Closing Disclosure

SunTrust Requires ALTA Best Practices Compliance by July 1

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… AND indicates it will produce and deliver Closing Disclosures.

suntan lotionMaking a significant announcement with a tight deadline, SunTrust Mortgage revealed in an April 22 letter to its settlement service providers (closing attorneys in South Carolina) that it will require them to comply with ALTA’s Best Practices and to complete an ALTA Self-Assessment no later than July 1, 2015.*

The letter also announced that SunTrust, following the lead of Well Fargo, Bank of America, CitiBank and Chase, will produce and deliver Closing Disclosures to borrowers and will require closing attorneys to provide complete and accurate title and settlement charges up to two weeks prior to scheduled closing dates.

SunTrust also plans to handle Closing Disclosure revisions and expects closing attorneys to provide timely notice of any changes in the closing numbers, including changes that occur after closing.

Closing attorneys will be responsible for preparing and delivering the seller’s Closing Disclosure on purchase transactions. A signed copy of the seller’s Closing Disclosure will be required by SunTrust as a condition of funding approval.

SunTrust will require an attestation form from closing attorneys for each closing, confirming the ability to comply with the new rules and expectations.

* The letter directed closing attorneys to www.alta.org/bestpractices/index.cfm for more information on ALTA’s Best Practices and offered assistance from SunTrust via e-mail at TitleSettlementMgmt@SunTrust.com and mail at Title/Settlement Management, SunTrust Mortgage, Inc., Mail Code: VA-INSB-7882, 5600 Cox Road, Glen Allen, VA 23060.

Five things lenders need to know before August

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Dirt lawyers: Educate your lender contacts!

Our company has developed resources to equip dirt lawyers to educate lenders about how the CFPB will impact them beginning August 1.  I’m sharing a few tips with the letstalkdirtsc.com audience because everyone will benefit if lenders are prepared.

As we have traveled the Palmetto state talking to lawyers, real estate agents and lenders, we have learned that many of the local folks are not familiar with the new rules, even the significant players in the market. We understand the corporate offices of national lenders may not have pushed this information down to the local level at this point. Any lawyer who will provide valuable information to local contacts now will be perceived as an important partner!

This is a primer, a very basic beginning point. As the software companies complete their updates, everyone involved will be trained on the details of the new rule and forms.  For now, let’s give our lender partners the following information:

1 flapWho will be responsible for preparing the Closing Disclosure? The lender will be ultimately responsible for preparing the CD (the document that replaces the HUD-1 and final TIL Disclosure). Four national lenders, Bank of America, CitiBank, Wells Fargo and Chase, have announced that they will prepare the CD. We anticipate that smaller banks may continue to rely on closing attorneys to prepare this important document. Closing attorneys will be responsible for preparing the seller’s side of the CD in all cases.

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Who will be responsible for delivering the Closing Disclosure? The rule requires that the borrower must receive the CD three days prior to closing. This actually translates to delivery six days prior to closing to accommodate transit time. The rule allows the closing attorney, at the lender’s discretion, to deliver the CD. The four banks who have announced that they will prepare the CD will also deliver it.

Closing Disclosure Delivery Timeline Chart

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How will closing attorneys and lenders communicate information contained in their respective systems? The big banks will most likely use some form of electronic communication. Some have already announced that they will use Real EC’s Closing Insight™ Most closing attorneys will work with settlement software companies (such as SoftPro) to connect with these systems. Regardless, information will have to be exchanged earlier to accommodate the delivery requirements of the CD.  Some experts have predicted that the numbers will have to be exchanged between lawyers and lenders no later than ten days prior to closing.

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Who will make changes to the CD? Changes to the CD may occur prior to closing, necessitating adjustments, re-printing, and delivery of the corrected CD at closing. Lenders and lawyers will have to discuss who will make the pre-closing changes. Changes to the settlement numbers on the CD may also occur after closing, requiring preparation and delivery of a revised CD. For example, if recording fees change, the CD will have to be revised. Previously, lawyers had the responsibility for these post-closing changes. Under the new rule, the lenders have primary responsibility, but they may delegate this responsibility to closing attorneys.

