1. Law Day 2015 presents:

2. Thank You! Golden Gavel Sponsor Scott Burgess Citywide Title Corp. (630) 849-7952 scott@citywidetitle.com scott@citywidetitle.com Partners in Professionalism Robert V. BorlaThomas Pilafas Borla, North & AssociatesNear North National Title (630) 969-3903(708) 805-2250 rborla@borlanorth.comtpilafas@nnnt.com

3. Got Questions? Text Us! Due to the impact of our agenda and the large number of attendees, questions will ONLY be taken via text message. To text your questions follow these quick steps! 1.Open your text messaging app on your cell phone and create a new message. 2.In the “To:” field type, “66746”. 3.In the message field type “askmainst”. 4.Click “Send” and follow the instructions that are sent to you. Mainstreet Network (for those attending at a MORe location): Wi-Fi Network: Mainstreet1 Wi-Fi Password: freeinternet

4. Introductions Finley Maxson National Association of REALTORS ®, Senior Counsel James Jefferson Branch Manager, Wells Fargo Thomas Pilafas Executive Vice President of Business Development Near North

5. NAR Legal Update Finley P. Maxson NAR Senior Counsel fmaxson@realtors.org (312) 329-8381

6. RESPA/TILA Integrated Disclosure (“TRID”) Created by Dodd-Frank, with a goal of improving disclosures to consumers by creating better consumer disclosures Two disclosure forms now required, Loan Estimate and Closing Disclosure Effective Date: August 1, 2015

7. TRID Changes to Real Estate Transaction 1.New timing requirements for disclosures 2.Tolerance limitations for cost variances

9. Takeaway for Real Estate Professionals Need to educate clients about changes & fact that transactions will likely take longer if a mortgage is involved Back-to-back closings problematic No last-minute negotiations; try to get transaction finalized as early as possible

10. Loan Estimate Provided within 3 days of receiving a consumer loan application Must contain “good faith estimate” of costs Estimates can only be changed in certain instances Lender cannot charge a fee (except for credit report) until after Loan Estimate provided and consumer has evidenced an intent to proceed with the transaction within 10 business days

11. Loan Estimate (cont.) Delivery- either deliver in person or put in mail no later than three business days after receiving application Application presumed to have 6 pieces of information: name, income, social security number, property address, estimate of property value, and amount of loan sought 4-page form

12. Any Questions?

13. Loan Estimate (cont.) Charges not subject to tolerance limits- charges not controlled by lender (services not required by lender or if consumer chooses own service providers) Charges subject to 10% cumulative limit- charges where lender has some control (recording fees, providers on lender’s list, 3 rd party services not paid to lender or lender’s affiliate) Zero tolerance- charges paid to lender or lender’s affiliate; transfer taxes; fees paid to a provider if consumer is not allowed to shop for services

14. Loan Estimate (cont.) Revisions/corrections of Loan Estimate only allowed in limited circumstances- not for a mistake or failing to collect all information (ex- salary information) Lender is generally bound by Loan Estimate, and can only increase costs if justified (ex- natural disaster, title company goes out of business) Lender can increase if consumer requests a revision; rate wasn’t locked within 10 business days; or new construction loans

15. Closing Disclosure Consumer must receive three days before closing Must contain actual terms and costs of loan If certain costs change between closing disclosure and closing, three-day waiting period is reset: APR changes by more than 1/8%; loan product changes; loan product changes; or prepayment penalty is added

16. Closing Disclosure (cont.) Delivery requirements: either delivered in person or by mail (electronic allowed, if consumer consents), but mail is presumed to take 3 business days Changes which don’t require a reset still will need to be reflected on new Closing Disclosure form (ex- broken dishwasher); post closing revisions within 30 days after closing must be reflected on revised closing disclosure

17. Model Purchase Contract Overview Real estate professionals provide these forms to their clients and so are used in many transactions How these forms are created varies by state, but generally created by state REALTOR ® association (some local associations also create these forms) Associations usually work with bar associations in creating forms(required in some states)

18. TRID Changes Main issue: How will purchase agreement address delays in closing due to reset of waiting period because of TRID requirements? Right now, most purchase contracts require buyer to close on a certain date; otherwise, buyer will be in breach of purchase agreement

