“TRID Requires Standardization of Fee Names on Loan Estimate, Closing Disclosure”

ARTICLE FROM ALTA.ORG: https://www.alta.org/new

In addition to preparing for new timing requirements and tighter fee tolerances, settlement agents and lenders must develop standardized fee names or descriptions for the Loan Estimate and Closing Disclosure.

Because the Consumer Financial Protection Bureau wants consumers to be able to compare fee estimates with what’s actually charged at consummation, the TILA-RESPA Integrated Disclosures (TRID) rule requires fee terminology to be consistent between the two forms.

“This is a challenge because fees for services are not called the same thing across the country,” said Don Partington, executive vice president and general counsel for Fidelity National Title Group. “Lenders and settlement agents will need to communicate and come to an agreement on fee naming.”

Another challenge is the requirement for fee names/descriptions/labels to match between the Loan Estimate and Closing Disclosure

Examples of variances in naming include valuation services versus appraisal. Ethan Pack, director of Information Technology Solutions for Stewart, said some states require a specific terminology for fees.

“In Texas, if you’re referring to a fee for termites, it has to be called a wood destroying insect fee,” he said. “There will need to be collaboration here to decide on fee name standardization.

Here’s the portion of the TRID rule addressing fee naming:

1. Consistent terminology and order of charges. On the Closing Disclosure the creditor must label the corresponding services and costs disclosed under § 1026.38(f) and (g) using terminology that describes each item, as applicable, and must use terminology or the prescribed label, as applicable, that is consistent with that used on the Loan Estimate to identify each corresponding item. In addition, § 1026.38(h)(4) requires the creditor to list the items disclosed under each subcategory of charges in a consistent order. If costs move between subheadings under § 1026.38(f)(2) and (f)(3), listing the costs in alphabetical order in each subheading category is considered to be in compliance with § 1026.38(h)(4). See comment 37(f)(5)-1 for guidance regarding the requirement to use terminology that describes the items to be disclosed.

Lenders and settlement agents have started attempting to determine standard fee names. Below is one lender’s example of what it plans to use for title fees on the disclosures:

1. Title – Closing/Settlement Fee
2. Title – Lender’s Title Insurance
3. Title – Title Exam/Search Fee
4. Title – Deed Preparation
5. Title – Closing Protection Letter
6. Title – Courier/Wire
7. Title – Tax Report
8. Title – Doc/Processing Fee

According to Steve Acker, founder of the technology-consulting firm Closergeist, the Mortgage Industry Standards Maintenance Organization (MISMO) is developing fee standards with the help of ALTA and MBA. He said version 3.3 of MISMO establishes a common dataset that is a prerequisite to share data required for the disclosures.  In addition, Fannie Mae and Freddie Mac have developed a new industry standard dataset to support implementation of the Closing Disclosure. The Uniform Closing Dataset (UCD) is based on the MISMO v3.3 Reference Model standard used to support the Closing Disclosure.

“For software providers who must update systems to support the new Closing Disclosure, the UCD will take much of the guesswork out of determining which pieces of data go into which spots on the form,” Acker said. “In addition to providing a blueprint to populating the disclosures, the UCD will also serve as a standard data format for settlement software and loan origination systems to exchange information about loan costs.”