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How will closing attorneys communicate title and settlement fees for use in the new forms? Lenders will continue to need accurate estimates of title and settlement fees for the preparation of the Loan Estimate and the Closing Disclosure. In addition, for transactions in which an owner’s policy will be issued, the rule prescribes special mathematical calculations for the disclosure of the owner’s and lender’s title insurance premiums, which may require receipt of rates for both a stand-alone and simultaneously issued lender’s policy, as well as the owner’s policy rate.

Good luck educating your referral sources!

Five Things Real Estate Agents Need To Know Before August

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 Dirt lawyers: Educate your real estate agents!

Our company has developed resources to equip dirt lawyers to educate real estate agents about how the CFPB will impact them beginning August 1.  I’m sharing a few tips with the letstalkdirtsc.com audience because everyone will benefit if real estate agents are prepared.

This is a primer, a very basic beginning point. The CFPB will not significantly impact the day-to-day processing of sales, but buyers and sellers will look to real estate agents for general information about the new rules and forms, as well as the impact on the loan process and the closing. As the software companies complete their updates, everyone involved will be trained on the details of the Loan Estimates and Closing Disclosures.  For now, let’s give real estate agents the following information.

1They should be able to explain the Loan Estimate and Closing Disclosure before August 1. The Good Faith Estimate (GFE), a form required by the Real Estate Settlement Procedures Act (RESPA), and the initial Truth-in-Lending disclosure (TIL), a form required by the Truth-in-Lending Act (TILA) have been combined into a new form, the Loan Estimate. For loan applications taken on or after August 1, the three-page Loan Estimate will replace the GFE and the TIL and must be delivered within three business days of the application. The new five-page Closing Disclosure will replace the HUD-1 Settlement Statement and the final TILA form.

2The timing of a closing will be impacted by Closing Disclosure delivery.  The CFPB has determined that borrowers will be better served by having three days after receipt to review the Closing Disclosure prior to the closing. Absent a positive confirmation of receipt of the form (i.e., hand delivery), the form is “deemed received” three days after the delivery process is started (i.e., mailing). Several lenders have already announced that they will deliver the forms six days prior to closing.

Closing Disclosure Delivery Timeline Chart

3Title fees may need to be adjusted at closing and explained. The full premium for the lender’s title policy must be reflected on the Loan Estimate and the Closing Disclosure despite the fact that we have a “simultaneous issue” discount in our filed rates in South Carolina. The discount that title insurance companies in South Carolina offer lenders must be deducted from the charge for the owner’s policy. Also, the owner’s policy will be shown as “optional” on both documents. Closing attorneys may look to real estate agents to assist them in explaining the value of owner’s title insurance.

4Line numbers have been removed and there are now seven fee areas on the Closing Disclosure. The familiar line numbering on the HUD-1 will disappear. Instead, the fees and charges are placed on the Closing Disclosure in one of seven areas:

  1. Origination charges;
  2. Services borrower did not shop for;
  3. Services borrower did shop for;
  4. Taxes and other government fees;
  5. Pre-paids;
  6. Initial escrow payment at closing; and
  7. Other.

Individual charges within each of these major groupings are listed alphabetically. Columns are provided to separate charges owed by the buyer, seller and others, as well as columns for payments before and at closing.

5Clients will likely receive more than one Closing Disclosure. Since the buyer will receive the Closing Disclosure several days before the closing (and likely before the walk-through), the buyer will likely receive a new, adjusted Closing Disclosure at the closing. The CFPB has also mandated that changes in the financial numbers in any amount, must be re-disclosed, even post-closing.

Good luck educating your referral sources!

