Texas Title Insurance Rate Decreasing
Please be aware that the title policy rates for Texas are decreasing on loans closed on or after September 1, 2019. The new rates may be accessed here.
Notice to Co-Signer
For most orders, once a request for closing documents is received, we can prepare and provide these documents in as little as 1-2 hours. In addition, before returning closing documents to our clients, our experienced operators review the title work and survey. If we discover any issues, we inform the client promptly to ensure that our clients receive adequate title insurance coverage and close loans that meet investor or agency guidelines all while making sure the loan closing stays on schedule.
With the repeal of Regulation AA effective March 21, 2016, there has been some confusion in the necessity to deliver and the circumstances under which a Notice to Co-Signer should be delivered.
What is PPDocs Changing?
We have in the past always included a Notice to Co-Signer within our guaranty agreements. In order to further support efforts by our clients to remain compliant with the co-signer rules, we are making a Notice to Co-Signer available for selection whenever a borrower will sign the legal obligation (promissory note), but is not required to sign the underlying security instrument (deed of trust/mortgage). Use of the Notice to Co-signer in final loan packages will remain a business decision for our clients and for those clients that are selling loans on the secondary market, based on specific investor requirements.
Who is a Co-Signer That Must Receive Notice?
The FTC defines a co-signer as follows: A natural person who renders himself or herself liable for the obligation of another person without compensation. The term shall include any person whose signature is requested as a condition to granting credit to another person, or as a condition for forbearance on collection of another person's obligation that is in default. The term shall not include a spouse whose signature is required on a credit obligation to perfect a security interest pursuant to State law. A person who does not receive goods, services, or money in return for a credit obligation does not receive compensation within the meaning of this definition. A person is a cosigner within the meaning of this definition whether or not he or she is designated as such on a credit obligation.
Which Lenders Must Comply?
Based on our research, all lenders, whether within the regulatory jurisdiction of the FTC or not, should provide the Notice to Co-Signers when required by the FTC’s Credit Practices Rules. Here’s why:
- 1. The Notice to Co-Signer is required by Federal Trade Commission’s Credit Practices Law. It applies to lenders who are within the jurisdiction of the FTC, which does not include banks, savings and loan institutions, or Federal Credit Unions. Under Reg AA the requirement was also applicable to federally regulated institutions. When Reg AA was repealed, the regulatory requirement on federally regulated institutions also went away.
- 2. For creditors governed under the FTC (which includes creditors not supervised by the FRB, FDIC, OCC, CFPB or NCUA) the FTC rules remain in place.
- 3. While there are no specific regulations requiring financial institutions not governed under the FTC rules to continue to deliver the Notice to Co-Signer, the prudential banking regulators jointly released the following guidance regarding the repeal of Regulation AA which can be seen here.
The critical aspect of this guidance is:
- “The Agencies are issuing this statement to clarify that the repeal of credit practices rules applicable to banks, savings associations, and Federal credit unions should not be construed as a determination by the Agencies that the credit practices described in these former regulations are permissible. The regulations were issued on the basis of extensive findings that identified the unfair or deceptive practices prohibited in the rules. The Agencies believe that, depending on the facts and circumstances, if banks, savings associations, and Federal credit unions engage in the unfair or deceptive practices described in these former credit practices rules, such conduct may violate the prohibition against unfair or deceptive practices in Section 5 of the FTC Act and Sections 1031 and 1036 of the Dodd-Frank Act.11 [Footnote 11. The Agencies note that the FTC’s Credit Practices Rule requires—and the former credit practices rules applicable to banks, savings associations, and Federal credit unions required—creditors to provide a “Notice to Cosigner” explaining the cosigner’s obligations and his or her liability if the borrower fails to pay. The Agencies believe that creditors have properly disclosed a cosigner’s liability if, prior to obligation, they continue to provide a “Notice to Cosigner.” End footnote 11.] The Agencies may determine that statutory violations exist even in the absence of a specific regulation governing the conduct.”
By linking the provisions of the Credit Practices Law to unfair and deceptive practices in the FTC Act’s Section 5(a), the Agencies broadened the coverage of the provisions. Section 5 prohibits “unfair or deceptive acts or practices in or affecting commerce”, and applies to all persons engaged in commerce, including banks. While FTC doesn’t have enforcement authority over banks, savings and loan institutions, or Federal Credit Unions, these institutions must comply with the law. Their primary federal regulator has authority to enforce the law in Section 8 of the Federal Deposit Insurance Act.https://www.law.cornell.edu/cfr/text/16/444.1