Only the mortgage world would make an acronym out of an acronym. But that’s been the least confusing thing for Realtors since the new TILA (Truth in Lending Act) / RESPA (Real Estate Settlement Procedures Act) Integrated Disclosure Rule took effect last October. To help agents wade through the rising swell of questions, the Women’s Council of Realtors asked several local professionals in the lending and title industries to speak during its monthly networking luncheon, held April 6 at the Choo Choo Hotel.
The members of the panel included: Valerie Epstein, owner of Milligan Reynolds Guaranty Title Company; Mary Slakie, loan officer with Mortgage Investors Group; Barbara Tawater, owner and president of Northgate Title Escrow; and Vickie Phillips, home loan specialist at Churchill Mortgage. Each speaker answered several previously prepared questions.
Valerie Epstein
How has TRID impacted title companies?
The impact has been two-fold. The software companies struggled to make the necessary changes. Across the title industry, the programs had a lot of bugs in them, and when the software companies tried to fix the bugs, it would throw off our system. This caused us to have to do a lot of manual checking and rechecking the final numbers on our closing statements.
Also, the title process is taking longer because there’s more back and forth between the lenders and us relating to the preliminary and final closing disclosures. Each of our escrow agents probably receives between 60 and 100 emails a day. At the same time, there’s more pressure on title companies because the new TRID rules put time guidelines into effect, and lenders often want work back the same day so they can get it to their underwriters to comply with the TRID rules. So the title process does take the full 45 days, and closings are taking a week or a week and a half longer because of all the back end processes we have to coordinate and prepare accurately.
What has been the biggest change for your industry?
Title companies are becoming more bank-like in the sense that when we’re audited, they look at our encryption systems and our cloud computing, they look to see if we’ve had any server intrusions, and they’re looking to see if our employees have signed confidentiality agreements. Also, we spent about $10,000 putting in a professional, bank-like glass door no one can walk through unless you’re an employee and have had a full-blown background check. We even have to escort the guy who comes to fix our printer to make sure he’s not wandering around our office looking at non-public information. We’ve been in business for 78 years; we have a lot of files somebody with a cell phone could copy. We provide these consumer protections so our clients know their information is secure.
Finally, closing disclosures are really the responsibility of the lenders, so the lenders are treating us like quasi-partners. There’s more pressure on them to make sure we’re doing our job since they’re ultimately responsible and will be held accountable by the CFPB (Consumer Financial Protection Bureau). The CFPB has a lot of employees and is looking into every complaint, so everyone is trying to dot their i’s and cross their t’s. For example, CFPB was recently successful getting a judgment against a title company for giving kickbacks to a mortgage company for referrals. In our community I’ve heard of title companies giving monies to Realtors for marketing arrangements, which might also be a matter the CFPB will frown upon.
Are you quoting enhanced title policies or regular title policies for loan estimates?
For unrepresented buyers, we’re quoting the enhanced title policies because they need extra protection. We quote our regular policies to buyers who have a Realtor. However, for the dollars involved, everyone should be getting an enhanced policy. One hour of time for the lawyers who work for the national underwriters is $675, and you can’t do a case for less than 10 hours. You would do well to advise your clients to buy the enhanced polices. They provide great protection for very few dollars and for most clients’ single largest investment – their home.
What advice do you have for preparing potential buyers for the new TRID rules?
As the issues with the software settle down, and as we deal with the learning curve on all fronts, ask your buyers to be patient. We’re working hard behind the scenes to make your closing go well, and we’re working hard to make you look good. But it could take a little longer than it did in the past. Look for title companies that are truly independent and that are fully compliant with TRID and following the best practices outlined by the American Land Title Association.
Mary Slakie
What are the six components that must be gathered in order for a prospective buyer to be able to make an application with a lender? And since two of the components are the property address and the estimated value of the property, is it true that a prospective buyer cannot fully make application for a loan until after they’re under contract with a seller?
The six elements of an application are name, Social Security number, income, property address, estimated loan amount, and estimated value of the property. Can you make an application without a property address and an estimated value? That comes down to pre-qualification versus pre-approval. If you have a formal pre-approval process in which you’re sending the loan to the underwriter, you do have to disclose. For prequalifications, we gather the buyer’s income, asset, and credit documentation, run it through an automated underwriting system, and do a prequalification based on the actual numbers. When we do that, we do not disclose. You don’t want to have to disclose on a loan without a property address because you would have to withdraw that loan and start over.
We’re averaging about 21 days from clear to closing. In a lot of ways, TRID has helped. Month end stress is no longer there because everything has to be out earlier. However, the confusion with the closing disclosures and not being able to share them with you has made it harder for that process to feel like it’s coming together. That’s one of the biggest changes – getting the closing disclosure out in three days and not being able to share it with you so you can go over it with your buyers and make sure everything is on there. But the process hasn’t slowed us down.
Talk about the list of providers lenders have to give to prospective buyers.
We have to be accurate on our fees. We don’t have a preferred provider list, but we do have to use actual fees, so we pick a title company in Georgia and one in Tennessee and use their fees. If the buyer chooses that particular title company and the fee is ten percent higher, we’re on the hook for those fees.
Barbara Tawater
Are buyers and sellers allowed to be at the closing together?
Split closings are not a TRID regulation. That’s up to the title company. At Northgate Title, we prefer to have the buyer and seller together at the end. We start out with the buyers, and spend about 30 minutes going over their private information and their loan documents, and then we bring in the sellers. That seems to work well because the buyers usually want to meet the sellers and discuss some things.
What has been the biggest change for your industry?
For us, the confusion on the title insurance premiums has been huge. I’ve gotten more questions from Realtors about that than anything else. TRID did not change the title rates. They are still filed with the state, and they are still the same. However, we have to disclose differently now, which is where the confusion comes in. We have to do that because an owner’s policy is not printed on the forms as being optional, even though it’s always been an optional premium. I understand where CFPB is coming from; they want us to disclose the loan policy as a full policy in case the buyer decides to not get an owner’s policy. If the seller is paying for an owner’s policy, and it’s disclosed and the buyer is paying for a full loan policy, they will get a credit for the simultaneous rate. If there’s a full charge for a loan policy, there will be a credit if the seller is paying for the owner.
What advice can you give us for preparing buyers for new TRID rules?
Give the best information you can to lenders and title companies.
Vickie Phillips
Are you closing your own loans or are you utilizing title companies?
We’re utilizing title companies. We don’t dare venture into doing closings ourselves. I think Bank of America is doing their own closings, but I’m not aware of anyone else who is.
What has been the biggest change for your industry?
The biggest change I’ve seen has to do with the closing disclosure. Buyers and sellers aren’t seeing the same document. Sometimes, that’s a big issue. Say the buyer or seller agreed to a credit, and the seller is looking at one document and the buyer is looking at another, and they’re not seeing that credit on there. That has been an issue in the 11th hour because the buyer or seller can’t see the money exchanged on the actual document.
What advice can you give us for preparing buyers for new TRID rules?
I recommend agents tell their buyers to get their paperwork in to their lender ASAP. And if they ask you for something, don’t wait until Thursday when you’re supposed to be closing on Friday. We need time to process it. Have them work with us to get everything in so we can expedite the process and meet your closing dates.