title Insurance & the Loan Estimate - 02/11/15 09:37 PM

From .37(g)(4):
...amounts in connection with the transaction that the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate,...

That language appears to include situations in which the seller agrees to pay for owner's title insurance.
Posted By: Puzzled

Re: Owner's Title Insurance & the Loan Estimate - 02/12/15 12:00 AM

What I am getting hung up on is the "likely to pay." Also included is contracted with a person other than the creditor or loan originator to pay at closing. This statement still implies that it is the buyer/borrower is will be paying not the seller.
Posted By: John Burnett

Re: Owner's Title Insurance & the Loan Estimate - 02/12/15 02:14 PM

The "likely to pay" wording is related to the lender's knowledge of customary practices in the area in which the property is located. In some areas, buyers routinely obtain owner's title coverage. In others, the practice may not be routine. If it's customary in an area for buyers to pay for the coverage and the lender has no documentation or other information to the contrary, an estimate should be provided. Take a look at comment 19(e)(3)(iii)-3 for some additional info on this perspective.

On the other hand, if the lender knows that the buyer has contracted to pay for an owner's title policy at closing, you must include an estimate.
Posted By: Puzzled

Re: Owner's Title Insurance & the Loan Estimate - 02/12/15 05:50 PM

This makes sense! Thanks for responding & the citation.
Posted By: raitchjay

Re: Owner's Title Insurance & the Loan Estimate - 02/12/15 06:18 PM

John, is it safe to say that always including OTI on purchase transactions on the LE (as we currently do with the GFE) would be a safe and sound practice, not subject to criticism?
Posted By: raitchjay

Re: Owner's Title Insurance & the Loan Estimate - 02/18/15 03:55 PM

Hate to do this, but.....bump.
Posted By: John Burnett

Re: Owner's Title Insurance & the Loan Estimate - 02/18/15 07:13 PM

Yes. If you analyze it, including the OTI in block H and labeling it optional is a no-risk deal as long as you provide a good-faith estimate of the cost. If the borrower doesn't want OTI, you drop it from the CD. If the borrower does want it, you put the actual cost on the CD (assuming you can get that number; otherwise, you get as close as you can and redisclose later at no risk of penalty), at no risk of a tolerance violation unless you can't demonstrate that you used a good faith estimate.

The only risk in doing this comes when you provide a SWAG number, one you pulled out of the air (or worse), and there's a difference at closing.
Posted By: raitchjay

Re: Owner's Title Insurance & the Loan Estimate - 02/18/15 07:17 PM

Thank you John.
Posted By: John Burnett

Re: Owner's Title Insurance & the Loan Estimate - 02/07/18 06:13 PM

My attention was turned back to this old thread. I'd add this -- If you know the seller is paying for OTI, you can omit it from the loan estimate. However, if the property's in a jurisdiction where there is a simultaneous issuance discount on LTI, and the seller is paying for OTI, there is a positive cash flow to the borrower/buyer, and you'd give a more accurate LE if you disclose the LTI and OTI using the Bureau's required formula and then show a seller credit for the actual OTI premium estimate.
Posted By: BA13

Re: Owner's Title Insurance & the Loan Estimate - 03/07/18 08:23 PM

To confirm, if I have:

Full owners $536
Full Lenders $539
Sim. Credit $271

The Lenders title work would be $536+$271-$539 = $268 and would be reflected in Section B or C on the LE & CD?
We would reflect $536 in Section H?
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 03/07/18 09:49 PM

Sim. Credit $271 where did this come from? And what is the simultaneous discount in your State?
Posted By: BA13

Re: Owner's Title Insurance & the Loan Estimate - 03/07/18 10:11 PM

Oops, the simultaneous credit is half of the full lenders and I should have stated $269.50. Using the TRID math with the correct figures, we would disclose $266.50.
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 03/07/18 10:48 PM

Then it would be $539 in Section B or C for the LTP and $263.50 for the OTP in Section H.

