Jonathan Foxx
President & Managing Director
This is the fourth article of a six-part
series devoted to TILA/RESPA Integration Disclosure. Although the series,
structured as White Papers, was initially established with four parts, I have
added a fifth and sixth part to discuss additional features of the Closing
Disclosure. In this article, I will take you through a review of Page One
and Page Two of the Closing Disclosure. In the fifth part, I will
discuss Page Three. The sixth and final part of the series will provide an
outline of Page Four and Page Five. Through a review of important highlights, I
invite you to join me in a deep dive into the intricate features of the Closing
Disclosure.
In the first article, I discussed
the mission of TILA-RESPA Integration and the Loan Estimate (LE).[i]
The second article introduced and treated the numerous features of the Closing
Disclosure (CD).[ii]
In the third article, I provided the salient features of the Loan Estimate, in
considerable detail.[iii]
The first two articles were accompanied by detailed tables to be used for
certain itemized categories and action requirements.
I would suggest that you read all
the articles in this series in order to better understand the TILA-RESPA
Integration Disclosure (TRID) rule promulgated by the Consumer Financial
Protection Bureau (CFPB).
One of the reasons I have written
this series is to cut through the information noise. My concern stems from the nearly
profiteering stance of the flourishing punditry to opine on TRID. This approach
to learning seems to have become the norm recently at conferences, conventions,
webinars, seminars, lectures, and pricey city-to-city forums. Indeed, also, people
with no real experience in directing regulatory compliance, though having some
training background, seem to hang out their TRID webinar shingle. I view the
latter as but shills for generating leads for their affiliated pundits.
I happen to think that TRID is
too important, being a generational change in disclosure, to hog the helpful information
about TRID by charging a fee just so somebody could attend and possibly learn
something about it. With that in mind, my firm recently established two
proactive paths to a TRID knowledgebase:
(1) We
established the TEAM TRID™ task force,[iv]
a relatively inexpensive, cost-effective way to get TRID integration
implementation done efficiently (viz., www.teamtrid.com); and importantly
(2) We
established TRIDHotline.com,[v]
an entirely free online service,
manned by our task force, to assist people with their questions about TRID. We
want to listen to their compliance needs (viz., www.tridhotline.com).
Hopefully, you will have read the
previous three articles. Now we will continue a detailed review of the new
disclosures, by providing this fourth article on the Closing Disclosure. As indicated
above, a fifth and sixth article will further elucidate the Closing Disclosure
analysis.
In focusing on the Closing Disclosure,
I will offer a perspective of its pertinent and critical highlights. As I have
stated throughout this series, I caution you to realize that this review is not
exhaustive or comprehensive, given that the TRID rule contains very complex disclosure
requirements, and there are on-going updates and interpretations involving its
implementation, some of which are borne of the CFPB’s own issuances as well as
the areas that may be subject to litigation.
Please consider my analysis carefully.
Follow along with a copy of the Closing Disclosure. I will provide, where
helpful, some information as Suggested
Guidance. Allow at least two hours to consider this explication.
And as I have admonished all along, make notes, raise questions, and seek answers
from competent compliance professionals!
There are five pages to the
Closing Disclosure. We will visit each of them, with particular interest in
understanding their key features. Although I will take the CD somewhat in
order, it should be noted that this method of explanation is not meant to
suggest that each Closing Disclosure contains five pages or that in all
instances the information described appears on that page in the same order. For
example, Regulation Z allows an alternative “Calculating Cash to Close” table
for transactions without sellers.[vi]
Page One
The first page of the Closing
Disclosure includes General Information, the Loan Terms table, the Projected
Payments table, and the Costs at Closing table. The CD begins with the title
“Closing Disclosure” and a form purpose statement, followed by three columns of
basic information headed “Closing Information,” “Transaction Information,” and
“Loan Information.”[vii]
The page then includes three tables: “Loan Terms,” Projected Payments,” and
“Costs at Closing.”[viii]
The text itself is required for federally related mortgage loans subject to
TILA-RESPA disclosure integration. Note should be taken that the model form is
for transactions subject to TILA only and not RESPA.
