CFPB Finds Mistakes With Simultaneous Issue Rates on TRID Disclosures

July 8, 2021

Some lenders are inaccurately disclosing fees for lender’s title insurance on the TILA-RESPA Integrated Disclosures in violation of Regulation Z, according to the Consumer Financial Protection Bureau’s summer Supervisory Highlights report.

In addition to mortgage origination, the findings included in this report cover examinations in the areas of auto servicing, consumer reporting, debt collection, deposits, fair lending, mortgage servicing, payday lending, private education loan origination and student loan servicing that were completed between Jan. 1, 2020 to Dec. 31, 2020.

Where there is simultaneous purchase of lender and owner title insurance policies, Regulation Z of the TILA-RESPA Integrated Disclosure requires creditors to disclose the lender’s title insurance based on the amount of the premium, without any discount that might be available for the simultaneous purchase of an owner’s title insurance policy.

Creditors are required to disclose the premium for the owner’s policy showing the impact of the simultaneous purchase discount. The CFPB said the intent of this rule is to provide consumers with information on the incremental additional cost associated with obtaining an owner’s title insurance policy, and the cost they would be required to pay for the lender's policy if they did not purchase an owner's policy. ALTA has consistently said the CFPB’s approach does not provide consumers with clear information about their title insurance costs.

This problem of not allowing title insurance companies to disclose available discounts for lenders title insurance is exacerbated in states where it common for the seller to pay for all or a portion of the buyer’s title insurance costs. In these states, the CFPB’s mandated formula not only leads to an incorrect disclosure of the cost of title insurance but confusion over how much the seller is obligated to pay.

TRID also can conflict with state law. Many state regulators require settlement agents to disclose the actual costs for each fee a homebuyer must pay. ALTA developed model settlement statements to help agents disclose those costs to homebuyers. So, to comply with state laws, buyers receive yet another piece of paper.

CFPB examiners found that some lenders disclosed the lender’s title insurance premium at the discounted rate and the owner’s title insurance at the full premium on the Loan Estimate. The lenders were disclosing the costs as filed by the title companies instead of following the CFPB’s TRID formula. While report focuses on lenders, title and settlement companies should take note that the CFPB is reviewing disclosure of fees and finding mistakes.

The CFPB has requested the lenders revise their policies and procedures and follow Regulation Z requirements to disclose title insurance premiums where there is a simultaneous issuance rate for lender’s and owner’s title policies.

Over 40 percent of American homebuyers felt taken advantage of confused by the calculation of title insurance fees under the CFPB’s method, according to an ALTA survey of more than 2,000 current and prospective homeowners

Contact ALTA at 202-296-3671 or [email protected].