We have received numerous reports that realtors involved in purchase transactions are requesting (demanding) copies of the borrower’s closing statement. Some realtors have included language (see sample below) in the purchase contract to ensure they receive the closing disclosure.
“All parties to this transaction, including buyers, sellers, real estate agents, lender, and closing agents acknowledge that the TRID Closing Disclosure, the Buyers Statement, the Sellers Statement, or any other summary form of the transaction does not contain non-public information and may be disclosed to any of the above referenced parties”.
Is the Lender a Party to the Purchase Contract?
If an authorized representative of the financial institutions signs a statement agreeing to be a party to the agreement then the outcome is obvious. Merely accepting a credit application from the borrower does not appear to make the financial institution a party to the purchase agreement between the seller and the buyer.
Nonpublic Personal Information
The Gramm-Leach-Bliley Act and the Consumer Financial Protection Bureau’s Regulation P state, “nonpublic personal information means:
- Personally identifiable financial information; and
- Any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable financial information that is not publicly available.”
Information included in the closing disclosure falls within the scope of this definition. Signing an agreement that states the information “ does not contain non-public information” does not change the definition contained in the regulation.
Privacy Rules
Regulation P prohibits sharing nonpublic personal information with nonaffiliated third parties unless conditions are met or an exception exists. The conditions include providing an appropriate privacy notice and a reasonable opportunity to opt out of the sharing.
Regulation P exceptions to the prohibition on sharing include, but are not limited to, the following:.
- One exception allows sharing with service providers. Sharing information with the settlement agent appears to fall into this category, but sharing with realtors generally does not.
- Another exception allows sharing “as necessary to effect, administer, or enforce a transaction that a consumer requests or authorizes’ doesn’t seem to fit either. Sharing information with the settlement agent appears to fall into this category, but sharing with realtors generally does not.
- An exception allows sharing “to comply with Federal, state, or local laws, rules and other applicable legal requirements” might work if a law that requires the realtor to receive the information exists in your area.
- One exception allows sharing “with the consent or at the direction of the consumer.” The lender may be protected if the consumer specifically authorizes sharing the closing disclosure with the realtor.
Possible Alternatives
Concerns voiced by many bankers relate to exposing non-public personal information of the borrowers to the realtors involved by releasing the borrower’s closing disclosure. The Regulation Z does not require a financial institution or settlement agent to provide the borrower’s closing disclosure to a realtor.
Consumer Involvement – A possible solution is to provide the closing disclosure to the borrower and the borrower may provide a copy to anyone they choose.
Modified disclosure – The regulation does allow for a modified closing disclosure to be provided to the seller and third parties that limits the amount of information shared. The modified closing disclosure is available in Appendix H of the regulation – H-25(I).
The creditor or settlement agent preparing the form may use form H-25 of appendix H to Regulation Z for the disclosure provided to both the consumer and the seller/third party, with the following modifications to separate the information of the consumer and seller, as necessary:
- The Summary of the Borrower’s and Seller’s Transactions required by paragraphs (j) and (k) may be disclosed on separate pages to the consumer and the seller, respectively, with the information required by the other paragraph left blank.
- The Summary of the Borrower’s Transactions required by paragraph (j) must be disclosed on the same page as the Calculating Cash to Close disclosure required by paragraph (i).
- The Loan Cost and Other Cost disclosures by paragraphs (f) and (g) with respect to costs paid by the consumer may be left blank on the disclosure provided to the seller.
- The information required by the following paragraphs may be left blank on the disclosure provided to the seller:
- (a)(2) – Form Purpose;
- (a)(4)(iii) – Lender;
- (a)(5) – Loan Information;
- (b) – Loan Terms;
- (c) – Projected Payments;
- (d) – Costs at Closing
- (f) – Loans Costs, with respect to costs paid by the consumer;
- (g) – Other Costs, with respect to costs paid by the consumer;
- (i) – Calculating Cash to Close;
- (l) – Loan Disclosures;
- (m) – Adjustable Payment Table;
- (n) – Adjustable Interest Rate Table;
- (o) – Loan Calculations;
- (p) – Other Disclosures;
- (r) – Contact Information, with respect to the creditor and mortgage broker; and
- (s)(2) – The statement required to be added to “Other Disclosures” if no line is provided for the consumer’s signature.
Note: Both Sections 1026.38(t)(5)(v) and (vi) provide special rules for customizing the closing disclosure provided to the borrower. There are some inconsistencies between the two sections.
Conclusions
Neither the lender nor the settlement agent is required to provide a copy of the consumer’s closing disclosure to a real estate broker or agent; such sharing could be a violation of Regulation P – Privacy of Consumer Financial Information. There are alternatives for providing the information in a manner that protects your bank’s interest – obtaining a consumer authorization, the customer, not your institution, shares with the realtor, or using the modified disclosure. Select an option for dealing with this matter and incorporate it into your procedures and training.