Closing Information
Under the heading “Closing Information,” the creditor must
disclose:
(1) Date Issued;
(2) Closing Date;
(3) Disbursement Date;
(4) Settlement Agent;
(5) File #;
(6) Property; and
(7) Sale Price or Appraised Prop. Value.
Under RESPA’s Regulation X, there
is a requirement for listing the name of the settlement agent, place of
settlement, property location, and settlement date.[ix]
The CD discloses the same information, excluding the place of settlement, plus
the date the disclosure is issued; the date funds are disbursed to the seller
or consumer, as applicable; the sale price or appraised value of the property;
and the file number assigned to the transaction by the closing agent.[x]
Let’s look more closely at how this section of the CD is
assembled.
Date
Issued
The creditor
must disclose the date the CD is delivered to the consumer, regardless
of the method of delivery, labeled “Date Issued.”[xi]
Closing
Date
The creditor
must disclose the consummation date for the transaction, labeled “Closing
Date.”[xii]
Additional
Guidance
In some
transactions, the consummation date may change after the delivery of the CD,
such as when the consumer waives the three-day waiting period between delivery
of the CD and consummation.
Under TILA,
creditors are required to use the best information reasonably available to them
to complete the CD, so the Closing Date will be based on that best information.[xiii]
If the disclosure previously provided becomes inaccurate, the creditor must
deliver a revised CD at consummation and the revised CD would disclose the
actual consummation date. Accordingly, either consummation will occur on the
date the creditor initially disclosed and be accurate, or the creditor will be
required to revise the CD to reflect the date on which consummation actually
occurs - and in either case the CD will reflect the actual date of consummation
and not an estimate.
Disbursement
Date
TILA requires
the creditor to disclose the date on which the “Closing Costs Financed (Paid
from your Loan Amount)” in the Calculating Cash to Close table on page 3 of the
Closing Disclosure, and “Cash From or To Seller” on page 3 of the Closing
Disclosure, are expected to be paid to the consumer and seller, respectively, and
labeled “Disbursement Date.”[xiv]
In a transaction
that is not a purchase transaction, the creditor must disclose the date the
amount of the consumer’s Loan Amount and/or Payoffs and Payments (in the
Calculating Cash to Close table on page 3) is/are expected to be paid to the
consumer or a third party.
Settlement
Agent
Creditors must
disclose the identity of the settlement agent conducting the closing, labeled
“Settlement Agent.”[xv]
The name of the entity that employs the settlement agent should be provided; however,
the name of the individual conducting the closing is not required.
File
Number
The CD must
include the number assigned to the transaction by the closing agent for
identification purposes, labeled “File #.” The file number may contain any
alphanumeric characters and need not be limited to numerals.[xvi]
Property
In this part of
the CD, include the street address of the property, labeled “Property.” This
item must include the address, including zip code, of the property that secures
or will secure the transaction or, if the address is unavailable, the location
of the property using a zip code. (A creditor complies by disclosing a complete
address as approved by the U.S. Postal Service.)
Sale
Price
In a credit
transaction involving a seller, the creditor must disclose the sale price for
the property, labeled “Sale Price.” In transactions not involving a seller
(such as in a refinancing), the creditor must disclose the appraised value of
the property, labeled “Appraised Prop. Value.”
If no seller is
a party to the transaction, the value to be disclosed is that determined by the
appraisal or valuation used to underwrite the transaction, or if the creditor
has obtained a more recent appraisal or valuation, the value determined by the
more recent appraisal or valuation. For refinances where an appraisal is not
obtained, the creditor may disclose an estimated property value and the label
should be changed to “Estimated Prop. Value.”
The creditor may
use the estimate provided by the consumer at application, or if the creditor
has performed its own estimate of the property value it may use that estimate
if it is the value the creditor used to determine approval of the transaction.
