How is title insurance premium calculated and disclosed on the Closing Disclosure?
The premiums for owner policies, loan policies, and endorsements, continue to be calculated using Florida’s promulgated rate structure. (This includes use of the discounted rates for simultaneous issue, substitution loan, new home purchase and reissue.) The display of premium on the Closing Disclosure in a purchase transaction are effected by making a calculation for a stand-alone loan policy, including endorsements, and a separate calculation of the cost of the purchase of both policies including endorsements. The difference between the two sums is the “incremental increase” attributed to the purchase of both policies.
The cost of a loan policy, and its endorsements, is disclosed on the Closing Disclosure as if there were no owner policy to be given (i.e. stand-alone loan policy). The reason TRID uses this method is based upon the premise that a borrower needs to know the cost of the policy required by a lender should the borrower choose not to purchase an owner’s policy. (This ignores a common scenario where the purchase of the owner’s policy is, by contract, being paid for by someone else, usually the seller.) The cost for the purchase of an owner’s policy is disclosed as the incremental increase attributed to the purchase of an owner’s policy when both policies are purchased.
The official commentary to the rule explains these procedures at http://www.consumerfinance.gov/eregulations/1026-Subpart-E-Interp/2015-18239#1026-38-g-4-Interp-1 and at http://www.consumerfinance.gov/eregulations/1026-Subpart-E-Interp/2015-18239#1026-37-g-4-Interp-2
The premiums for owner policies, loan policies, and endorsements, continue to be calculated using Florida’s promulgated rate structure. (This includes use of the discounted rates for simultaneous issue, substitution loan, new home purchase and reissue.) The display of premium on the Closing Disclosure in a purchase transaction are effected by making a calculation for a stand-alone loan policy, including endorsements, and a separate calculation of the cost of the purchase of both policies including endorsements. The difference between the two sums is the “incremental increase” attributed to the purchase of both policies.
The cost of a loan policy, and its endorsements, is disclosed on the Closing Disclosure as if there were no owner policy to be given (i.e. stand-alone loan policy). The reason TRID uses this method is based upon the premise that a borrower needs to know the cost of the policy required by a lender should the borrower choose not to purchase an owner’s policy. (This ignores a common scenario where the purchase of the owner’s policy is, by contract, being paid for by someone else, usually the seller.) The cost for the purchase of an owner’s policy is disclosed as the incremental increase attributed to the purchase of an owner’s policy when both policies are purchased.
The official commentary to the rule explains these procedures at http://www.consumerfinance.gov/eregulations/1026-Subpart-E-Interp/2015-18239#1026-38-g-4-Interp-1 and at http://www.consumerfinance.gov/eregulations/1026-Subpart-E-Interp/2015-18239#1026-37-g-4-Interp-2
03/16/2016