Question
Do services - and the fees for such services - that are not
required by a lender need to be disclosed on the Loan Estimate once the TILA-RESPA
Integration Rule becomes effective on August 1, 2015?
Answer
Yes, the CFPB has made it clear that fees paid by the borrower,
even if not required by the lender or part of the loan transaction must be
disclosed on the Loan Estimate. This would include the commissions of
real estate brokers or agents, additional payments to the seller to purchase
personal property pursuant to the property contract, homeowner’s association
and condominium charges associated with the transfer of ownership, engineer
inspection fees and personal attorney fees.
Specifically, a creditor is required to itemize in the column
titled “Other” in the Closing Costs Details provided on page 2 of the Loan
Estimate “any other amounts in connection with the transaction that the
consumer is likely to pay or has contracted with a person other than the
creditor or loan originator to pay at closing and of which the creditor is
aware”. [12 CFR 1026.37(g)(4)]
The Official Commentary states:
Examples. Examples of other items that are disclosed under §
1026.37(g)(4) if the creditor is aware of those items when it issues the Loan
Estimate include commissions of real estate brokers or agents, additional
payments to the seller to purchase personal property pursuant to the property
contract, homeowner’s association and condominium charges associated with the
transfer of ownership, and fees for inspections not required by the creditor
but paid by the consumer pursuant to the property contract.
[Official Commentary: 12 CFR
1026.37(g)(4)]
Further, Official Commentary provides additional guidance when discussing
the good faith requirement for services chosen by the consumer that are not
required by the creditor.
[Official Commentary: 12 CFR 1026.19(e)(3)(iii)-3]
The foregoing comment states, in pertinent part, that:
… if the
subject property is located in a jurisdiction where consumers are customarily
represented at closing by their own attorney, even though it is not a
requirement, and the creditor fails to include a fee for the consumer's
attorney, or includes an unreasonably low estimate for such fee, on the
original estimates (Loan Estimate) then the creditor's failure to disclose, or
under-estimation, does not comply with § 1026.19(e)(3)(iii).
As this is
a big change from existing requirements, brokers, lenders and loan originators
need to make sure that they have policies and procedures in place to comply
with the foregoing requirements.
Michael
Barone
Director/Legal
& Regulatory Compliance
Lenders Compliance Group