If personal property is included in the sale price of real property, the
creditor may disclose the aggregate price without a reduction for the appraised
or estimated value of the personal property.[xvii]
Transaction Information
In the second column near the top
of page 1 of the CD, the creditor discloses the names and addresses of the
parties to the transaction (i.e., borrower, seller, and lender, as applicable)
under the heading “Transaction Information.”[xviii]
Suggested
Guidance
·
Name and Address. The name and mailing
address for each consumer and seller must be provided, and if the names and
mailing addresses do not fit in the space allocated on the Loan Disclosure, an
additional page may be appended to the end of the form.[xix]
·
Addendum. If the form does not provide
enough space to include the required information for each seller, an addendum
may be used, provided the creditor complies with the form requirements.[xx]
·
No Seller. In transactions with no
seller, such as a refinancing or home equity loan, the creditor must provide
the name of the person or persons primarily liable under the obligation or who
have a right of rescission. The disclosure of the seller’s name and address may
be left blank.[xxi]
·
Multiple Creditors. If a credit
transaction involves more than one creditor, the creditors must choose which
one of them will provide the CD and a single, complete set of disclosures must
be provided.[xxii]
·
To Whom Delivered. If the transaction is
rescindable, a CD must be provided separately to each consumer who has the
right to rescind. In transactions that are not rescindable, a CD may be
provided to any consumer with primary liability on the obligation.
Loan Information
In the third column near the top
of page 1 of the CD, the creditor discloses information about the loan under
the heading “Loan Information.”[xxiii]
With the exception of the mortgage insurance case number (labeled “MIC #”), the
information mirrors the basic loan information disclosures required at the top
right of page 1 of the Loan Estimate: (1) Loan Term; (2) Purpose; (3) Product;
(4) Loan Type; (5) Loan ID #; and (6) MIC #.
NOTE: The Rate Lock disclosure of
the Loan Estimate does not appear on the Closing Disclosure because it is no
longer relevant.
Suggested
Guidance
·
The Loan ID numbers on the Loan Estimate and
Closing Disclosure must match. If a creditor uses the same loan ID number on
several revised Loan Estimates, but adds after the number a hyphen and a number
to denote the number of revised Loan Estimates in sequence, the creditor must
disclose the loan ID number before the hyphen.[xxiv]
·
A settlement company may use a different
identification number for a transaction, which would be disclosed not in this
column but as “File #” under the Closing Information column.
·
The Loan ID # must be one that enables the
creditor, consumer, and other parties to identify the transaction as the same
transaction disclosed on the Loan Estimate.
·
The Loan ID # may contain any alphanumeric
character, which means that the number need not be limited to numerals.
Loan Terms Table
Creditors use a table to disclose
key loan terms that mirror the Loan Terms table that appeared on the Loan
Estimate.[xxv]
Projected Payments Table
Under Regulation Z, the creditor
is required to disclose a table that mirrors the Projected Payments table on
the Loan Estimate, except for:[xxvi]
(1) the added
cross-reference in the statement “Amount can increase over time See page 4 for
details” that appears under the “Estimated Taxes, Insurance & Assessment”
subheading;
(2) the
different cross-reference in the statement “See Escrow Account on page 4 for
details. You must pay for other property costs separately” that appears on the
right side of the same row; and
(3) the
different rules applied for determining escrow payments.
Another difference from the Loan
Estimate is that all amounts include cents.[xxvii]
Determining Escrow Payments
There are
different rules for determining escrow payments are two:
(1) For
transactions subject to RESPA, the estimated escrow payments are determined
under the escrow account analysis described in Regulation X.[xxviii]
(2) For
transactions not subject to RESPA, the estimated escrow payments may be
determined under the escrow account analysis described in Regulation X or in
the manner set forth in Regulation Z for the same escrow payment disclosure on
the Loan Estimate.[xxix]
RESPA specifies how a creditor
conducting an escrow account analysis must estimate disbursement amounts.[xxx]
Briefly put:
A.
If the creditor knows the charge for a particular
escrow item, the creditor must use that amount in estimating the disbursement.
B.
If the creditor does not know the charge, the
creditor may base the estimate on the preceding year’s charge, but may adjust
the estimate to account for inflation.
Without getting into an extended
observation in this article, I think the foregoing requirement that the
creditor use actual charges, if known, may conflict with the TILA requirement[xxxi],
as amended by the Dodd-Frank Act, that the creditor take into account the
replacement costs of the property for hazard insurance when determining the
estimated escrow account.
