Five Things to Know: Five Things You Need to Know Before August 2015 What Transactions Types Are Affected What Transaction Types Are Exempt The New Forms – Loan Estimate (LE) & Closing Disclosure (CD) Title Fees - Explaining CD Requirements & Actual Fees Closing vs. Consummation & Transaction Timeline

1. What Transactions Types Are Affected? Five Things You Need to Know Before August 2015 1. What Transactions Types Are Affected? The new rules and the new forms apply to all closed-end consumer credit transactions secured by real property, other than reverse mortgages, which include the following types of loans: Purchase money Refinance  25 Acres or less Vacant-land  Construction-only  Timeshare 

2. What Transaction Types Are Exempt? Five Things You Need to Know Before August 2015 2. What Transaction Types Are Exempt?   Consumer loans exempted from the new rules and the new forms are as follows: Reverse Mortgages Home Equity Lines of Credit (HELOCs) Chattel-Dwelling/Mobile Home Only Loans Creditors who originate less than 5 loans in a calendar year

2. What Transaction Types Are Exempt? Cont. Five Things You Need to Know Before August 2015 2. What Transaction Types Are Exempt? Cont.  The portions of TILA and RESPA governing Reverse Mortgages are not being replaced or deleted. Creditors will be required to issue a TILA disclosure and Good Faith Estimate (GFE) on these types of loans. Settlement agents will be required to use a 2010 HUD-1 settlement statement to close these types of loans. Loans in progress (applications submitted prior to August 1, 2015) are not subject to the new rules or the new forms.

New Terms Closing Disclosure Creditor = A Loan Originator, Lender or Mortgage Broker Consummation = The day the borrower becomes legally obligated to repay the debt – the date of the signing of the loan documents Business Day = A day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions For purposes of rescission under TILA – all calendar days EXCEPT Sundays and Legal Public Holidays

Know before you close. The LE & CD will be available in translated versions that include Spanish, Chinese, Japanese, Russian, Tag-a-long?

Loan Estimate| At-a-Glance Know before you close. Loan Estimate| At-a-Glance The new form is 3 pages long New form replaces the GFE and Early TILA The creditor is not allowed to revise and re-disclose if charges go up or down prior to the closing Creditor errors are not legitimate reasons for revising Loan Estimates Currently, borrowers receive two separate forms from their lender at the beginning of the transaction: the Good Faith Estimate ( GFE), a form required under the Real Estate Settlement Procedures Act (RESPA), and the initial disclosure required under the Truth-in Lending Act (TILA). For loan applications taken on or after August 1, 2015 the creditor will instead use a combined Loan Estimate form intended to replace the two previous forms. The new three-page Loan Estimate form must be provided to borrowers on a timetable similar to the current receipt of the GFE. The creditor can only reissue a Loan Estimate based on 6 events which qualify as a “Changed Circumstance” Changed Circumstance Affecting Settlement Charges – changes that cause the sum of all estimated charges to increase by more than 10% Circumstances Affecting Eligibility – Borrower creditworthiness or value of the of the collateral causes charges to increase (i.e. job loss/low appraisal)? Revisions Requested by the Consumer – if borrower requests changes to the mortgage loan that change the settlement charges or terms of the loan Interest Rate Dependent Charges – if the interest rate hasn’t been locked, expires, etc. (Lender to give examples) Expiration – if a borrower doesn’t express an intent to continue with the transaction within 10 business days of receiving the Loan Estimate Delayed Settlement Date on a Construction Loan – when the LE is delivered 60 days prior to consummation of the transaction

Receiving the Loan Estimate Lender must deliver within three business days of the lender’s receipt of an “application” Application – automatically occurs when lender receives six pieces of information: Borrower(s) Name(s) Income Social Security Number(s) Property Address Estimated Value of Property Mortgage Loan Amount

Loan Estimate | pg.1 Basic Information Loan Terms Projected Payments Costs at Closing

The Loan Estimate Basic Transaction Information Basic Loan Terms

The Loan Estimate Information about the New Monthly Mortgage Payment Estimates amount borrower will need at closing

Loan Estimate | pg.2 Loan Costs Other Costs Calculating Cash to Close

The Loan Estimate Alphabetical Order - Cost descriptions in each section must be listed in alphabetical order Title Insurance and Settlement Charges - The description of each fee related to title insurance or settlement (escrow) must be preceded by “Title –” The terms to describe charges on the LE MUST be SUBSTANTIALLY similar to the terms used on the CD so the customer can easily compare charges Lender’s Title Insurance – Purchase Transactions - Must show the full Loan Policy Rate, NOT the simultaneous issue rate often charged when an Owner’s policy is also issued © 2015 Fidelity National Title Group