19. Association Approaches to TRID Changes NAR solicited association counsel involved in creation of forms, and heard back from about 15 states Uncertainty about when new disclosures/delays will occur was common theme

20. Association Approaches to TRID Changes (cont.) Variety of approaches: –Some are drafting new language to extend the closing to reflect mandatory disclosure requirements –Some are not making changes, believing existing contractual language addresses situation –Most are taking a wait-and-see approach, as they want to see how this plays out before making changes to purchase agreement

21. New Language Approach “automatic extension of __ business days for an unsatisfied contingency through no fault of either party” “if closing date cannot occur by the date of closing due to any government regulation or lender requirement, the date of closing shall be extended for the period necessary to satisfy these requirements, not to exceed 7 business days”

22. Existing Language Approach Absent agreement to the contrary in this Contract or any subsequent modification thereto, if a party is unable to complete Settlement by the Settlement Date but intends to complete the transaction and is acting in good faith and with reasonable diligence to proceed to Settlement (“Delaying Party”), and if the other party is ready, willing and able to complete Settlement on the Settlement Date (“Non-Delaying Party”) then the Delaying Party shall give as much notice as possible to the Non-Delaying Party and closing attorney and shall be entitled to a delay in Settlement. If the parties fail to complete Settlement and Closing within fourteen (14) days of the Settlement Date (including any amended Settlement Date agreed to in writing by the parties) or to otherwise extend the Settlement Date by written agreement, then the Delaying Party shall be in breach and the Non-Delaying Party may terminate this Contract and shall be entitled to enforce any remedies available to such party under this Contract for the breach.

23. Existing Language Approach (cont.) Unless otherwise mutually agreed, final settlement shall be held in_________________ County, on, or before if mutually agreed upon, at which time possession shall be given and Seller shall deliver all keys in Seller’s possession or under Seller’s control. It is expressly agreed if a longer time is necessary to secure a survey, or to prepare the necessary legal and financial settlement documents, the date of settlement shall be extended for a reasonable time to effect these conditions. [next paragraph contains a Time is of the Essence clause]

24. Wait-and-See States Because of the perceived uncertainty of how the rules will affect closings, most states are holding off making changes Many of the large states are still considering this issue with their forms committees and so do not have a clear approach at this time but may change forms before August 1st NAR does not have any recommendations for associations at this time

25. Other Issues for Model Forms Focus has been on obligation to close, but other issues will arise One issue raised: collection of real estate licensee information for disclosure forms

26. SundayMondayTuesdayWednesdayThursdayFridaySaturday 1 Day 1 Consumer makes offer for property; offer is accepted 2 Day 2 Consumer sends application to Creditor; Creditor collects fee for credit report 345 Day 5 Creditor mails Loan Estimate to Consumer 6 789 Day 9 Consumer presumed to have received application; 10 days to decide to proceed 10111213 141516171819 20 Day 20 Consumer decides to proceed with loan; appraisal ordered 212223 Day 23 Appraisal comes back; LTV exceeds 80%; revised LE sent 24252627 2829 Day 29 Consumer accepts new LE (can only close 7 days out) 3031123 Day 34 Leaking dishwasher; revised CD will be needed 45 Day 36 Closing  Within 30 days of closing - revised CD reflecting actual costs of closing  Within 60 days of closing - refunds of tolerance violations

27. Takeaway for Real Estate Professionals Need to educate clients about changes & fact that transactions will likely take longer if a mortgage is involved Back-to-back closings problematic No last-minute negotiations; try to get transaction finalized as early as possible

28. “Know Before You Close” Thomas Pilafas Executive Vice President Business Development 708-805-2250 Cell/Text tpilafas@nnnt.com 2015 Law Day – Monday, May 18 th, 2015

33. Reason # 1 – In the lead of the financial crisis, many consumers took on loans they could not afford. Interest rates and payments could increase, prepayment penalties and other costs could arise later.

34. Reason # 2 – When consumers are confused, they are more likely to take on riskier loans. Evidence suggests that borrowers who are not presented with clear, understandable information about their mortgage loan offer may lack an accurate understanding of the loan costs and risks.