Under TILA,[xxxii]
for consumer credit transactions secured by a first mortgage on the principal
dwelling of the consumer (other than a reverse mortgage or open-end credit
plan), the creditor is required to take into account the taxable assessed value
of the property during the first year after consummation, including the value
of any improvements constructed or to be constructed on the property, if known,
and the replacement costs of the property for hazard or flood insurance, when
disclosing estimated escrow payments. The Loan Estimate generally incorporates
these statutory provisions, but expands the requirements to all transactions
subject to disclosure integration.[xxxiii]
Clearly, the CFPB believes the
TILA requirement for estimating escrow payments is appropriate for the Loan
Estimate because it requires creditors to use a uniform standard for estimates
and facilitates comparison, the disclosure of actual payment amounts, when
known, is more appropriate for the CD to avoid conflict with Regulation X. Accordingly,
the CFPB used its regulatory flexibility authority to modify the TILA requirements[xxxiv]
for the estimation of escrow payment amounts on the CD, implementing the two
rules stated above, one for RESPA transactions and one for non-RESPA
transactions.
Suggested
Guidance
·
The amount of estimated escrow payments
disclosed on the CD is considered accurate if it differs from the estimated
escrow payment disclosed on the Loan Estimate due to the escrow account
analysis described in Regulation X.[xxxv]
·
The creditor must disclose taxes, insurance and
assessment information on the Projected Payments table even when no escrow
account will be established.
Costs at Closing Table
Standard Costs at Closing Table
Creditors must disclose the cash
required from the consumer at consummation, with a breakdown of the amounts of
loan costs and other costs associated with the transaction.[xxxvi]
This information must be included
in a table entitled “Costs at Closing” nearly identical to the Loan Estimate’s
“Costs at Closing” table, with the following differences:
(1) the headings
“Closing Costs” and “Cash to Close” appear without the word “Estimated;” and
(2) the
cross-reference to “Calculating Cash to Close” refers to page 3 instead of page
2.
Another difference from the Loan
Estimate is that all amounts include cents.
Alternative Costs at Closing
Table
There is an alternative “Costs at
Closing” disclosure[xxxvii]
with a “„ From
„ To
Borrower” check box for cash-out refinances (i.e., transactions without a
seller).[xxxviii]
If the Loan Estimate disclosed the optional alternative table,[xxxix]
then this alternative CD table is required. Also, if this alternative CD table
is used, then the creditor must use the optional alternative “Calculating Cash
to Close Table” on page 3.
Page Two
Loan Costs and Other Costs Tables
The Closing Disclosure must
contain final details about the loan costs and other costs estimated in the
“Loan Costs” and “Other Costs” tables on the Loan Estimate, using expanded
versions of those tables headed “Loan Costs” and “Other Costs” under the master
heading of “Closing Cost Details.”[xl]
Disclosure items must appear in the same lettered categories as, using
terminology consistent with, and in the same sequential order as, the Loan
Estimate, facilitating the comparison of estimated and final loan terms and
costs (with adjustments for charges that move from “Services Borrower Did Not
Shop For” to “Services Borrower Did Shop For,” or vice versa, between the Loan
Estimate and the Closing Disclosure). When items are added on the Closing
Disclosure, subcategories must be re-alphabetized to reflect the addition(s).[xli]
Two-Digit Line Numbering System and 3 or 5
Columns
The CD adds a two-digit line
numbering system, in contrast to the three-digit numbering system used on
the RESPA HUD-1/1A settlement statement. For each item, the creditor must
identify any third party providing the service, if applicable. Also, for each
item, the creditor must use three (if no seller is involved) or five (if a
seller is involved) columns to separate fees, as follows:
(1)Borrower-Paid/At Closing;
(2)Borrower-Paid/Before closing;
(3)Seller-Paid/At closing;
(4)Seller-Paid/Before Closing; and
(5)Paid by Others.
The “Paid by Others” column does
not distinguish between charges paid before or at closing because the
distinction is not essential for determining the amounts due to or from the consumer
and seller at consummation.
As with the Loan Estimate, the
creditor must itemize its other charges after these specified charges within
each appropriate category, in alphabetical order.