The Loan Estimate Owner’s Title Insurance Rules If to be paid by borrower, must show “(optional)” in description Actual Charge not shown - for simultaneous issue, owner’s rate = Owner’s Rate + Simultaneous Issue Loan rate – Full Loan rate © 2015 Fidelity National Title Group

Owner’s Title Insurance Any simultaneous issue discount must be applied to the owner’s policy premium (and not the loan policy premium). Owner’s Coverage + Simultaneous Issue Loan Premium – Full Loan Premium = Owner’s Rate

Example On the purchase of a $300,000 residence with a $240,000 loan closed simultaneously, an approximation of actual costs and the redistributed disclosure “costs” would be: Owner’s Policy Premium: $1,090.00 Lender’s Policy Premium (Full-Premium Rate): $928.00 Lender’s Policy Premium (Simultaneous Issue Rate): $469.00 Seller’s Cost per Contract Buyer’s Cost per Contract Seller’s “Cost” per Disclosure Buyer’s “Cost” per Disclosure “Cost” Difference – Seller “Cost” Difference – Buyer Owner’s Policy $1,090 $0 $631 ($1,090 +$469 ‐ $928) $459 less ($1,090‐$631) Lender’s Policy $928 $459 more ($928‐ $469)

Loan Estimate | pg.3 Comparisons Other Considerations Confirm Receipt

The Loan Estimate Various specific Loan calculations, including APR, required under TILA, RESPA or Dodd-Frank

The Loan Estimate

Receiving the Loan Estimate Except for credit report, no fees chargeable until after Loan Estimate is provided Lender must attach separate Provider List similar to that currently used with the GFE Must include all services which the borrower may need for the transaction (not just items for loan)

The Loan Estimate The Provider List

Re-Disclosure The creditor can only reissue a Loan Estimate based on six events which qualify as a “Changed Circumstance.” Changed Circumstance Affecting Settlement Charges – changes that cause the sum of all estimated charges to increase by more than 10%. Circumstances Affecting Eligibility – borrower creditworthiness or value of the collateral causes charges to increase. Revisions Requested by the Consumer - if borrower requests changes to the mortgage loan that change the settlement charges or terms of the loan.

(continued) “Changed Circumstance.” Re-Disclosure (continued) “Changed Circumstance.” Interest Rate Dependent Charges – if the interest rate has not been locked or a locked interest rate has expired, the charge or credit for the interest rate chosen, the adjusted origination charges, per diem interest, and loan terms related to the interest may change. Expiration – if a borrower does not express an intent to continue with the transaction within ten business days. Delayed Settlement Date on a Construction Loan – when the Loan Estimate is delivered sixty (60) days prior to consummation of the transaction

Closing Disclosure | At-a-Glance Know before you close. Closing Disclosure | At-a-Glance The new form is 5 pages long New form replaces the TILA and HUD-1 One closing disclosure is required for each loan Charge descriptions on both the loan estimate and closing disclosure must match The combination of forms continues at the end of the transaction as well, with the HUD-1 Settlement Statement and the final TILA forms now combined into a single Closing Disclosure form. This new five-page form is used not only to disclose many terms and provisions of the loan, but also the financial transaction of the closing of the sale. The line numbering on the HUD-1 familiar to most of us is gone. Instead, the fees and charges are placed on the Closing Disclosure in one of seven areas:  Origination Charges Services Borrower Did Not Shop For Services Borrower Did Shop For Taxes and Other Government Fees Pre-paids Initial Escrow Payment at Closing Other

Who prepares the new Closing Disclosure Form? The Lender is primarily responsible for the preparation and delivery of the Closing Disclosure The Lender may permit the Settlement agent some portions or all of the form and/or deliver the form Settlement Agent liability – for those portions prepared or delivered Lender remains responsible for all portions of the Closing Disclosure to “ensure the disclosures are provided” in accordance with the rule

Closing Disclosure| pg.1 Basic Information Loan Terms Projected Payments Costs at Closing

Closing Disclosure| pg.1 Close Disclosure Closing Disclosure| pg.1 Basic Transaction Information

Closing Disclosure| pg.1 Close Disclosure Closing Disclosure| pg.1 Description of Basic Loan Terms

Closing Disclosure| pg.1 Information about the New Monthly Mortgage Payment Amount includes monthly obligations on property even if not included in impound amount

Closing Disclosure| pg.1 Cash to Close – shows the buyer/borrower the amount necessary for closing

Closing Disclosure| pg.2 Loan Costs Other Costs

Closing Disclosure| pg.2 Cost Descriptions Must be substantially similar to description on Loan Estimate Alphabetical Order “Title –” designation on all Title and Settlement Fees Lender’s Title Rule 33

