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10 Things You Should Know about Title Insurance: APR Includes Settlement Costs

August 29, 2009 Leave a comment

Settlement costs factor into your loan’s Annual Percentage Yield (APR). Home buyers should know the settlement process can be delayed due to recent changes to the Truth in Lending Act (effective Aug. 1, 2009). If the actual APR differs from the estimated APR by more than 0.125 percent, your mortgage lender must issue a new initial disclosure that reflects the accurate rate and wait a minimum of 3 business days to close the deal. To avoid surprises at the closing table, invest five minutes of your time at the beginning of the transaction to obtain a guaranteed quote online for settlement services.

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10 Things You Should Know about Title Insurance: It’s a One-time Fee

August 25, 2009 Leave a comment

Title insurance is a one-time fee. Unlike other types of insurance, there is no ongoing premium to pay for title insurance. Your mortgage lender is required to provide you with a Good Faith Estiamte for closing costs, including title insurance, and factor those costs into the initial disclosure. This three-minute video explains closing costs in laymen’s terms: Closing Costs Explained Visually.

New RESPA Rule FAQs – Good Faith Estimates

August 21, 2009 Leave a comment

1) Q: What happens if a GFE is not provided to a borrower?

A: In a transaction involving a federally related mortgage, the loan originator is required to provide a GFE to the borrower. Failure to provide a GFE as required is a violation of Section 5 of RESPA.

2) Q: When will the use of the new GFE and HUD-1 forms be required?
A: The new GFE and HUD-1 forms must be used as of January 1, 2010. The new GFE and HUD-1 forms may be used before this date. Please note that if a loan originator issues a GFE on the new form, then the settlement agent must use the new HUD-1 form and the tolerances and other requirements in the revised RESPA regulations will apply.

3) Q: If a GFE is issued on the old form prior to January 1, 2010, and the loan will close after January 1, 2010, which HUD-1 form is to be completed by the settlement agent?

A: If a GFE is issued on the old form prior to January 1, 2010, then the old HUD-1 form must be used even if closing will occur after January 1, 2010. For GFEs issued on the old form, the loan originator has the option to reissue the GFE (with the same terms and charges) on the new form, in which case the settlement agent must complete the new HUD-1 form.

4) Q: When does a loan originator have to issue a GFE?

A: A loan originator must issue a GFE no later than 3 business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower‘s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following: (1) borrower‘s name, (2) borrower‘s monthly income; (3) borrower‘s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator.

5) Q: What is a loan originator?

A: “Loan originator” means a lender or a mortgage broker.

6) Q: What fees can a loan originator charge before issuing a GFE?

A: Prior to issuing a GFE, the loan originator may, at its option, collect a fee limited to the cost of a credit report.

7) Q: I am a mortgage broker. Can I provide the GFE?

A: Yes, a mortgage broker can provide the GFE, however the lender is ultimately responsible for ascertaining that the GFE was provided to the applicant.

8) Q: There are not enough lines on the GFE or the HUD-1 to show all of the charges that are appropriate for some of the categories. Where should these charges be listed?

A: Additional lines may be added to Blocks 3, 6 and 11 of the GFE. Additional lines may also be added to the HUD-1.

9) Q: Is a GFE a loan commitment?

A: No, the GFE is not a loan commitment. A GFE is an estimate of settlement charges a borrower is likely to incur to obtain a specific loan.

10) Q: At what point can a loan originator charge a loan applicant fees for services other than the cost of obtaining a credit report?

A: After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services.

11) Q: If the borrower is taking out two loans to finance the purchase, how should the loan originator disclose the charges from each loan on the GFE and the HUD-1?

A: Each loan must have a separate GFE and a separate HUD-1. However, the principal amount of the second loan and a brief explanation of the second loan should be listed on Lines 204 – 209 of the HUD-1 for the first loan.

12) Q: What are processing and administrative services?

A: Processing and administrative services are those services required to perform the functions involved in title service and origination service. Processing and administrative services include, but are not limited to the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.

*The preceding Q&A was originally published on the HUD website.

What Do TILA Changes Mean for Lenders, Title Agents?

Changes to the Truth in Lending Act (TILA) now require lenders to provide consumers “early disclosure” of good faith estimates of mortgage loan costs and a minimum seven-day waiting period between disclosure and closing.

This means it’s all the more important for lenders to obtain an accurate settlement fee quote from their title agent as early as possible.

The Federal Reserve has highlighted the major changes in the truth in lending early disclosure requirements in the chart below:

To avoid delays in the closing process, lenders must be precise. The new requirements also call for an additional three business days of wait-time before consummating a loan transaction should the APR reflected in the initial disclosure vary by more than an eighth of one percent (.125%).

A guaranteed quote, such as the one offered by Federal Title & Escrow Company, will ensure there are no surprises – or closing delays – at the end of a real estate transaction.

Transparency in Title Charges

WHY AREN’T TITLE COMPANIES MORE TRANSPARENT?

On average, title charges (i.e., settlement or closing fee, title insurance) comprise 70% of the total variable closing costs*. Since title charges do vary significantly from title company-to-title company in DC, MD, VA, and FL, it is very important for a home buyer to comparison shop.

Ever wonder why most title companies force you to make contact with them in order to get a quote for title charges? Seriously, with today’s technology, why won’t your title company allow you to anonymously get a customized quote for their services so you can do some comparison shopping? Why do you have to contact them and wait for them to call or email you back with a quote?

Where is the demand from consumers on title companies? After all, mortgage lenders are soon to be required (by law – see http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm) to provide a Good Faith Estimate (GFE) that is subject to a “no tolerance” increase for originiation and lender costs. Shouldn’t similar demands be placed on title companies?

Most title companies hope that the referring party sends the contract and/or title order and doesn’t encourage the consumer to comparison shop for title services. In this instance, the consumer is a captive audience and will be charged accordingly. When the referring party does encourage the consumer to shop, most title companies force the consumer to call them or email them before they will provide a quote for services. They want to “feel you out” over the phone or via email to determine how hard you are shopping. If they sense a “hard” shopper, the price goes down; if they sense a “soft” shopper, the price may go up. In other words, their title charges are not consistent across the board and vary depending on how hard they have to try. Further, there is a belief among these same title companies that if they can just get you on the phone or make direct contact with you, they can “reel you in” and sell you on their service (even if the company’s charges are above market). If you are like me, you really don’t want to talk with anyone and have to haggle – JUST GIVE ME YOUR PRICE SO I CAN COMPARE AGAINST OTHERS!

Whether you are a “hard” shopper or a “soft” shopper, the charges are consistent and available online 24/7 at http://www.federaltitle.com/. You don’t have to talk to us! We are so confident of our service and pricing, that we allow consumers to obtain, ANONYMOUSLY, a guaranteed quote for services using our QuickQuote https://www.federaltitle.com/titleagents/QuickQuote/Default.aspx feature. Give it a try and you will see that Federal Title & Escrow Company is the most transparent and consumer-friendly title company in the market.

*Accurately defined, “variable closing costs” are those non-recurring costs for which you can shop. Examples of variable closing costs include lender charges (i.e., appraisal fee, underwriting fee, tax service fee, flood certification, document preparation fee); title company charges (i.e., settlement or closing fee, title insurance premium); or ancillary services (i.e., location survey, property inspection, termite report, home warranty).

Items such as transfer taxes, recordation taxes, stamp tax, prepaid interest and escrow/reserves for taxes/insurance are not considered “closing costs” because these items do not vary among service providers and cannot be “shopped.”