Breaking News! Surcharge Removal, New Estate Tax Lien Procedure, CFPB Lender Vetting

As of December 31, 2016 the $3.28 surcharge fee will be removed from closings.

Dear Members,

It makes it so much easier to write these messages when there is breaking news to report and this week’s news has some good and some “meh” news!

SURCHARGE – HERE TODAY, GONE TOMORROW. The surcharge is going away on December 31, 2016. This is the $3.28 charge you are required to collect at every closing and remit to us for processing. OIR has done its analysis and sufficient funds have been collected under the statute, such that the surcharge can be stopped. Here is a link to the order issued by OIR.

Here are some practice pointers that we have developed so far. THESE ARE SUBJECT TO CHANGE as we get more information from OIR.

• The order says that the underwriters shall “cease collecting” the surcharge on December 31, 2016. Despite some confusion over this wording, OIR has confirmed that closings occurring ON OR BEFORE December 31, 2016 require collection of the surcharge. December 31 is a Saturday so it won’t come into play very much.
• Date of issuance of the policies is not relevant; it is the closing date that matters.
• If you collect the surcharge in error (the closing is AFTER December 31, 2016), IT MUST BE REFUNDED TO THE CONSUMER.
• If you collect the surcharge in error and you send us a separate check for it, we will return the check to you and instruct you to issue a refund to the consumer. If you include the surcharge in your premium check, we will send a check payable to you for $3.28 and you must refund this amount to the consumer.
• If the Closing Disclosure is issued to the buyer and contains the surcharge, the closing gets delayed beyond December 31, 2016, but the lender won’t let you change the CD, then close and refund the surcharge to the consumer.

NEW PROCEDURE FOR ESTATE TAX LIENS. The government has changed the rules regarding Estate Tax Lien Releases. Here is a link to a very good article written by Laird Lile who specializes in estate and trust matters. Laird is based in Naples, Florida. IF YOU ARE HANDLING A CLOSING THAT REQUIRES A RELEASE OF ESTATE TAXES AND YOU ARE RELYING ON AN ESCROW ARRANGEMENT, YOU MUST OBTAIN ADVANCE APPROVAL FROM UNDERWRITING. These rules are significantly different than those that were in place for years, so you need to familiarize yourselves and your staff with the new process.

Lastly, there appears to be a small bit of good news from the CFPB re: lender vetting of third party vendors, i.e., YOU. CFPB recently issued a bulletin that a lender’s risk management program for service providers can be scalable under certain circumstances. The main message from the bulletin is that a lender’s risk management program for service providers should be flexible based on the type of vendor and the risk of harm to the consumer. This makes me just a tiny bit hopeful that consumer choice of settlement agents will continue to be viable. Here is a link to the CFPB bulletin.

I hope you are getting some value from these emails. I always like to hear from Fund Members, so shoot me an email when you get a chance. And thank you for your support of The Fund!

Best Regards,

Melissa Jay Murphy
Senior Vice President and
General Counsel