CFPB May Soon Change the Way Title Insurance Premiums are Disclosed to Combat Inaccurate Estimates

After TRID changed the title insurance process last year, the accuracy of title insurance fee estimates became a contested issue. Following the TILA-RESPA Integrated Disclosure Rule, it became much more difficult to deliver accurate title insurance premium estimates. In particular, concerns with the manner in which title insurance premiums are disclosed have been brought to the attention of legislators urging regulators of the industry to make a move.

As a result of the TILA-RESPA Integrated Disclosure Rule that took effect on October 1, 2015, members of Congress have requested to initiate changes with the Consumer Financial Protection Bureau (CFPB) and modify the way in which title insurance premiums are disclosed. An effort to make these changes is currently underway, as the calculation methods applied to title insurance premiums can sometimes lead to incorrect title insurance premium estimates on mortgage disclosures.

At the present moment, the lender’s title insurance policy listed on the Loan Estimate and Closing Disclosure forms amounts to the regular cost of the total title insurance premium without any adjustments. However, oftentimes the homebuyer will receive a discount when requesting a home owner’s title insurance policy in addition to the lender’s policy. When purchasing the home owner’s title insurance policy and the lender’s policy simultaneously, this can lead to inaccurate estimates on closing disclosure forms.

According to National Mortgage News, “seventy-four members of Congress signed a letter to CFPB Director Richard Cordray arguing that consumers are receiving ‘incorrect’ title insurance premium disclosures.” This issue goes back to manner in which title insurance fees are defined under TRID. The main problem title insurance agents are facing is that the current regulations do not allow for the “simultaneous issue” rate. This means that at first glance, the consumer is not actually seeing the correct amounts for title insurance premiums on the mortgage closing disclosure.

The CFPB made a proposal asking for feedback and lawmakers stated it was a good opportunity to try and remedy the issue. The American Land Title Association (ALTA) supports the proposal to make changes to the CFPB’s calculation process and states the current method is confusing.

“We do not think that showing the consumer the actual number they will pay and putting a totally different number on the disclosure is accurate or fair to the homebuyer who already has questions about the transaction,” stated spokesman for the ALTA Wayne Stanley.

This July (2016),  the CFPB is working to issue a TRID mortgage disclosure rule expected to debut this month. At the current moment, the organization continues to work with groups of stakeholders and gather insight to shape what new regulations are to come. At the same time, ALTA has assembled a group of 12,000 agents prepped to blast letters and emails to the CFPB informing them of the reality of the issue for closing teams across the country.

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SOURCES:

CFPB is Urged to Change How Title Insurance Premiums

Title Agents Press CFPB to Change Title Fee Disclosures