Charges disclosed in the Loan
Costs and Other Costs tables under “Paid by Others” to include a notation of
“(L)” to designate those charges paid by the creditor (lender) pursuant to the
legal obligation between the creditor and the consumer,[xlii]
thereby enabling a clear enumeration of how a lender credit was applied.[xliii]
Loan Costs Table
General Description
Like the Loan Costs table on the
Loan Estimate, the Closing Disclosure’s Loan Cost table includes subcategories
A through C, followed by “D. TOTAL LOAN COSTS”:
Loan Costs
A. Origination Charges
B. Services Borrower Did Not Shop For
C. Services Borrower Did Shop For
D. TOTAL LOAN COSTS (Borrower-Paid)
Origination Charges
The first subcategory of loan
costs in the Loan Costs table, labeled as “A. Origination Charges,” includes
all compensation paid to a loan originator; that is, a third party associated
with the transaction, regardless of the party that pays the compensation.[xliv]
Generally, the amounts should correspond to the same items disclosed as
“Origination Charges” on the Loan Estimate.
Compensation from the consumer to
a third-party loan originator is designated as borrower-paid at or before
closing, as applicable. Compensation from the creditor to a third-party loan
originator is designated as paid by others.[xlv]
Suggested
Guidance
·
There is a prohibition of compensation from both
the consumer and the creditor to the loan originator.[xlvi]
·
The creditor must provide the identity of any
third-party loan originator that ultimately receives compensation from the
creditor.
·
The amount of compensation paid to a third-party
loan originator by a creditor must be calculated according to the guidance for
calculating creditor-paid compensation for the purposes of determining the
amount of points and fees.[xlvii]
The amount would include the dollar value of salaries, commissions, and any
financial or similar compensation considered points and fees.[xlviii]
·
Regulation Z exempts from disclosure the amounts
paid to the employee of a loan originator organization, which are excluded in
the points and fees calculation.[xlix]
Services Borrower Did Not Shop
For
The second subcategory of loan
costs in the Loan Costs table, labeled as “B. Services Borrower Did Not Shop
For,” includes costs of services required by the creditor and provided by
persons other than the creditor for which the consumer could not or did not
shop. The creditor must provide the identity of the person ultimately receiving
the payment. The creditor must include any additional items of this sort it
required but did not disclose on the Loan Estimate.[l]
Services Borrower Did Shop For
The third subcategory of loan
costs in the Loan Costs table, labeled as “C. Services Borrower Did Shop For,”
includes services required by the creditor for which the consumer independently
shopped. The creditor must provide the identity of the person ultimately
receiving the payment. All services disclosed on the Loan Estimate as “Services
Borrower Did Shop For” but for which the consumer did not shop must be moved to
“Services Borrower Did Shop For” on the Closing Disclosure.[li]
Total Loan Costs and Subtotal of
Loan Costs
In the last two rows of the Loan
Costs table, the creditor must disclose the total loan costs amount, labeled
“D. TOTAL LOAN COSTS (Borrower-Paid),” which is the sum of the Loan Costs
disclosed in the “Borrower Paid/At Closing” and “Borrower Paid/Before Closing”
columns.
Underneath this number, in the
appropriate columns, the creditor must include the subtotals for the costs
disclosed in the “Borrower-Paid/At Closing” and “Borrower-Paid/Before Closing”
columns for “A. Origination Charges,” “B. Services Borrower Did Not Shop For,”
and “C. Services Borrower Did Shop For.” Charges designated seller-paid at or
before closing, or paid by others, are not subtotaled here.[lii]
Other Costs Table
General Description
Like the Other Costs table on the
Loan Estimate, the Closing Disclosure’s Other Costs table include subcategories
E through H, followed by “I. TOTAL OTHER COSTS” and “J. TOTAL CLOSING COSTS,”
as follows:[liii]
Other Costs
E. Taxes and Other Government Fees
F. Prepaids
G. Initial Escrow Payment at Closing
H. Other
I. TOTAL OTHER COSTS (Borrower-Paid)
J. TOTAL CLOSING COSTS
(Borrower-Paid)
Taxes and Other Government Fees
The first subcategory of Other
Costs in the Other Costs table, labeled “E. Taxes and Other Government Fees,”
includes the same items disclosed under this subcategory on the Loan Estimate.[liv]
Suggested
Guidance
·
Unlike for the Loan Estimate, the CD requires
itemization of the transfer taxes[lv]
and does not require all transfer taxes to be aggregated on one line.[lvi]
·
The itemization of transfer taxes must reflect
the actual division of transfer taxes between the consumer and seller, instead
of only including the transfer taxes that the consumer could pay as is required
on the Loan Estimate, because any negotiations between the consumer and seller
will be resolved by consummation.
