By: Gina Ellis
Can you believe it’s already March? You know what that means! The August 1steffective date for the Truth In Lending/RESPA Integrated Mortgage Disclosure rules is on the horizon.
With that, here are 5 things to consider now before the effective date:
1. Many smaller community banks decided not to implement the use of a shopping list for service providers after the RESPA changes in 2010. However, considering the new rules for calculating tolerance violations, it may be more beneficial for the bank to provide a shopping list. When the bank provides a shopping list and the borrower selects a required provider not on the list, the tolerance is unlimited. If the bank chooses not to provide a shopping list, all the required provider fees are subject to a zero tolerance.
2. You also need to review any fees paid to affiliated and unaffiliated service providers. The definition of ‘affiliate’ differs between RESPA and the new integrated rules, thus you will need to determine the direct or beneficial ownership interest for any affiliates and whether or not the Affiliated Business Arrangement Disclosure under RESPA is required. You should include fees paid to an affiliate on your shopping list to ensure you are aware of them even though they are calculated at zero tolerance. If the borrower chooses another provider, the fee will not be subject to any tolerances.
3. Does the bank require owner’s title insurance for all purchase transactions? When title insurance is not required and is disclosed as optional, it will not be subject to any tolerances, even if paid to an affiliate. If your bank is not requiring owner’s title insurance, you will need to make sure this is disclosed as optional on the new loan estimate.
4. You might also consider developing an internal method to calculate tolerances since a comparison chart is not included with the new disclosures. If you have not discussed this with your loan operating software provider, you might consider asking if they will be providing a method to calculate tolerances for each category: zero tolerance, 10% tolerance, as well as charges that can change. If not, you should plan to develop your own procedures internally and determine where in the loan process the comparisons will be made.
5. Have you centralized your mortgage document preparation procedures? Accepting mortgage applications may require specialized training but preparing the required loan estimate and closing disclosures will require intense training and expert knowledge. If you haven’t already, you need to consider centralizing the mortgage disclosure process and identifying specific personnel to receive mortgage applications and prepare the new disclosures.