Lenders’ Closing Plans Solidify As August 1 Approaches

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news news newsCitibank recently notified settlement agents (closing attorneys in South Carolina) that they will be requested to register with the FPSDirect Vendor Website at the time they agree to handle a Citibank closing. This website was created to provide the bank’s settlement agents with an easy and efficient method of loan document delivery, closing date confirmation and funding approval, among other matters. The memo stated the bank’s goal is to save the time of faxing and the insecurity of email.

Wells Fargo issued a Settlement Agent Communication on March 16 indicating that, like Bank of America, it plans to integrate with Closing Insight™ with a goal of improving the way instructions, fees and other information is shared. The memo stated: “Unlike today where we typically use email to pass these important details back and forth, Closing Insight™ will support an interactive, online collaboration that includes a full view of information from both parties, and provides an audit trail and quality checks to reduce errors.”

We have learned and the Wells Fargo communication states that many closing attorneys will be able to access Closing Insight™ through connections with their existing software packages. Wells’ communication also states that attorneys without closing software packages will not be left out because a secure web portal will be available. Wells reiterated its goal of continuing to do business with local service providers, but emphasized that it expects closing attorneys to be ready, willing and able to comply with requirements and closing instructions.

Wells Fargo also answered four recent FAQs:

“If co-borrowers plan to sign the loan documents on different dates, which date applies for compliance with the three business day receipt requirement of the CD? The borrower’s CD must have been received not less than three business days before the earliest signing date. This question highlights the importance of communicating specifics about signing plans to your Wells Fargo closing contact, including cases when a mobile signing agent or mail away signing is being requested.

Will Wells Fargo be providing loan closing documents to the settlement agent at the same time the borrower’s CD is delivered? Our goal is to provide the closing documents to the settlement agent shortly after the borrower’s CD has been finalized and provided to the borrower. In most cases, you should receive the closing documents earlier than in the past.

Will Wells Fargo permit any other party to deliver the borrower’s CD to meet the three business day closing requirement for a rush closing situation? No. We have determined that we must be responsible for delivering the borrower’s CD to meet and track the three business day receipt requirement for all transactions We will continue to encourage all parties involved to stay in close communication and work together proactively to minimize the need for expedited CD delivery.

Is my company required to be ALTA Best Practices Certified by August 1 to continue to close Wells Fargo loans?  No. Completing your certification by August 1 will not be a Wells Fargo requirement. However, we hope that if your company is not yet certified you will – at minimum – have already completed a self-assessment and addressed any identified gaps. As communicated in our March 6, 2014, newsletter, Wells Fargo supports the ALTA Best Practices as sound business practices that should ideally already be in place for businesses providing title and closing services to our customers.”

Wells Fargo also stated that it has entered into a business arrangement with ClosingCorp, a leading provider of fee management solutions, to obtain actual fee information from selected settlement agents who closing a high number of Wells Fargo loans.

Lenders Announce They Will Control More of the Residential Closing Process

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Regional bank will require third-party BP certifications on a short time frame!

work in progressLet’s take the big bank first. Bank of America recently shared more details about changes in its closing processes after August 1, 2015.  In addition to delivering Closing Disclosures, BofA will take the responsibility for complying with the three-business day waiting period. It will not require closing attorneys to monitor the timing of the delivery of the initial CD or any required re-disclosures.

BofA stated that close collaboration will be needed with closing attorneys for requests of information and notices of all loan and fee changes through its selected platform, RealEC® Technologies Closing Insight™. Closing attorneys will be notified of re-disclosure requirements and new closing dates through Closing Insight™.

BofA said it expects to engage closing attorneys to begin fee collaboration a minimum of ten calendar days prior to closing, and it intends to generate and send the CD six business days prior to closing.*

Now let’s look at an interesting announcement from a small bank, and please pay attention to the short time frame.

