Fund News and Alerts

By: Richard Zaretsky, Esq., Richard P/ Zaretsky P.A. Attorneys at Law

There are people out there that are looking for your email address but they are neither buyers nor sellers. Their goal is for YOU to help them steal money from YOUR client. They are thieves, crooks, scoundrels, terrorists, and intentioned with the worst of motives. Why do I know about this - I just saw it happen!!

Email hackers are changing wiring instructions in order to steal the seller's proceeds.

That depends on the form used by the lender. When construction is financed, there often is no seller. That opens up the possibility that the lender will require the use of the CD form H-25(J) which can be used when there is no seller. On that form, page three has a Payoffs and Payments table where these payments can be itemized. If the number exceeds 15, the final line can be used in connection with an addendum which would include additional payments.

Since the lender may not necessarily use the alternative form, the payments can be disclosed on the standard form H-25(A) in Section K. Due from Borrower at Closing as Adjustments. Since there are so few lines, the bottom line can contain the total of all additional payments disclosed on an addendum.

If a fee to the consumer becomes inaccurate within 30 days of consummation and that inaccuracy results in a change to the amount actually paid by the consumer, the Creditor must deliver or place in the mail a revised Closing Disclosure (CD) within 30 days of knowledge of the inaccuracy.

If a clerical non-numeric error is discovered, the Creditor must deliver or place in the mail a revised CD within 60 days after consummation.

If a tolerance level is violated, the Creditor must refund the required amount to the consumer within 60 days of consummation and the Creditor must provide a revised CD reflecting the refund within the same 60 day time period.

You can easily remember the six elements by its acronym = A.L.I.E.N.S. (See 12 CFR § 1026.2(a)(3)(ii))

Address of Property
Loan Amount Sought
Income
Estimated Value
Name
Social Security Number

Since an October closing usually means the first loan payment will be due on December 1, lenders often want the settlement agent to collect for and make payment of the current year’s tax bill when it becomes available in November. (Lenders may also insist upon similar withholdings and payments for closings in other months due to the logistics of setting up and administering the borrower’s escrow account for future payments.) Here are some examples of how lenders may allow these payments to be disclosed:

“Section F. Prepaids” is reserved for items the lender requires to be paid in advance of the first loan payment. Payment of the tax bill in November in advance of the first loan payment due in December satisfies that condition. If shown in Section F. Prepaids, the payment would likely be disclosed in the borrower’s column, but it could be directed to the seller’s column as well. In either case, the proration on page three in the Summaries of Transactions tables will apportion the obligation between the parties.

“Section H. Other” is intended to capture optional items as well as those services which the lender does not require as a condition of closing the loan. Since arguably the payment of a tax bill before its due date is not a condition for closing the loan, some lenders may decide that this is the appropriate location.

“Section N. Due from Seller at Closing” is intended, among other things, to capture the payoff of liened items such as the seller’s existing mortgage. Although some may discount the disclosure here of a not yet due tax bill, they do so on the theory that no lien has been recorded. Since, in Florida, the lien attaches automatically on January 1st of the tax year without the necessity of a recording, we feel this solution addresses the Florida situation accurately and that Section N is a viable alternative.

When conducting a transaction with two simultaneous mortgages, the primary lender will make the decision as to whether there will be one Closing Disclosure (CD) or two. If the second loan is exempt (e.g. HELOC; downpayment assistance loan), a separate settlement statement might be used since a CD would not be required. (The Rule only discusses the disclosure and placement of the proceeds from the subordinate loan on the primary loan’s CD when two settlement statements are being utilized and leaves open the possibility that all costs would be shown on one.) If the lender chooses to show both the primary and subordinate loan on one CD, the lender will determine how to disclose the costs associated with the subordinate loan.

Like RESPA and the HUD-1, there is no requirement that either party acknowledges the truthfulness of the form or authorizes disbursements. (However, the Rule provides an option for the lender to include a Confirm Receipt signature for the borrowers.) Our Florida Insurance Premium Disclosure rule requires such an acknowledgement and authority and the required language confirms the parties review and agreement with the CD and any other settlement statements used by the settlement agent. In the event you need a signature page for your CD forms, you may use the Addendum B - Customary Recitals which includes the same certifications as found in the Florida rule. Finally, the optional use of an ALTA Settlement Statement will also provide you with the ability to have the parties sign and the same certifications mentioned above will be found there as well.

The Rule grants the creditor the option of preparing the CD or sharing that responsibility with the settlement agent. TRID Comment 19(f)(1)(v)-3 states: “If a settlement agent provides disclosures...in the creditor's place, the creditor remains responsible…for ensuring that the requirements of [12 CFR] § 1026.19(f) have been satisfied.”

Unlike the HUD-1 where settlement services were grouped together, the location of the individual services and products on the Closing Disclosure are primarily based upon whether the services are required to complete the loan transaction. Those connected to the loan are further categorized based upon who is providing the service and sometimes by the ability of the borrower to shop for a required service. Those not required to complete the loan transaction, like the Owner’s policy, are grouped together in Section H even though they may be required by the purchase and sale contract (e.g. real estate agent commissions; home warranty; seller-paid owner policy), are optional products or services chosen by the borrower (e.g. inspections; buyer-paid owner policy), or otherwise identified by TRID (e.g. association fees and charges).