[tclowes]

This is a follow up to the yesterdays webinar.
Let’s say that we disclose on the LE the cost of a title search only; however, after that point they request a title policy. Would this be a valid change in Circumstance? My thoughts on this would be, is a title policy required by the bank as a common procedure for this loan type? If it is, that was something that we would have been aware of at the time that the LE was created therefore it would not be a valid CIC. Am I on the right track????

[rcooper]

1026.37(g)(4) says to include:
Under the subheading “Other,” an itemization of any other amounts in connection with the transaction that the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts.

If it is something that the bank requires or that is commonly part of the particular type of transaction in question, then in my opinion you would need to include it and a changed circumstance would not be justified because you were aware that fee was either required or likely to be a cost to the consumer.

If you have additional questions please let us know.

[asimp]

If we disclose using a certain title company’s fees and the customer decides to use a different title company after the initial disclosures are sent out would this trigger a change circumstance so we could re-disclose using the new title company’s fees? Also would it make a difference if the new title company is on our service provider list?

[asimp]

If we disclose an appraisal fee on the LE and when the appraisal comes in the fee is higher is this something that we can re-disclose? I know it’s a zero tolerance category but the appraisers in our area won’t give an estimate so I’m not sure how we can keep from getting a tolerance cure if we can’t re-disclose.

[rcooper]

asimp,
Assuming you allow the borrower to shop and you provided a written list (and the provider isn’t an affiliate which would result in a 0% tolerance) then you are subject to the 10% tolerance category. If the borrower decides to use someone that is not on the list then there is not a tolerance threshold and the charge can increase beyond 10%. I may not be understanding all the specifics of the situation, but assuming you disclosed based on your list of providers and the borrower chose a different provider there is no tolerance issue and if the borrower has selected a provider from your list you are subject to the 10% tolerance which I also assume isn’t an issue since your disclosures would have reflected the fees applicable on your list.

As for the appraisal, there would have to be a reason for the appraisal cost to have increased in order for it to be a changed circumstance. The regulators assume that you will have knowledge of what the appraisers that you use will charge for a certain type of property. At this point, appraisers should be aware of the need to provide you with a schedule of fees based on types of property.

Example of CC from commentary 19(e)(3)(iv)(A)-1(I): Estimate was based on a single family dwelling, but when the appraiser arrives to the property it is a single family dwelling located on a farm; a different fee applies to a single family dwelling located on a farm so this would be a changed circumstance.

[asimp]

You had stated above that you assumed I wouldn’t have an issue because I had reflected the fees on my provider list but in one of the counties that we use there is three title companies that we use and all three have totally different fees. How can I disclose for all three. Would I disclose the highest fee for each company. For example if for each company the escrow fee was $225.00, $375.00, $450.00 would I disclose the $450.00? If I disclose the $225.00 and they go with the company that’s $450.00 then I’m way out of tolerance and all three are on our list.

[asimp]

As far as the appraisal we can’t get the appraisers to give us a schedule of fees because they say their fee is based not only on the type of property but the number of acres and the time they put in. They say they don’t want to guess because they don’t want to be bound to it. If we request a quote they normally don’t even get back with us before we have to disclose the LE within the three days.

[rcooper]

If you allowed the borrower to select the provider before you provided the LE and disclosed the estimate based on that and the borrower has now requested a change I believe that would be a changed circumstance.

In order to avoid this issue, most banks will disclose on the LE the highest fee from their list of providers (since it is a possibility that the borrower will choose that provider and they are subject to a 10% tolerance).

It sounds like the appraisers need to be informed of your requirements under federal law and that in order to meet these requirements and still use their services you will need a schedule of fees. This isn’t to say they are bound by these fees if it is found the property falls into a different category on their fee schedule once they arrive at the property or it found to be a complex property that will cause the appraisal cost to increase (historic home, acreage, unique structure, etc.). If this is the case this is where you have a changed circumstance.

[jsevers]

Loan application received with a requested loan amount of $130,000. Initial disclosures sent within 3 business days indicating a 1 point fee and a 2.625 origination fee. Bank received notification borrower requested increase in loan amount to 180,000. Revised LE not completed and sent. Loan was re-approved at higher loan amount three weeks prior to closing. Once closing was scheduled, the CD was produced indicating the increase in origination/point fees. Without a revised LE to reset the baseline, would the increase in these 0% fees be considered a tolerance cure and reimbursable to the borrower at post consummation?

Application date: 8/27/19
LE sent 8/29/19
Borrower requests increase: 10/9/19
Re-approval 10/9/19
CD produced indicating increase 10/29/19 – hand delivery
Loan closed 11/1/19

Please provide guidance if a cure and reimbursement is required.
Thank you,
Jenny

[rcooper]

1026.19(e)(4) states:
Provision and receipt of revised disclosures.

(i) General rule. Subject to the requirements of paragraph (e)(4)(ii) of this section, if a creditor uses a revised estimate pursuant to paragraph (e)(3)(iv) of this section for the purpose of determining good faith under paragraphs (e)(3)(i) and (ii) of this section, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section or the disclosures required under paragraph (f)(1)(i) of this section (including any corrected disclosures provided under paragraph (f)(2)(i) or (ii) of this section) reflecting the revised estimate within three business days of receiving information sufficient to establish that one of the reasons for revision provided under paragraphs (e)(3)(iv)(A) through (F) of this section applies.

You have three business days from the date you receive the changed circustance information to issue a revised LE estimate to reset fees associated with that change. It sounds like you did not issue the revised LE during that time, therefore, you fees did not reset. I would consider the fee that exceeded tolerance of the initial LE (or the LE you had issued prior to the change) to be the test for tolerance.

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