·
The creditor must include the name of the
government entity assessing the transfer tax.
·
Transfer taxes may be itemized as provided in
state or local law and the real estate purchase contract.
Prepaids
The second subcategory of Other
Costs, labeled “F. Prepaids,” includes the items disclosed under this
subcategory on the Loan Estimate. The creditor must include the name of the
person ultimately receiving the payment, except for the disclosure of Prepaid
Interest, and the total of the itemized Prepaids.[lvii]
Suggested
Guidance
·
The interest rate used to determine the amount
of Prepaid Interest is the Interest Rate disclosed on page one of the Closing
Disclosure.[lviii]
·
Prepaid Interest is disclosed as a negative
number if the calculation results in a negative number.[lix]
·
If interest is not collected for a portion of a
month or other period between closing and the date from which interest will be
collected with the first monthly payment, then $0 must be disclosed under
Prepaid Interest.[lx]
·
Property taxes are the items that meet the
definition of “mortgage-related payments”:[lxi]
“[o]bligations that are related to the ownership or use of real property and
paid to a taxing authority, whether on a monthly, quarterly, annual, or other
basis,” including “obligations that are equivalent to property taxes, even if
such obligations are not denominated as ‘taxes.’”[lxii]
Initial Escrow Payment at Closing
The third subcategory of Other
Costs, labeled “G. Initial Escrow Payment at Closing,” includes the items
disclosed under this subcategory on the Loan Estimate along with their actual
cost, the applicable aggregate adjustment under TILA,[lxiii]
and the total of the items.[lxiv]
Suggested
Guidance
·
The creditor must state the amounts it requires
the consumer to place into a reserve or escrow account at consummation to be
applied to recurring charges for property taxes, homeowner’s and similar
insurance, mortgage insurance, homeowner’s association dues, condominium dues,
and other periodic charges.[lxv]
·
Each charge must be identified with a relevant
label, monthly payment amount, and the number of months’ payments collected at
consummation.[lxvi]
·
The method used to determine the aggregate
adjustment for purposes of establishing the reserve or escrow account is
described in TILA, the methodology for which is illustrated in Appendix E to RESPA
Regulation X.[lxvii]
Result of the calculation will always be a negative number or zero, except for
amounts due to rounding.[lxviii]
·
Escrow payments are paid to a creditor (or a
mortgage servicer if one has been identified at closing), while prepaid amounts
generally are paid to third parties.
·
The aggregate adjustment[lxix]
must be listed as the last item disclosed under the “Initial Escrow Payment at
Closing” subheading.[lxx]
·
Amounts disclosed under this subheading are
those amounts[lxxi]
included in the definition of “escrow account” under RESPA.[lxxii]
Other
The fourth subcategory of Other
Costs, labeled “H. Other,” like the same subcategory on the Loan Estimate,
lists other services required or obtained in the real estate closing by the
consumer, seller, or other party (and not required by the creditor or disclosed
elsewhere on the Closing Disclosure). The label for any cost that is a
component of title insurance must begin with “Title—.” The label for costs of
premiums for separate insurance, warranty, guarantee, or event-coverage
products must include the parenthetical “(optional)” at the end.[lxxiii]
Suggested
Guidance
·
Charges falling in this subcategory include all
real estate brokerage fees, homeowner’s or condominium association charges paid
at closing, home warranties, inspection fees, and other fees that are part of
the real estate transaction but not required by the creditor or disclosed
elsewhere in Closing Cost Details.
