It’s always difficult to know what to do when you realize that the person in charge is wrong about something. This can happen when lenders outsource the Closing Disclosure (CD) to settlement agents—and they tell the agents they want it done in a way that isn’t compliant with TRID regulations.
What’s a Title Agent To Do?
This question came up in ATS Secured’s webinar, “Post TRID Challenges and Innovative Solutions” with Richard Horn, former CFPB attorney who led the final rule, and Brent Laliberte with Bayou Title. Consider their answers below.
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Question: How should we, a title company, handle the situations where the lender is directing us to prepare the CD in a way that we know is incorrect?
Richard Horn’s Answer:
This is a great question, it’s something that unfortunately is not described in the preamble of the rule, it’s not something that’s in any of the regulatory provisions, and it’s something that is really of concern to settlement agents. Because there are a lot of misunderstandings about how to comply with TRID and actually there are probably a lot of cases where a settlement agent might understand the way the rule is intended, might understand the correct way to comply with the rule, and the lender might have a misunderstanding about it.
But the lender might still require under their closing instructions for the disclosure to be disclosed incorrectly because of their misunderstanding and the question then comes up, is the settlement agent subject to potential administrative liability for that violation.
Hopefully that’s something that the CFPB does, at some point in the future, provide some guidance on for settlement agents. I know the HUD FAQ’s previously did talk about some agents’ responsibility with respect to tolerance violations for the GFE and the HUD-1 and so there is some precedent for a regulatory agency giving some guidance about these types of situations where the lender might have a violation that the settlement agent is really just a part of because they are following the lender’s instructions.
Document the Lender’s Instructions
I think the best thing for settlement agents to do is to document that they informed the lender of their interpretation and that the lender decided to still follow through with the lender’s interpretation, and then keep that in their own file. Because if there is any potential administrative liability I think that would probably be taken into account by an examiner.
Brent Laliberte’s Answer:
We’ve actually seen this some, where you know the lender will do theirs and then we’ll do ours and we try to reconcile them and they’re just off, and I think the occasions where we’ve had that, if anything I think they’ve usually deferred to ours.
It hasn’t been wide scale, I’d say just probably a handful of situations, but I think you’ve got to document and keep copies of whatever you have because clearly, if you read a lot of these closing instructions now, they’re trying to shift as much blame and liability and responsibility to us (Title) as they can so we need to make certain that we do the best job we can and try to be in conformity with what the rule provides for, but at the end of the day it is their form so with their form, we need to do an adequate job of protecting ourselves, and our own interests.
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