TRID

FHA Settlement Certification Will Require Tweaking After October 3

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FHA answers a FAQ; it doesn’t officially change the certification

The Federal Housing Administration (FHA) released a new settlement certification this summer in anticipation of the implementation of the TRID rules on October 3. The new certification is intended to replace FHA’s current addendum to the HUD-1 Settlement Statement and will be used for the new Closing Disclosures once the TRID rules become effective.

The new certification reads:

“To the best of my knowledge, the Closing Disclosure which I have prepared is a true and accurate account of the funds which were (i) received, or (ii) paid outside closing, and the funds received have been or will be disbursed by the undersigned as part of the settlement of this transaction. I further certify that I have obtained the above certifications which were executed by the borrower(s) and seller(s) as indicated.”

Please note that the new certification contains the language “which I have prepared”.  As we have all heard by now, many of the large lenders have indicated that settlement agents will not prepare the Closing Disclosures to be delivered to borrowers. Because of the perceived liability, several of the larger lenders have announced that they will prepare the deliver borrowers’ Closing Disclosures.

frustrated man paperworkSettlement agents (closing attorneys in South Carolina) will prepare and deliver sellers’ Closing Disclosures in all cases and will prepare the borrowers’ forms for the smaller lenders who are not taking the responsibility internally.

American Land Title Association reached out to FHA, the Mortgage Bankers Association and individual lenders to inform them that the new certification would be inaccurate in the cases where the lender prepares the Closing Disclosure.  FHA did not revise its certification, but, in connection with issuing an additional 120 new FAQs to its Single-Family Handbook Frequently Asked Questions, it answered the following question this month:

FAQ 347:

Q: “The Model Settlement Certification requires the Settlement Agent certifying that he or she has prepared the Closing Disclosure but the CFPB’s requirements for issuing the new TRID Closing Disclosure will make this unlikely to be the case. Should the Settlement Agent sign the form anyway?”

A: “FHA does not wish for anyone to make a false certification. Because this is a model component, FHA will accept the tailoring of this phrase to the actual circumstances. This if the Settlement Agent does not prepare the closing disclosure, he or she should remove or strike through the statement ‘which I have prepared’ before executing the Settlement Certification.

FHA is only providing this guidance through the FAQ. It is neither revising the certification nor clarifying the instructions on the certification itself.  As a result, closing attorneys will be required to educate their staff members about the necessity to revise the certification for FHA closings after the new rules take effect.

Another Lender Communication to Settlement Agents…

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… And a denial from the CFPB.

newsBank of America answered several frequently asked questions from settlement agents by memo dated June 9.

Significantly, BofA indicated that agents will not be allowed to accept its title or closing orders if they are not registered with Closing Insight™. Because BofA and several other lenders will require Closing Insight™,  South Carolina closing attorneys who have not yet registered should follow this link to do so.

Asked whether BofA will require the use of ALTA model settlement statements, the bank responded that it prefers the ALTA model form if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (“CD”), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to BofA. The memo also stated that all revised fees and costs will require both bank approval and an amended CD. In other words, fees and costs cannot be revised by simply supplementing the CD with a settlement statement.

ALTA’s settlement statements are available for review and use at this link.

The memo confirmed our thinking that separate CDs will be provided to the buyer and the seller. BofA added that the buyer and seller will not sign the same form nor see the contents of the other party’s CD. Further, BofA will instruct the closing attorney to prepare and deliver the seller’s CD and to provide copies of CDs to the real estate agents.

Finally, the bank clarified its process for making post-disbursement fee modifications. If the closing attorney identifies the need for a change in the numbers reflected on the CD, the attorney must request that the “collaboration session” be reopened in Closing Insight™, and the bank will review the update made by the attorney to determine whether a revised CD is necessary. The party in possession of any excess funds will be responsible for sending the funds to the buyer/borrower, while BofA will prepare and send the revised CD to the buyer/borrower. The closing attorney will be responsible for revising and delivering the seller’s revised CD, if necessary.

cfpb-logoIn related news, on June 3, the CFPB released a fact sheet in response to “much information and mistaken commentary” surrounding perceived closing delays that will be caused by the implementation of the new rules. The CFPB denied that the new CDs will delay closings “for just about everybody.” In response to the belief that any change in the CD will cause a new 3-day review period, the CFPB clearly stated that only the following matters will trigger an additional 3- day wait:

  1. The new APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or ¼ of a percent for adjustable loans. A decrease in the APR will not require a new 3-day review if it is based on changes to interest rate or other fees.
  2. A prepayment penalty is added, making it expensive to refinance or sell.
  3. The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.

