Pub. 6 2018 Issue 1

title policy, the discount is technically applied to the lender’s title policy. The CFPB didn’t much care for this approach, though, and designed a specific formula for banks to use for disclosing title policies under the TRID rule. The rule as it stands today reads as follows: The premium for an owner’s title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender’s and an owner’s policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows: 1. The title insurance premium for a lender’s title policy is based on the full premium rate, consistent with § 1026.37(f) (2) or (f)(3). 2. The owner’s title insurance premium is calculated by taking the full owner’s title insurance premium, adding the simul- taneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage. 12 CFR 1026.37(g)(4)-2 In simpler terms, the lender’s title policy must be disclosed as the full undiscounted amount, while the owner’s title policy is disclosed as the cost of both the owner’s and lender’s title policies together, minus the cost of the full lender’s title policy. For those math types out there, this is what it looks like as a formula: Lender's Title = Cost of Lender’s Title without purchasing Owner’s Title Owner’s Title = (Owner’s Title + discounted Lender’s Title) – Cost of Lender’s Title without purchasing Owner’s Title For example, if the lender’s title policy on its own is $900, and a $1,000 owner's title policy is also purchased, the lender's title poli- cy is discounted to $100 and the owner's title policy remains at its full $1,000. Under the current TRID rule, disclosing lender’s title as $100 and owner’s title as $1,000 as it is actually charged would be incorrect. The correct way to disclose these facts is: Lender’s title policy = $900 Owner’s title policy= $200 [$1000 (Owner's) + $100 (Discount- ed Lender’s) - $900 (Lender's) = $200] For a rule that was created to support transparency and accura- cy in the home closing process, many understandably question whether this convoluted formula may be doing just the opposite. The TRID Improvement Act seeks to change this rule, and require disclosure based on the actual amounts imposed. Specif- ically, the requirement to “itemize all charges” will be replaced with one to “itemize all actual charges,” and the following sentence will be added: “Charges for any title insurance premium disclosed on such forms shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by State regulation or the title company rate filings.” To apply these proposed changes to our example above, the bank would disclose the lender’s title policy as $100 and the owner’s title policy as $1,000, exactly as they are charged by the title insurance company. So where do we go from here? As of publishing, the bill is still awaiting passage by the Senate before it moves on to the Presi- dent, so there are several steps left before these changes poten- tially become final. The effective date currently set out in the bill is 18 months after enactment of the Act, so banks will have plenty of time for implementation if and when it is enacted. As for other TRID changes, the proposed rule that seeks to clarify the infamous “black hole” problem is still pending, with no word yet on when it might be made final. Mandatory compli- ance for the other 2017 TRID amendments is fast approaching though. Generally, compliance with the 2017 amendments is mandatory for transactions for which the bank receives an ap- plication on or after October 1, 2018. As a reminder, banks are allowed but not required to implement the amendments early, and don’t necessarily have to implement them all at once. For a rule that was originally designed to help consumers better understand the home closing process, many would say that we have a long way to go, but the TRID Improvement Act seems to be a step in the right direction. As always, Compliance Alliance is here to help you through these and all other regulatory changes. For any questions or concerns, feel free to give us a call at (888) 353-3933, or email at: hotline@compliancealliance.com. n Victoria E. Stephen serves as Associate General Counsel for Compliance Alliance. While receiving her Bachelor of Business Administration in Banking Finance from the McCombs School of Business, Victoria worked in both deposit and lending services. She continued her interest in financial services at the University of Texas School of Law by focusing on secured transactions, taxation, contracts, and corporate governance. Victoria has since worked in corporate tax law, mergers and acquisitions, and performed legal research on a range of regulatory issues. As one of our hotline advisors, Victoria helps Compliance Alliance members with a variety of compliance and regulatory questions For a rule that was originally designed to help consumers better understand the home closing process, many would say that we have a long way to go, but the TRID Improvement Act seems to be a step in the right direction.