Hands off, Buster! The CD is all mine

No!!!

The word “no” is one of the shortest words in the English language, but it is also one of the most potent.

When we ask a question, it is often the response that we dread. However, if you are a real estate agent working with a title company that follows the rules, it is the response that you should get when you ask the title company for your buyer’s Closing Disclosure form, or CD.

No!

But there is an alternative, just read on.

Although this change has been in place for more than a year, it seems that some real estate licensees are still struggling with this evolution. Perhaps some historical perspective will help those who are still struggling with these changes to better understand the new paradigm within which residential real estate professionals must now operate.

From the time the Real Estate Settlement Procedures Act was first enacted, title companies were authorized to bifurcate the HUD-1 settlement statement, so that neither buyers nor sellers were privy to the financial information of the other. In fact, prior to implementing the Know Before You Owe, also known as the TILA-RESPA Integrated Disclosure rule, the regulations interpreting RESPA provided, in part, “the settlement agent shall provide a completed HUD-1 or HUD-1A settlement statement to the borrower, the seller (if there is one), the lender (if the lender is not the settlement agent), and/or their agents.” In other words, RESPA required the title companies to share the HUD-1 settlement statement with you.

However, things changed when the real estate bubble burst. The Gramm-Leach-Bliley Act was passed and new privacy requirements were imposed upon all residential real estate practitioners. In short, these new privacy regulations prohibit lenders and (arguably) title companies from disclosing non-public personal information to third parties, like real estate agents. RESPA and its interpretive regulations direct that title companies provide real estate agents with copies of the HUD-1 settlement statement before closing. GLBA, on the other hand, prohibits title companies from providing copies of the CD to anyone except the consumer and the seller (when the CD is bifurcated).

Even if the buyer directs the title company to provide the CD to you as their real estate agent, the title company is not allowed to do so unless the lender gives the title company permission to share the CD. The CD is a loan document and as such it comes under the purview of the lender’s direction.

What options are available to you, as the buyer’s agent, and the title company who wants to keep you happy?

One option is for the title company to provide you with the ALTA Settlement Statement. The ALTA settlement statement is a disclosure form, created by the title industry, that accurately lists the charges and disbursements for the underlying transaction, oftentimes more accurately than does the CD. It will also provide you with the information that you need about the transaction. Because the ALTA settlement statement is a title company form, as opposed to a loan document, if the ALTA settlement statement is bifurcated (and it probably should be), then the title company is permitted to give this form to you with the buyer’s authorization even if the lender prohibits the title company from sharing the CD. (As a buyer’s agent, you may have to train the title company to provide you with the breakdown of the broker fees, but it is a very simple request to honor.) If the ALTA settlement statement is integrated, showing both the buyers’ and the sellers’ numbers, then the title company needs permission from both the buyer and the seller.

If the title company with which you are working does not use ALTA settlement sheet (unusual, but not necessarily unheard of), or if you are hell-bent on getting a copy of the CD prior to settlement, then you need to work with your buyer-clients and their lender to ascertain what requirements the lender has in order to permit the title company to provide you with a copy of the CD. Remember, this is a loan document and the lender makes the rules, for now, as to how and when the CD can be shared.

There is hope that this process will become less regimented. The Consumer Financial Protection Bureau is in the process of a proposed rule change, part of which (if approved) will add language to the TRID rules that should give some comfort to the lenders about sharing the CD with third parties in the transaction. Importantly, the proposed changes do not require the lenders to share the CD. It simply gives the lenders something to consider when making the decision. While the prognosis for improved access to the CD is good, the final rule changes implementing and improving this availability will likely not be seen before Spring 2017. Until that time, it is important that Realtors® understand that title companies are not permitted to provide you with a copy of the CD prior to settlement without lender approval.

One more observation: Paragraph 30 of the Standard Agreement for the Sale of Real Estate does not impose any obligations on the title company or the lender. This paragraph only applies to the buyers, presumably your clients, reminding them to provide you a copy of the CD when they receive it from their lender.