The following circumstances will not require a new 3-day review, according to the fact sheet:

  1. Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer.
  2. Most changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow.
  3. Typos found at the closing table.

The CFBP’s denial notwithstanding, we are all naturally concerned about other matters that will cause delays during the transition period, particularly the steep learning curve that must be overcome by everyone involved in closings. But we will all work hard to get through the transition period together! We’re predicting that closings will be much smoother by the beginning of 2016.

CFPB proposes TRID delay until Oct. 3

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stay tuned

Quick note to get this information out quickly: Today the Consumer Finance Protection Bureau announced that it will be issuing a proposed amendment to delay the effective date of the new mortgage disclosure rule from August 1 to October 3.

More to follow!

BB&T Follows the Lead of Other Large Lenders

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It will produce and deliver Closing Disclosures

BB&T logo 2BB&T announced on May 26 that it will be responsible for completing and delivering borrowers’ Closing Disclosures after the Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Mortgage Disclosures (TRID) rule becomes effective on August 1.

By making this announcement, BB&T joins Bank of America, Chase, Citi, Wells Fargo, SunTrust and Freedom Mortgage in removing the responsibility for preparing the borrower’s settlement statement from the hands of settlement agents (closing attorneys in South Carolina). Closing attorneys will prepare the seller’s CD as well as other forms necessary for disbursement. It is clear that the borrower’s CD will not contain sufficient information for disbursement, which will continue to be the responsibility of the closing attorney.

Like the other lenders, BB&T confirmed in its announcement that it will continue to work with closing attorneys to determine the fees and other information required for the Closing Disclosure.

stay tunedBB&T also announced, like several other large lenders, that it will use the web-based portal, Closing Insight™, to gather the information and data required to complete the CD. Closing attorneys were encouraged to register with Closing Insight™ immediately.

BB&T promised to provide further communications and training to settlement agents prior to August 1.

Three New Lender Announcements in Early May

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They keep rolling in as August 1 approaches!

town crierWe’re 60 business days away from implementation of TRID, and lenders continue to make announcements about how they will approach the closing process in the new environment. I am committed to keeping South Carolina closing attorneys informed about these continuing revelations, so here is a synopsis of the most recent developments.

Freedom Mortgage announced on May 7 that it will prepare and deliver the borrower’s Closing Disclosure and will employ Closing Insight™ as its method of exchanging information with settlement agents (closing attorneys in South Carolina). Other methods of exchanging information (e-mail, fax) will no longer be used, and closing attorneys were encouraged to sign up for this information portal by visiting www.closinginsight.com.

Chase Mortgage Banking recently repeated that it will deliver the borrower’s CD and will provide a copy of that document in the closing package. The closing attorney will prepare and deliver the seller’s CD and will provide Chase with a copy.

Chase stated it will rely on closing attorneys for transaction numbers such as seller credits, broker’s commissions, seller and purchaser attorneys’ fees, real estate agent bills, external mortgage payoffs, adjustments, prorations, taxes, recording fees and title fees. All of this information should be given to Chase ten days prior to closing.

Chase also stated that it will continue to use encrypted secure email (iSentry and/or Voltage) to provide documents to closing attorneys.

Bank of America announced on May 6 that closing attorneys should register with Closing Insight™, but that registration will not insure a place on BofA’s “Written List of Providers” (WLP). Those interested in being including on the WLP should apply at www.bankofamerica.com/suppliers, but applying does not insure that applicants will be added to the list. BofA representatives will engage prospective candidates for consideration as opportunities for expanding the supplier base become available. Those currently on the WLP do not need to reapply.

BofA also announced that it will absorb the cost of Closing Insight™. To our knowledge, no other lender has made a similar announcement.

It is encouraging that lenders continue to think through their processes and to provide us with additional information. The more knowledge we have up front, the fewer surprises we will experience after August 1. I promise to continue to distribute this news as it is announced to the letstalkdirtsc.com audience.