Mississippi based regional BancorpSouth announced in early March that its approved closing must comply with ALTA’s Best Practices through a certification from an independent third party vendor acceptable to the bank. Self-certifications will not be accepted.certified - blue (small)

The announcement stated that Memphis Consumer Credit Association and many of the large accounting firms have agreed to provide the certification. The bank asked closing attorneys to advise by March 23 whether they intend to obtain the certification. And the deadline for obtaining the certification was stated to be July 31.

*In almost all South Carolina transactions, we expect the “consummation date” to be the same as the closing date and the same as the date BofA refers to in this memorandum as the signing date.

Three Lenders Make CFPB Announcements

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Two additional lenders will deliver the borrower’s Closing Disclosure

extra extra kid- citi chaseCiti and Chase have joined Well Fargo and Bank of America by announcing that they will deliver borrowers’ Closing Disclosures after the CFPB rules take effect on August 1, 2015.

Citi’s announcement was made on January 28, 2015, followed by Chase’s announcement on February 26. Both lenders stated that closing attorneys will continue to be responsible for sellers’ Closing Disclosures in purchase transactions. Closing attorneys will be required to deliver copies of sellers’ Closing Disclosures to the respective lender.

Citi’s announcement shared some information with its settlement agents that has previously been made clear by the rule itself. That is, there will be several weeks or months after August 1 when the old forms will be used because it is the application date as of August 1 that triggers the use of the new forms, and early use of the Closing Disclosure is not allowed. Citi also pointed out that the new rules do not apply to home equity loans.

Closing attorneys should note that their software systems will have to accommodate old and new versions of the forms because of the transition and because all loans will not be subject to the new rules.bandwagon - one way (smaller)

Union Bank announced on February 26 that it will use the web-based tool Closing Insight™ to simplify the multi-party closing process and support efforts to ensure regulatory compliance. The announcement stated that no other means of communication or document delivery will be accepted.

We will continue to read and keep you informed!

Collaboration is King!

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ALTA’s CFPB webinar emphasizes that the exchange of data will be the biggest challenge to the closing process after August 1, 2015.

American Land Title Association’s value to closing attorneys grows each day as August 1, 2015 approaches. Closing forms will change dramatically later this year, and ALTA is valiantly attempting to keep those of us who plan to remain in this game ahead of the learning curve.

pawns king crown - small featheredSouth Carolina has strong representation in ALTA! Cynthia Blair, a real estate attorney in Columbia, sits on ALTA’s board and participated in this webinar. Each time Cynthia said, “In my state” we knew we were about to receive information specific to us. This local support at this critical time is invaluable, and I strongly encourage South Carolina closing attorneys to join ALTA.

Yesterday, ALTA hosted an excellent webinar entitled “5 Key Areas to Prime Your Operation for the New Closing Process”. The webinar was attended by more than 1,100 of us! The strong message was “Collaboration is King”.

Closing attorneys and lenders will work more closely together than ever to manage and share information. Some lenders have indicated they will deliver the Closing Disclosure to the borrower, but others will require the closing attorney to deliver it. The seller’s form will be prepared by the closing attorney, and a copy of it must be provided to the lender.

The underlying information for the closing documents will be located in two systems: (1) the lenders’ loan origination systems (LOS) will contain the loan-centric information; and (2) the closing attorney’s systems (sometimes referred to as the “title platform”) will contain the property-centric information. Large lenders are likely to utilize entirely electronic systems that will avoid rekeying of information to reduce the possibility of errors. The two systems will talk to each other via platforms that are now being developed.

Don’t Expect Uniform Closing Procedures in 2015

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And … Bank of America makes a big announcement.

changes comingLenders will not collaborate on a standard and consistent process for closings under the new CFPB rules effective August 1, 2015, at least not according to Wells Fargo.

Wells Fargo’s December 10, 2014 Settlement Agent Communication answered nine FAQs from settlement agents, the first of which sought confirmation on whether to expect standard closing procedures from lenders. Wells responded with a “no,” and stated that each lender is accountable and must determine its own method for achieving compliance.