·
The creditor must calculate any owner’s title
insurance premium in a jurisdiction that permits simultaneous issuance title
insurance rates by using the full owner’s title insurance premium, adding any
simultaneous issuance premium for issuance of lender’s coverage, and then
deducting the full premium for lender’s coverage disclosed under Services
Borrower Did Not Shop For or Services Borrower Did Shop For.[lxxiv]
·
The cost of a premium for an owner’s title
insurance policy must always be labeled with “Title—” at the beginning, and
labeled “(optional)” at the end when designated borrower-paid at or before
closing.[lxxv]
·
The total amount of the real estate commission
charged by any real estate brokerage must be disclosed under this subcategory,
regardless of the identity of the party that may hold any earnest money
deposit. Additional charges made by real estate brokerages or agents are
separately itemized as additional items for services rendered, with a description
of the service and the identification of the person ultimately receiving the
payment.[lxxvi]
Total Other Costs and Other Costs
Subtotals
Following the label “I. Total
Other Costs (Borrower-Paid),” which states the total of “Borrower-Paid/At
Closing” and “Borrower-Paid/Before Closing” Other Costs, the creditor must
include the subtotal for each of the two columns of Borrower-Paid Other Costs
(“Borrower-Paid/At Closing” and “Borrower-Paid/Before Closing”). The creditor
does not include subtotals for any of the other columns (“Seller-Paid/At
Closing,” “Seller-Paid/Before Closing,” and “Paid by Others”), which are
subtotaled on the line for “Closing Costs Subtotals (D+I),” as explained below.[lxxvii]
Total Closing Costs
The creditor must disclose the
sum of the borrower-paid Loan Costs and Other Costs, labeled “J. TOTAL CLOSING
COSTS (Borrower-Paid),” which is the total amount of consumer-paid closing
costs (D+I). This disclosure is followed by two rows – the first row showing
the subtotals of Loan Costs (A+B+C) and Other Costs (E+F+G+H) for each column
and the second row showing any Lender Credits for each column (as negative
numbers).[lxxviii]
If a refund is provided to cure a
tolerance violation (i.e., because an amount exceeds the limitations on
increases in closing costs, the lender must include the amount in the
appropriate column of Lender Credits and an explanatory statement; for
instance, “Lender Credits (includes $200 credit for increase in Closing Costs
above legal limit)”.
Suggested
Guidance
·
I recommend that the lender review the
methodological requirements to designating specific closing costs paid by the
lender,[lxxix]
which is intended to permit the itemization of lender credits in accordance
with the legal obligation between the creditor and the consumer.
·
Generally, undesignated lender credits also must
be appropriately reflected on the CD.[lxxx]
In the next article in this
six-part series, I will discuss Page Three of the Closing Disclosure. Page
Three contains two sections: (1) Calculating
Cash to Close, which requires the creditor to disclose the “cash to close,”
that is, the total amount of cash or other funds the consumer must provide at
consummation, and how the creditor determines that amount; and (2) Summaries of Transactions, which
summarizes the consumer and seller portions of the transaction.
[i]
Foxx, Jonathan, RESPA/TILA Integration – Part
I: Overview and Loan Estimate, pp 28-54, National Mortgage Professional,
October 2014
[ii]
Foxx, Jonathan, RESPA/TILA Integration –
Part II: Closing Disclosure and Action Plan, pp 26-50, National Mortgage
Professional, December 2014
[iii]
Foxx, Jonathan, Loan Estimate: Deep Dive,
pp xx-xx, National Mortgage Professional, June 2015
[vi] So creditors that take that option will provide
different information on CD page 3 than appears on the standard CD page 3 [see
model form H-25(E)]
[vii]
Regulation Z § 1026.38(a)
[viii]
The format of this disclosure is based on a model form, entitled H-25.
[ix]
Regulation X, Appendix A
[x]
Regulation Z § 1026.38(a)(3)
[xi]
Regulation Z § 1026.38(a)(3)(i). Comment 38(a)(3)(i)-1 refers to the commentary
for the corresponding item on the Loan Estimate, Regulation Z § 1026.37(a)(4).
[xii]
Regulation Z § 1026.38(a)(3)(ii)
[xiii]
Regulation Z § 1026.19(f)(1)(i)
[xiv]
Regulation Z § 1026.38(a)(3)(iii)
[xv]
Regulation Z § 1026.38(a)(3)(iv)
[xvi]
Regulation Z § 1026.38(a)(3)(v)
[xvii]
Regulation Z § 1026.38(a)(3)(vii) and Comment 38(a)(3)(vii)-1. Note also, when
personal property secures a transaction, a description of the personal property
may be disclosed to the extent it fits in the space provided for in the CD as
modeled on form H-25.
