Wells Fargo Details Plans for Production, Delivery of CFPB’s Closing Disclosure
September 30, 2014
Wells Fargo detailed plans on how it will handle production and delivery of the Closing Disclosure once the form goes into effect next year and provided initial guidance on how the lender will collaborate with settlement agents during the closing process.
Beginning Aug. 1, 2015, a new five-page Closing Disclosure will replace the HUD-1 and final Truth-in-Lending disclosure. A three-page Loan Estimate will replace the GFE and initial TIL disclosure.
In its final rule, the Consumer Financial Protection Bureau proposed two alternatives for which party is required to provide consumers with the Closing Disclosure. Under the first option, the creditor would be responsible for delivering the Closing Disclosure form to the consumer. Under the second option, the creditor may rely on the settlement agent to provide the form. However, under the second option, the lender would also remain responsible for the accuracy of the form. On top of this, the regulation requires that consumers receive the Closing Disclosure three days prior to consummation of the transaction.
Wells Fargo explained in its quarterly newsletter to settlement agents that due to creditor liability of the Closing Disclosure it plans to produce and deliver the Closing Disclosure to the borrower.
Before making any decisions about the Closing Disclosure, Wells Fargo noted that it considered many factors including the closing volume of the large number of local settlement agents who close loans for the lender.
“After assessing all requirements and options, it has been determined that Wells Fargo needs to control the generation and delivery of the borrower's Closing Disclosure to consistently meet internal compliance and regulator expectations,” Wells Fargo said in the newsletter. “With these new regulations, it is essential for (settlement agents) to understand the expectations of the regulations and of Wells Fargo, so we can consistently deliver high levels of quality and service to our customers.”
In its letter, Wells also stated that it values its local business partners and plans to continue collaborating with settlement agents to schedule and conduct closings. Wells Fargo is asking settlement agents to provide feedback on the information contained it is newsletter. Click here to take the survey.
Dan Mennenoh, chair of the Research Committee and president of Illinois-based H. B. Wilkinson Title Co., said Wells Fargo reached out to ALTA’s Research Committee to get feedback on which entity will prepare and deliver the Closing Disclosure. The lender also wants feedback on how processes will need to change in order to meet regulatory requirements that the borrower receive the form at least three days prior to closing.
“We appreciate Wells Fargo’s initiative to get feedback from title and settlement agents and learn how the new Closing Disclosure will impact the closing process,” Mennenoh said. “We understand the liability creditors have in regard to the accuracy and delivery of the Closing Disclosure and will work closely with Wells Fargo and all creditors to ensure transactions continue to close efficiently and legally. While the industry prepares for a sea change, one thing will not change, and that’s high level of professionalism and commitment to quality that ALTA members will provide to their customers.”
How Will Data Be Collected
To collect the data required for the Closing Disclosure, Wells Fargo said it must collaborate with settlement agents to determine fees and other content. Settlement agents have expressed concern that any collaboration with lenders must occur sooner in the process than what happens today in order to avoid rush closings. The need to share data seamlessly may result in increased integration with lenders’ loan origination systems or the development of systems that allow settlement agents to enter data into a lender’s system in order to generate the Closing Disclosure.
“This is where we have an opportunity to improve the process of data exchange,” Mennenoh said. “New methods will need to be developed to support the timely preparation and delivery of the Closing Disclosure to the homebuyer. Earlier collaboration will be needed in the process to ensure closings are not disrupted.”
This data exchange will require settlement agents and lenders to share securely private data in order to complete the Closing Disclosure. Implementation of ALTA’s “Title Insurance and Settlement Company Best Practices” will help prepare title professionals prove they have the ability to protect private information.
Generating the Closing Disclosure
While the Closing Disclosure is a blend of disclosures required under TILA and RESPA, the form is governed by TILA, which provides different accuracy expectations and enforcement provisions than RESPA. The difference is that there's a private right of action for a violation of the TILA disclosure requirements with significant penalties. This is not the case for RESPA.
With TILA applying to the Closing Disclosure and creditors being held responsible for the accuracy and delivery of the form to the consumer, Wells Fargo decided that it “needs to control the generation and delivery of the borrower's Closing Disclosure to consistently meet internal compliance and regulator expectations.”
Delivering the Closing Disclosure
Creditors must be able to prove the borrower received the Closing Disclosure at least three days prior to closing. If an internal or external audit is conducted, a creditor will need to have easy access to this proof. Wells Fargo decided it would handle delivery of the form due to the evolving use of electronic delivery within its loan process and considering the limited integration capabilities of settlement agents to provide compliance data.
“At this point in time, we believe that this critical compliance evidence can only be provided if Wells Fargo delivers the Closing Disclosure directly to our borrowers to meet the three-day requirement, including when a change occurs that requires the three-day clock to be restarted,” the lender said in its newsletter.
Scheduling the Closing
Wells Fargo expects closings to occur similar to how they are handled today where all parties involved must collaborate. The three-day delivery requirement for the Closing Disclosure will have an impact, however.
ALTA members have shared that settlement agents and lenders must improve communication in order to meet the three-day requirement. Things could get even trickier in situations when several transactions rely on other deals to close by a certain date, involve different settlement agents, lenders and real estate agents.
“Failing to meet the three-day delivery requirement on one linked transaction could derail the others,” Mennenoh said. “This is why it’s vital for settlement agents and lenders to work together to develop solutions that meet our customers’ needs and compliance expectations.”
Conducting the Closing
Settlement agents will continue to be responsible for conducting closings for Wells Fargo, “but with increasing focus on compliance with our closing instructions,” the lender said in the newsletter. “As we expectations on lenders increase, so do expectations on our third-party service providers.”
For purchase transactions, Wells Fargo said that settlement agents will continue to be responsible for the seller’s information and will prepare and deliver the seller’s Closing Disclosure. A copy of the seller’s Closing Disclosure must be provided to Wells Fargo in order to comply with the final rules.
Contact ALTA at 202-296-3671 or email@example.com.