Closing Disclosure| pg.2 Owner’s Title Rule © 2015 Fidelity National Title Group

Closing Disclosure| pg.3 Calculating Cash to Close Summaries of Transactions

Closing Disclosure| pg.3 Comparison Table – shows the buyer/borrower a comparison of amounts from Loan Estimate v. Closing Disclosure

Closing Disclosure| pg.3 Summary of Transactions – a summary of the transaction similar to page 1 of the HUD-1 Settlement form 37 © 2015 Fidelity National Title Group

Closing Disclosure| pg.4 Loan Disclosures – contains various lender disclosures required under TILA, RESPA or Dodd-Frank © 2015 Fidelity National Title Group

Closing Disclosure| pg.5 Loan Calculations – Various specific Loan calculations, including Finance Charge and APR, required under TILA, RESPA or Dodd-Frank Other Disclosures – Various lender disclosures required under TILA, RESPA or Dodd-Frank Contact Information – Confirm Receipt – © 2015 Fidelity National Title Group

Three different three-day periods in closing Closing Disclosure Three different three-day periods in closing The 3-day right of rescission (“3-day rescission”) under TILA Presently applicable to most refinance transactions Not impacted by the Final Rule The 3-day waiting period (“3-day waiting”) after delivery of the Closing Disclosure, the Borrower has 3 days to review before a closing may occur The 3-day delivery period for delivery of the Closing Disclosure (“3-day delivery”) – Unless the Closing Disclosure is delivered personally, the Rule “deems” it delivered three business days later Period may be shortened by actual confirmation of receipt

Disclosure Delivery Timing Closing Disclosure Disclosure Delivery Timing

Changes to initial Closing Disclosure after delivery Only a few changes will require another 3-day waiting period – Change in the loan program Example – moving from fixed rate to an adjustable rate loan Changes to Annual Percentage Rate (APR) greater than 1/8 % Applies only to increases in APR items , other increases do not trigger a new disclosure with waiting period. Caution – other increases may still cause tolerance violations The addition of a prepayment penalty fee after the initial disclosure But , all changes require a new Closing Disclosure to be prepared and delivered at or before “consummation”. Since the buyer/borrower will receive a Closing Disclosure several days before the closing (and likely a few days before a walk-through on the property), buyers/borrowers will likely receive a new, adjusted Closing Disclosure at the closing showing any changes that occurred between the initial disclosure and the closing, including adjustments due to timing of the closing, walk-through adjustments and other matters. But changes may not end there and CFPB mandates that changes in financial disclosure numbers (i.e. changes in a recording fee) in any amount must be re-disclosed, even post-closing. 

Tolerance Rule Changes Closing Disclosure Tolerance Rule Changes Both TILA and RESPA previously contained tolerance rules: TILA rules generally required a re-disclosure if finance charges or APR exceeded threshold RESPA actually provided penalties (“tolerance violations”) if an item, or series of items, exceeded a monetary threshold

Tolerance Rule Changes Closing Disclosure Tolerance Rule Changes Changes to tolerance rules Addition to “zero tolerance” category (may not change for numbers on Loan Estimate) Third Party Services where the provider is selected by the Lender Third Party Services provided by an affiliate of the Lender

Tolerance Levels Charges that cannot increase at closing include: Creditor or broker charges Fees charged by an affiliate of the creditor or broker Charges for services for which the borrower is not permitted to shop Charges that cannot increase at closing include: Charges that in the aggregate cannot increase by more than 10%: Charges that can increase at closing (but which were estimated in good faith): Recording fees Owner’s title premium Escrow/Closing fee Charges for services the consumer shopped for using the creditor’s provider list Prepaid interest Impound account set up Homeowner’s insurance Property taxes Charges for which the borrower chose a service provider not on the creditor’s list Any other non‐loan related charges © 2015 Fidelity National Title Group

Civil Penalties The new rules replace the Truth-in-Lending Act and sections 4 and 5 of RESPA. Unlike TILA and RESPA, the new rules contain enforcement provisions and fines for violating any act or omission of the federal consumer financial law. Tier Penalty/Fine First Tier Up to $5,000/day for each day the violation or failure to pay continues Second Tier Up to $25,000/day for each day that a person continues to recklessly engage in a violation of a federal consumer financial law Third Tier Up to $1,000,000/day for each day that any person knowingly violates a federal consumer financial law

Closing Disclosure to the Seller Settlement Agent is responsible for providing the Closing Disclosure to the Seller Closing Disclosure format for the seller may be either: The same format as for Borrower, but items related solely to borrower (i.e., loan disclosures) and using only seller data; or Use the separate CFPB seller’s disclosure form Disclosure must be delivered to the Seller on or before “consummation”; no 3-day waiting period 3-business day delivery period applies, except for personal delivery.

Seller’s Disclosure

Seller’s Disclosure

Know before you close. Question?