Federal regulations provide “zero tolerance” for miscalculations of real estate transaction taxes when providing borrowers with integrated TILA-RESPA disclosure, Black Knight warns.
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A flurry of voter-approved real estate transfer tax increases, like the “mansion tax,” approved by Los Angeles voters in November to tackle homelessness, may be a potential liability for mortgage lenders. who can be penalized if they fail to incorporate the higher fees when providing quotes to borrowers.
That’s according to mortgage technology provider Black Knight, which says it has updated the software that lenders rely on to calculate estimated fees when providing loan estimates to borrowers, as required by federal law. on Truth in Lending (TILA) and the Real Estate Settlement Procedures Act (RESPA).
Black Knight’s Ernst Fee Service solution “has been enhanced to help customers address the challenges resulting from an increasing number of municipalities requiring additional and more complex real estate transaction taxes,” the company said. announcement Monday.
Obtain the correct real estate transaction taxes when providing loan estimates, as required by the Federal Integrated Disclosure TILA-RESPA (TRID) is a big deal because TRID categorizes them as “zero tolerance fees”.
“Except in specific circumstances, fees that fall into the zero tolerance category should not increase after delivery of the loan estimate,” Black Knight warns. “If they do, lenders may have to pay borrowers a fee covering the difference between the amount they were quoted and the amount they were charged.”
Los Angeles voters on November 8 approved a ballot measure raise the transfer tax on properties that sell for more than $10 million to 5.5 percent. After April 1, the transfer tax on a $10 million property will increase from $45,000 to $595,000.
According to the National Association of Realtors, which opposes property transfer taxesCalifornia voters approved 13 out of 20 transfer tax initiatives who were put on the ballot between 2010 and 2020. A number of cities in Pennsylvania have also raised local transfer taxes, along with states like New York, Delaware and Washington.
Black Knight says data collected for its Ernst Fee Service solution highlighted “a rapidly rising trend… with municipalities implementing real estate transaction fee changes to support local policy issues. These changes are often marked by complex and variable timelines, short implementation times and substantial fee increases, making them difficult for lenders to track and adhere to.
Richard Gagliano
According to Rich Gagliano, president of Black Knight Origination Technologies, previously these fees were implemented “with great uniformity” and at the state level.
“But the paradigm has shifted, and there’s a growing disconnect between localities that are rapidly implementing varying tax levels for specific neighborhoods and the resources needed by lenders to implement those changes in a manner consistent with the scale and on schedule,” Gagliano said in a statement. . “By doing the heavy lifting and legwork for our clients, the Ernst Fee service helps lenders integrate new requirements into production workflows on time and meet increasingly tight deadlines.”
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