[compliancegirl2012]

We have an affiliate relationship with a title insurance company with less than 1.5% ownership. So, we do not own 25% or more of the company, we do not control in any manner the election of directors and we do not directly or indirectly exercise a controlling influence over the management or policies of the company. However, we do receive some compensation from title insurance sales based upon our percentage of ownership. Currently we include the title insurance fee in the HOEPA fees calculation. With the new TRID rules do we also need to include any title insurance fee (lender’s and owner’s) in the zero tolerance category?

Topic

[rcooper]

If the third party to which the fee is being paid is not an affiliate based on the definition provided in this section and you are not retaining the fee then it would be subject to the 10% tolerance rather than the 0% tolerance.

The Small Entity Compliance Guide provides this information – a charge is paid to the creditor, mortgage broker, or an affiliate of either if it is retained by that person or entity. A charge is not paid to one of these entities when it receives money but passes it on to an unaffiliated third party.

[compliancegirl2012]

We don’t retain the fee. The fee is sent to the title company. However, we do receive monetary compensation. Does the compensation make the fee subject to the 0% tolerance?

[rcooper]

In my opinion, the CFPB must have known that there would be smaller shareholders with less than 25% stake in some third party service providers that would not meet the definition of affiliate but might still receive dividends or other compensation based on their ownership yet they didn’t include them in them in the fees that must be included in the 0% tolerance. Because of that I believe you would still be subject to the 10% tolerance for title insurance since you are passing the fee along to a unaffiliated third party as it is defined in this in 1026.19(e).

[compliancegirl2012]

Thank you. I have another question then. Do we not have to include the same title insurance fees in our HOEPA calculation?

[jholzknecht]

First, let me clarify that the same definition of “affiliate” is used for both Section .19 and Section .35.
• Comment 19(e)1. The term “affiliate,” as used in § 1026.19(e), has the same meaning as in § 1026.32(b)(5).
• Section 1026.32(b)(5) states “Affiliate means any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).”

Next I assume you are referring to the “points and fees coverage triggers that appear in Section 1026.32(a)(1)(ii). Title insurance premiums are generally not included points and fees calculation unless they are paid to affiliate, which they are not in your case.

[Author]

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