[xviii]
Regulation Z § 1026.38(a)(4)
[xx]
Regulation Z § 1026.38(t)(3); also Comment 38(a)(4)-1)
[xxii]
Comment 38(a)(4)-3
[xxiii]
Regulation Z § 1026.38(a)(5)
[xxiv]
Comment 38(a)(5)(v)-1
[xxv]
Regulation Z § 1026.38(b). For guidance, see Comment 38(b)-1, referring to the
commentary on the corresponding Loan Estimate provision, Regulation Z
§ 1026.37(b).
[xxvi]
Regulation Z § 1026.38(c)
[xxvii]
Comment 38(c)-1 refers to the commentary on the corresponding Loan Estimate
provision, Regulation Z § 1026.37(c)
[xxviii]
Regulation X § 1024.17
[xxix]
Regulation X § 1024.17, or in the manner set forth in Regulation Z
§ 1026.37(c)(5)
[xxx]
Regulation X § 1024.17(c)(7)
[xxxi]
TILA § 128(b)(4)(B)
[xxxiii]
Regulation Z § 1026.37(c)
[xxxiv]
TILA §128(b)(4)(B)
[xxxv]
Regulation X § 1024.17. See also Comment 38(c)(1)-1
[xxxvi]
Regulation Z § 1026.38(d)
[xxxvii]
Comment 38(d)(2)-1
[xxxviii]
Regulation Z § 1026.38(d)(2)
[xxxix]
Regulation Z § 1026.37(d)(2)
[xl]
Regulation Z § 1026.38(f) and (g)
[xli]
As with the rest of model form H-25, the text illustrated by the form is
required for federally related mortgage loans covered by the TILA-RESPA
Disclosure Integration Rule, but is a model form for transactions subject to
TILA only and not RESPA.
[xliv]
Regulation Z § 1026.38(f)(1)
[xlvi]
Regulation Z § 1026.36(d)(2). See also Comment 38(f)(1)-2.
[xlvii]
Regulation Z § 1026.32(b)(1)(ii)
[xlviii]
Regulation Z § 1026.32(b)(1)(ii). See also Comment 38(f)(1)-3.
[xlix]
Pursuant to Regulation Z § 1026.32(b)(1)(ii)
[l]
Regulation Z § 1026.38(f)(2) and Comment 38(f)(3)-1
[li]
Regulation Z § 1026.38(f)(3)
[lii]
Regulation Z § 1026.38(f)(4)-(5) and Comment 38(f)(5)-1
[liii]
Regulation Z § 1026.38(g)
[liv]
Regulation Z § 1026.38(g)(1) and Comment 38(g)(1)-1, which refers to the
corresponding Loan Estimate provisions for guidance (Comments 37(g)(1)-1
through -4).
[lv]
Regulation Z § 1026.38(g)(1)(ii)
[lvi]
Comment 38(g)(1)-2.
[lvii]
Regulation Z § 1026.38(g)(2) and Comment 38(g)(2)-1, which refers to Comments
37(g)(2)-1 and -2 for further guidance.
[lviii]
Comment 38(g)(2)-4
[lxii]
Comment 38(g)(2)-5
[lxiii]
Regulation X § 1024.17(d)(2)
[lxiv]
Regulation Z § 1026.38(g)(3)
[lxv]
Comments 38(g)(3)-1 and -4
[lxvi]
Comment 38(g)(3)-1
[lxvii]
Regulation X § 1024.17(d)(2)
[lxviii]
Comment 38(g)(3)-2
[lxix]
As required by Regulation Z § 1024.17(d)(2)
[lxxi]
Comment 37(g)(3)-5
[lxxii]
Regulation X § 1024.17(b)
[lxxiii]
Regulation Z § 1026.38(g)(4)
[lxxiv]
Comment 38(g)(4)-2
[lxxvi]
Comment 38(g)(4)-4
[lxxvii]
Regulation Z § 1026.38(g)(5)-(6), Comment 38(g)(6)-1
[lxxviii]
Regulation Z § 1026.37(h)(1)-(3)
[lxxix]
Comments 38(f)-1 and 38(h)(3)-1
[lxxx]
Regulation Z § 1026.38(h)(1), Comment 38(h)(3)-1
