Disclosing title fees on the loan estimate

Answered by:

Melissa Blaser | CRCM, CAMS, CPA, CFSA, CFIRS

Question:

For our portfolio mortgage loans we disclose title fees in the section of the loan estimate marked "borrower allowed to shop for" since we do not usually have a detailed fee quote before the loan estimate is required. A closing fee or settlement fee usually charged by the title company is a prepaid finance charge. Should we disclose a Title Closing fee and mark it PPF on the loan estimate even without an exact quote so that we do not have to do a new loan estimate for a changed circumstance due to a change in APR exceeding .125 when fees do come in prior to sending the closing disclosure?

Answer:

by Randy Carey:

There is no APR tolerance test between issuing LEs. During the LE phase of the transaction a change in the APR is not a changed circumstance. A changed circumstance only happens if you lock the rate, and it was not previously locked, or your fees subject to the tolerance tests increase. The APR tolerance testing only applies once you issue an initial CD. Why would you not include it as a PPFC, as it is always going to be treated as a PPFC.

Answer:

by Melissa Blaser:

Your Loan Estimate should be disclosed in Good Faith based on the best information available with an expectation that you will take steps to obtain that information if its available. If you allow your customers to shop and include title fees and a title company on the shopping list, you should obtain the fees charged by that title company and disclose them on your LE. If they charge a closing fee, you should disclose it, and yes, it would be a prepaid finance charge. I believe you are referring to the requirement to redisclose the Closing Disclosure 3 business days prior to closing if the APR will change from the initial CD and will exceed tolerance. Typically, you would know title fees by the time you issue the initial CD so that most likely will not be an issue.