The owner’s title insurance premium is calculated by taking the full owner’s title insurance premium, adding the simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage.
Posted By: BA13

Re: Owner's Title Insurance & the Loan Estimate - 03/08/18 03:25 PM

Aarrgh! After I left work last night I realized I stated it incorrectly. Yes, LTP would be 100% and TRID math would be for OTI. Thanks for the clarification Randy!!
Posted By: ComplyCycle

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 03:50 PM

I'd like to revisit this thread, please.

Basically, we have a proposal to have two processes: 1. omit OTI from LE where we have a purchase contract specifying that the seller will be paying for OTI, 2. use the CFPB's required formula to list OTI and LTI as buyer paid expenses when we do not have a purchase contract or the purchase contract is not clear.

First of all, would both of these be acceptable processes? Second, is there any concern regarding having multiple LE disclosure processes?

Thank you.
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 04:26 PM

No problem, but you are going to have to calculate the additional seller credit for disclosure in process #1.
Posted By: ComplyCycle

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 04:58 PM

Thank you for the quick response. Are you stating that we will need to list the seller credit on the LE in process #1 above?
Posted By: Hawk

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 05:20 PM

Technically owner's title is required to be on the loan estimate regardless of who is paying for it.
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 05:23 PM

If you know there is going to be a seller credit in the transaction, the LE has to be based on that knowledge.
Posted By: ComplyCycle

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 06:35 PM

Hawk - what citation are you basing this off of? How are you handling this if the seller is paying for OTI? Thank you.
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 08:20 PM

Hawk - I would like to know also. You might want to review:

37(h)(1)(vi) Seller credits.

2. Seller credits for specific charges. To the extent known by the creditor at the time of delivery of the Loan Estimate, specific seller credits, i.e., seller credits for specific items disclosed under § 1026.37(f) and (g), may be either disclosed under § 1026.37(h)(1)(vi) or reflected in the amounts disclosed for those specific items under § 1026.37(f) and (g). For example, if the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay half of a $100 required pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $50 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose the required pest inspection fee as $50 under § 1026.37(f), reflecting the specific seller credit in the amount disclosed for the pest inspection fee. If the creditor knows at the time of the delivery of the Loan Estimate that the seller has agreed to pay the entire $100 pest inspection fee, the creditor may either disclose the required pest inspection fee as $100 under § 1026.37(f) with a $100 seller credit disclosed under § 1026.37(h)(1)(vi) or disclose nothing under § 1026.37(f), reflecting that the specific seller credit will cover the entire pest inspection fee.
Posted By: Hawk

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 09:39 PM

Here is where I read it...

https://www.elliemae.com/rt-faq?part=5&question=51
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 02/12/19 09:57 PM

I believe that is saying the exact same thing that I have said, is it not???

or as a Seller Credit under the "Calculating Cash to Close" section.
Posted By: ComplyCycle

Re: Owner's Title Insurance & the Loan Estimate - 02/13/19 01:47 PM

I am sorry to keep revisiting this, but I want to ensure I understand our disclosure requirements.

If the standard realtor purchase contract in our state contains default language requiring the seller to pay for OTI, can we always omit it from the buyer's cost and include a seller credit? Or should we be looking for specific additional language in the contract that the seller is paying for OTI?

As always, thanks so much for the feedback and assistance. It's incredibly helpful!
Posted By: rlcarey

Re: Owner's Title Insurance & the Loan Estimate - 02/13/19 01:56 PM

If the seller customarily pays for the OTI and that language is the default in your standard real estate contracts in your State, then when you issue your LE, you have the ability to disclose the LE reflecting the seller paying for the OTI, if you don't have a copy of the contract at that time. If at a later point you get an actual purchase contract and find out that the buyer and seller have modified the standard contract and the buyer is assuming responsibility for the payment of the OTI, that would be a changed circumstance. However, since neither OTI in Section H or seller credits are subject to any tolerance test, your only responsibility would be to update that information on the next disclosure that you issued to the borrower.