To Itemize or Not to Itemize?...That is the Question!

A review on the rules of fee itemization.

Dear Member,

Since we are all focusing on new rules and new forms, why don't we throw in a review of the rules on what costs and fees you are REQUIRED to itemize, which fees you MAY itemize and which fees you CANNOT itemize. Historically, there has been a lot of confusion because of a tendency to focus on Federal rules while overlooking Florida's role in regulating title insurance and the settlement process.

Federal rules have loosened up once again; however Florida law has not changed since the adoption of Sec. 627.7711 Fla. Stat. in 2007. To the point: Federal law now says what you MAY itemize but Florida law controls what may NOT be itemized.

Florida's rules are based upon:

• An analysis of the statutory definitions of "Closing Services" and "Primary Title Services". F. S. §627.7711 (1)(a)&(b).
• Informational Memorandum DFS-12-2007. Here is a link to this document.
• Requirement to collect the "temporary" policy surcharge on settlement statements/Closing Disclosure. F. S. §631.401(2).

Here's the bottom line:

You MUST separately itemize the following:

• Title insurance premiums

You MAY charge and separately itemize the following:

• Actual cost of abstracting or title search
• A closing or settlement fee. Here is where there is a lot of confusion. Your closing or settlement fee should include (and therefore you cannot separately charge for) notary fees, preparation of closing documents (e.g. deeds; affidavits; settlement statements), costs related to conducting the closing (e.g. copying, scanning and faxing; notarization; delivering documents for recording; mailings; conference room rental), handling the disbursements of closing funds (e.g. incoming wire transfer fees) or eRecording fees for recording the deed, mortgage or curative documents. These costs are related to conducting the closing and compensation for these items are to be included in your closing or settlement fee.
• Surveys, wire fees to pay off existing mortgages, express mail fees to expedite closing packages or for delivery of a loan payoff check because the Florida Department of Financial Services has given express guidance on this (here is a link to this guidance letter ******). You may also separately charge for services requested by the parties that are not otherwise required (such as wiring the proceeds or express mailings). You may also separately charge for services required by the lender which you would not otherwise be required to do (such as eRecording).

You may NOT separately charge for the following:

• Title examination, UCC searches, determining insurability, preparing and issuing the title commitment and policies, or your own costs for clearing underwriting obstacles (e.g. research; preparing affidavits). These are deemed included in the premium.
• A lien search because, like a UCC search, it is a "primary title service" covered by the title insurance premium. You can charge separately for a permit search if that search is authorized by the purchase contract even if the service you receive includes a lien search.
• For preparation of closing documents (e.g. deeds; affidavits; settlement statements), costs related to conducting the closing (e.g. copying, scanning and faxing; notarization; delivering documents for recording; mailings; conference room rental), or for handling the disbursements of closing funds (e.g. incoming wire transfer fees). These are part of your settlement or closing fee.
• eRecording fees for recording the deed, mortgage or curative documents (unless required by the lender). These costs are related to conducting the closing, and compensation is included in the settlement fee.

Now that preparation of the Closing Disclosure will be controlled by lenders, members will need to provide settlement charges well in advance of the actual closing date. While lender closing instructions may provide the best information, I expect that lenders will have specific requirements as to fee names and limits on the type and number of services they will allow on the new form. It is possible that they will be looking only for a settlement fee, title search, survey fee and the premiums for title insurance. Even if you feel that you are free to separately charge for eRecording, express mail fees, and bank wire charges, you may find it more productive to review the components of the services included in your settlement fee and add these charges to it. Best practice would be to provide a separate statement to the parties spelling out the costs and services included in that one settlement fee.

As for the policy surcharge, you should show it as a separate fee as part of your recording fee charges and transfer taxes (documentary stamps/surtax/intangible tax). The reason: TRID requires all charges imposed by government to be disclosed together in this section. See 12 CFR 1026.38(g)(1).

GOOD NEWS FROM WASHINGTON, DC: By an overwhelming bipartisan vote of 303-121, the U.S House of Representatives passed H.R. 3192. The bill will create an official hold-harmless period through Feb. 1, 2016 for companies making good-faith efforts to comply with the Consumer Financial Protection Bureau's TILA-RESPA Integrated Disclosures (TRID) rule. Sponsored by Representatives French Hill (R-Ark.) and Brad Sherman (D-Calif.), the Homebuyers Assistance Act also will provide companies relief from civil liability during the hold-harmless period. This is a perfect example of what our industry can do when we work together through our advocacy networks. ALTA's Title Advocacy Network is the reason why this bill passed. Now we need to work on members of the Senate to do their part!

I hope you have found this helpful. As always, thank you for your support of The Fund.

Best Regards,

Melissa Jay Murphy
Senior Vice President and
General Counsel