This mega lender had announced on September 24 that it will control the generation and delivery of the buyer/borrower Closing Disclosure (“CD”), the form that will replace the HUD-1 Settlement Statement. The stated rationale was that the new CD is governed by the Truth-in-Lending Act (“TILA”), not the Real Estate Settlement Procedures Act (RESPA), and the risks and penalties for lenders are more severe under TILA.

Bank of America announced on December 17 that it will follow suit by generating and delivering the buyer/borrower CD.  Both banks have indicated settlement agents will generate the seller’s CD. Other lenders have not announced whether they will follow this procedure. It is entirely possible that settlement agents (closing attorneys in South Carolina) will prepare the CDs for other lenders.

The December 10 memo did state that Wells will work closely with settlement agents to determine fees, prorations, and other content required for the CD and, importantly, Wells will not assume the responsibility for disbursing loans. This quote from the Communication provides some comfort with regard to Wells’ attitude about keeping local settlement agents involved in the closing process:

“The settlement agent is critical and continues to be responsible for executing the closing including document signing, notarization, disbursement of funds, document recordation and delivery of final documents post-closing.”

Also comforting was the promise of training plans for settlement agents in collaboration with American Land Title Association, title underwriters and other service providers. The plans are said to include many educational communications and an information guide.

Bank of America stated that it will use Closing Insight™, an industry tool developed by Real EC Technologies®. All documents, date and information will be exchanged through Closing Insight™, discontinuing the use of e-mail, fax and other document delivery methods.

Bank of America also indicated that the requirement for the buyer/borrower to receive the CD three business days prior to closing will intensify the need for the bank to work very closely with the settlement agent to schedule the details of the closing.

stay tunedFor more information about Real EC ® Technologies and Closing Insight™, Bank of America invited settlement agents to visit their website at www.bkfs.com/realec.  The December 17 memo indicated that many title and escrow production systems are working with RealEC® Technologies to enhance current integrations in support of Closing Insight™. The bank suggested that settlement agents reach out to their title and escrow production system provider directly.

Stay tuned!

Who Will Get On the Wells Fargo Wagon?

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Wells Fargo announces it will generate and deliver the Closing Disclosure

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Wells Fargo announced on September 24, 2014 that it will generate and deliver the borrower’s Closing Disclosure when the TILA-RESPA Integrated Disclosure Rule becomes effective on August 1, 2015.

Software companies, title insurance companies and closing attorneys have been speculating about this for many months. Now we have an answer, at least as to this mega-lender. Whether other lenders will fall in line remains to be seen.  The stated rationale is that the process will allow Wells Fargo to consistently meet compliance and regulator expectations.

The announcement stated that Wells will continue to collaborate with closing attorneys to determine fees and other content required for the Closing Disclosure and to ensure that the lender has accurate information.

For purchase transactions, the closing attorney will continue to be responsible for the seller’s information and will prepare and deliver the seller’s Closing Disclosure. A copy must be provided to Wells Fargo.

The Closing Disclosure must be delivered three business days prior to the closing, and Wells Fargo anticipates this requirement will require that all the parties work together more than ever on scheduling closings.

Conducting closings will continue to be the responsibility of closing attorneys, but with increasing focus on compliance with the lender’s closing instructions, according to this announcement.

This announcement has a huge impact on the closing process. The closing attorney will continue to be responsible for gathering information required to generate the document that replaces the HUD-1 Settlement Statement, but Wells Fargo, not the closing attorney’s office, will actually generate and deliver the form.

Please recall that Wells Fargo is the lender that endorsed ALTA’s Best Practices. My best advice for residential closing attorneys in South Carolina who want to remain in the game after August, 2015?  Get your office in compliance with Best Practices now so you will be prepared to implement the hardware/software changes this announced “collaborating” with lenders will require.

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