35. Reason # 3 – Difficult to understand mortgage disclosures continue to make it hard for consumers to know the true costs and risk of their mortgages. The current forms are managed by two different federal agencies. Overlapping information can be confusing to consumers.

37. Reason # 4 – The current forms make it difficult to comparison shop. Consumers have a hard time comparing loans and determining which works best for them and their families.

39. Reason # 5 – The final figures can be surprising at the closing table. Consumers can feel trapped – it is not easy to object, ask questions, or walk away from the closing.

40. Reason # 6 – The Dodd-Frank Wall Street Reform and Consumer Protection Act recognized the need to simplify and streamline this information for consumers. CFPB combined the TILA and RESPA forms.

41. Reason # 7 – CFPB conducted extensive research and analysis for more than two years to simplify and condense information in a way that consumers can understand mortgage disclosures.

42. Reason # 8 – Mortgages made safer. The new forms are one part of the CFPB’s efforts to make the mortgage market better for consumers, the industry, and the economy as a whole.

44. Credit Card Agreements Student Loans Mortgage Servicing Cell Phone Prepaid Cards General Purpose Reloadable Prepaid Cards Credit Bureaus Debt Collectors Payday Lending

46. 1 in 20 households have taken out a Payday loan.

47. $9 Billion Dollar Industry

48. There are more Payday Loan Stores than……….

52. Highest Annual Interest Rate?

53. A: 56% B: 156% C: 297% D: 582%

54. D: 582% Idaho

56. Established July 21, 2011

58. A few examples of fines by the CFPB…………. Regions Bank - 7.5 Million for Unlawful Overdraft Practices – April 2015 Green Tree Servicing - 15 Million for mistreating borrowers trying to save their homes – April 2015 New Day Financial, LLC - 2 Million Civil Penalty for Deceptive Mortgage Advertising and Kickbacks February 2015

59. A few examples of fines by the CFPB…………. DriveTime – “buy-here, pay here” car dealer – $8 Million as a civil money penalty for its Unfair Debt Collection Tactics – Nov 2014 Ocwen Financial Corporation refund $125 million to compensate people who have already lost their homes through significant Servicing Errors Dec 2013

61. What Transactions Types are Affected? Closed-end consumer credit transactions secured by real property Purchase money Refinance 25 acres or less Vacant-land Construction-only Timeshares

62. What Transactions Types are Exempt? Reverse Mortgages Home Equity Lines of Credit (Helocs) Chattel-Dwelling/Mobile Home Loans Creditors who originate less than 5 loans in a calendar year

63. Cash Real Estate deals will still use the current HUD we use today!

64. Replaces Good Faith Estimate & Early Truth-In-Lending Mortgage Broker may provide, the Lender is still responsible Delivery must be within 3 business days of application Limitations on up-front fees with exception for credit reports Disclaimer on early estimates used before Loan Estimate LOAN ESTIMATE (LE) – 3 Pages

65. Replaces HUD-1 and Final Truth- in-Lending Consumer must receive at least 3 business days before signing Increase of APR by greater than 1/8% requires re-disclosure – 3 business day wait Escrow may prepare and/or deliver – Depends on Lender Closing Disclosure (CD) – 5 Pages

66. Closing time will be impacted by the closing disclosure delivery. Three-day review period starts upon “receipt” of the form by the borrower. (Examples - hand delivery or email) If the form is mailed it would result in six business days from mailing to loan signing.

67. What is Consummation? Consummation is defined under Regulation Z as the day the borrower becomes legally obligated under the loan on a credit transaction. This will generally be the date of signing.

68. Business days are defined as Monday through Saturday except when they fall upon federal holidays.

73. Communication is the key!

74. The Elephant is in the room! Be proactive & discuss with your real estate partners (lenders, attorney and title company) and clients. Plan for the 3 Day Rule. Review and learn the new forms Loan Estimate (LE) & Closing Disclosure (CD). Identify procedure changes within your company. Embrace it! It’s not going away!

75. Ways to Stay Up to Date with the CFPB

80. Any Questions?

81. Thank You!