[GwenM]

Do we need to disclose the Bank’s name as the settlement agent at the top of the CD if an outside third-party is not used to close the loan? Does the settlement agent and the agent number need to be blank if there is no settlement agent or do we need to show the Bank’s name as settlement agent and leave the agent number blank?

Comment 1 to 1026.38 Disclosures not applicable. Where a disclosure is not applicable to a particular transaction, form H-25 of appendix H to this part may not be modified to state “not applicable” or “N/A.” The portion of the form pertaining to the inapplicable disclosure may be left blank unless otherwise provided by § 1026.38. For example, the disclosure required by § 1026.38(r) of the consumer’s or seller’s real estate broker may be left blank for a transaction that does not involve real estate brokers, such as a refinance or home equity loan . . .

Topic

[kmeade]

Following!

[GwenM]

Just following up to be sure you hadn’t missed or overlooked this question sent 03.15.21.

Thanks!

[Brent V]

Gwen,

I apologize for the delay. This issue has never been clear.

Logic says an “agent” is a party that represents the bank in a closing, and that a bank cannot be its own agent. But the CFPB has stated, informally, that a bank conducting settlement should be listed as the settlement agent. In our opinion listing the bank as settlement agent is illogical. The regulation does not require the disclosure, nor does it prohibit the disclosure. Showing the bank as a settlement agent is, in our opinion, not likely to be cited as a violation.

[pcorder]

Just ran across this post, and wanted to comment.

The FRB interprets it as: the bank is the settlement agent (if no other agent is listed), and to go one step further, they expect a file # to be there too. The file number for a bank will be identical to the loan id#, which is located on the other side of the CD. IMO, it could create some confusion for the borrower. That’s not the intent of the disclosure. I argued this point at our last Consumer Compliance and CRA exam, but to no avail.

As Brent said, it is illogical, but personally, I seldom find logic in most regulations. lol

Thanks,

[GwenM]

Agree, logic and regulations do not always go hand-in-hand. However, the below comment from the regulation indicates that if the information is not applicable the fields can be left blank. Brent, you indicate above that examiners are not likely to cite this as a violation but we can’t be sure. It depends on the examiner. Doesn’t the below comment support leaving the fields blank? I want to be certain written procedures clarify which way we go and we follow it consistently. During reviews, when the bank is closing the loan, I see the bank listed as the settlement agent but the agent number is NA, or left blank or has the loan ID#.

Comment 1 to 1026.38 Disclosures not applicable. Where a disclosure is not applicable to a particular transaction, form H-25 of appendix H to this part may not be modified to state “not applicable” or “N/A.” The portion of the form pertaining to the inapplicable disclosure may be left blank unless otherwise provided by § 1026.38. For example, the disclosure required by § 1026.38(r) of the consumer’s or seller’s real estate broker may be left blank for a transaction that does not involve real estate brokers, such as a refinance or home equity loan . . .

Thanks!
Gwen

[jholzknecht]

Gwen,

The “not applicable” argument may be a good defense if an examiner asks why you left the settlement agent blank. As Brent explained above, “The regulation does not require the disclosure, nor does it prohibit the disclosure.” In Patti’s situation her examiner told her to disclose the bank as a settlement agent. She should follow the examiner’s instructions. I can not suggest that for every situation. Patti is in Kentucky. As far as I am aware, Kentucky does not prohibit a bank from servicing as the closing agent. Some states do have such a prohibition, so disclosing the bank as the settlement agent could have serious ramifications.

Life would be much easier if the CFPB would add a definition statement of the rule in the Official Staff Commentary; but they haven’t done so.

If you decide to leave the settlement agent line blank and an examiner challenges your action, use your “not applicable” defense. If the examiner persists, respectfully request a citation for the section of the regulation that supports their position that a bank can serve as its own agent.

[rcooper]

I lean toward leaving it blank too, but the regulation doesn’t clearly state what is expected in this situation, which is why banks continue to have to hash this out and is also the reason that it isn’t likely to be cited as a violation as Brent mentioned. The CFPB could easily clear this up but hasn’t. Hearing from peers like Pattie that her regulator expects the bank to be listed as the settlement agent when an outside party isn’t used is very helpful. If you know other banks regulated by your regulator reach out to see if they’ve heard a stance from their examiners.

Since it is the CFPB’s regulation, I’ve sent the question over to them. I’ll pass along any feedback they provide.

BTW – I like Jack’s advice.

[GwenM]

Thanks Jack and Robin! Sounds like leaving it blank is the best practice for now and shouldn’t be cited as a violation. I want to be sure our written procedures and actual practices are consistent. I would appreciate you letting know what you learn from the CFPB.

[rcooper]

I certainly will. Once I get any info, I will post it in this string. Have a great weekend!

[Author]

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