Good Faith Estimates in Florida
or
What do I tell my borrower about the costs of closing their loan in the Sunshine State, when I am 1,200 miles away?

Nobody wants to be the guinea pig in a federal investigation based on inaccurate disclosure to a future disgruntled borrower. With that said, this article will briefly address three topics. First, who governs what will be charged to a borrower in Florida; Second, a brief description of the costs typically involved in a residential 1-4 family refinance; and Third, how these costs are calculated. This article will only address the situation where the borrower is doing a refinance. You should also be aware that these costs apply to closings done by underwriter-owned title offices, independent title agency businesses, and attorney-agent offices. The only difference between these three entities is your personal preference for the people in these entities. In other words, if you have fostered a good relationship with someone in an independent title agency office and they provide you with the kind of service you expect, then you should possess a level of assurance that their fees are the same fees that would be charged by an attorney-agent office or an underwriter’s closing office. They all are in business to provide the same service.

In Florida, the Department of Financial Services, a.k.a. “DFS”, along with a couple of very important court cases, and the local County Clerk’s office, determine what and how fees will be charged to your borrowers. The Department of Financial Services is the state agency that administers and monitors the licensing of all title agents, whether they are an actual underwriter, an independent agency, or an approved attorney agent.

 

In addition, this state office enforces the regulations that govern what will be charged for title insurance policies on transactions involving Florida Real Estate. This is why Florida is typically referred to as a “regulated” or “promulgated” state. The DFS produces the “Rate Regulations” that must be followed by any agent issuing a policy, whether it is a loan policy or an owner’s policy. Any agent that does not follow these regulations when issuing a policy, does so at their peril…

The case law used by the settlement services industry in Florida really provided two things. First, it clarified who could actually provide settlement services in Florida. As a result of these cases, independent licensed agents could provide settlement services and issue title insurance policies without the necessity of a law degree. More importantly however, the case law clarified what could be charged, and what must be charged, in Florida, in keeping with the dictates of the Federal Real Estate Settlement Procedures Act (RESPA) regulations. The case law has provided that three things must be charged; a closing/settlement fee, a title search fee, and an examination fee of that title search. However, as of October 1st, 2007, settlement service providers are no longer allowed to charge a separate Title Examination Fee on the settlement statement, a.k.a the HUD. This fee is one that is considered to be part of the fee earned by the agent within the agent’s portion of the title insurance premium. In other words, the examination fee which was separately charged in the past, is now part of the fee commonly known as the title agent’s commission. Additional fees that are allowed to be charged are known as third party vendor fees; i.e., survey, courier fees, wire fees, discharge/lien release tracking fees, etc…

County Clerks in the state of Florida are in the business of recording and maintaining the property records and collecting the appropriate state mandated fees. These state-mandated fees are more commonly known as the recording fees. In addition, when there is a mortgage involved, there are Documentary Stamps and Intangible tax collected based upon the loan amount of the mortgage. By and large, the fees charged by each county clerk are identical, except for a couple of counties which have implemented small variations in their fees. If you have a client with a property in Palm Beach or Miami-Dade County, make sure to confirm with your settlement services provider, what the exact fees are for those counties.


I probably receive the most questions, about the costs of the title insurance for Florida transactions. What is unique about this request, is that this is the area that is the most controlled. Remember, DFS determines what, when, and how fees are to be charged. Despite these regulations, there can be slight variations in typical fees. Because I don’t want to reprint the rate regulation manual in this article, I will attempt to give a brief overview of a typical Refinance transaction with a loan amount of $250,000.00.

The first question any title agent has to ask the borrower and/or the loan officer is; do you have a copy of the original owner’s policy? If so, then we must issue the new lender’s policy with the reissue rate discount. In some cases, this can be substantial. The discount will only be applied to the insured amount of the prior policy. But here is the caveat. The title agent must have a copy of the owner’s policy or the discount can’t be given. Period. Let’s assume there is no prior owner’s policy provided to the closer. Let’s also assume that the property is in a Planned Unit Development (PUD) and that the loan is an Adjustable Rate Mortgage. The policy premium would calculate as follows:
$5.75/$1,000 for the first $100K of loan amount,
$5.00/$1,000 for the remainder, up to $1M,
plus, the cost of the endorsements. In our case, that equates to $575 + $750= $1,325.00 for the base policy premium. In Florida, the endorsements that are needed for a title insurance policy that provide affirmative coverage are paid for at time of closing as part of the title premium. Most lenders will require a Florida Form 9 and an Environmental Protection Lien endorsement, at a minimum. In our case, we also have a PUD and an ARM endorsement requirement. So, the endorsements price out as follows:
Florida Form 9 = 10% of the premium, or $132.00
EPL (ALTA 8.1)= minimum of $25
PUD (ALTA 5.1)= minimum of $25
ARM (ALTA 6) = minimum of $25
Most title agents will charge from $50 to $100 for these endorsements. We will use $75 each for our example. With that said, here is our total loan policy premium: $1,325 + $132.50 + $75 + $75 + $75 = $1,682.50
As you can see, the premium is a fairly large number. It is also completely dictated by the rate regulations. And despite the minor flexibility in the endorsement charges, it shouldn’t differ from agency to agency, whether that agent is an independent, underwriter, or attorney agent. It also should be on every loan officer’s mind that it is imperative to get a copy of the owner’s policy to be able to save his client more money.

Next, let’s look at the “normal” closing fees. If you recall, this article mentioned case law and the “must charge” fees of closing, search, and exam. Typically, you will find that most settlement service providers will charge between $100 and $600 for the closing/settlement fee. The search fee is really a third party vendor fee that is not a profit center for the closer. The closer should be charging exactly what their cost is to acquire the search information from their supplier. As an example, my search provider charges me $100 per search. I put this on the HUD payable to the search provider. That is the correct way to disclose this and not run afoul with the HUD Police…. The exam fee is no longer allowed. Instead, you will probably see the closing fees increase a bit because of this new mandate. Remember, these are the required fees for a settlement services provider to charge. Now, let’s look at the other costs we mentioned earlier. In Florida, surveys are required. I won’t go into a long explanation as to why, or how this requirement is met, but suffice it to say that if one needs to pay for a survey, that charge should be between $250 and $400. If you are quoted more, ask your closer to get a competitive/better quote. Now there may be a valid reason why the fee is higher, but don’t be afraid to ask for an explanation or a lower quote. If the explanation is reasonable, you are probably stuck with it. Remember, Florida is a huge state. Some parts of it require great difficulty just to walk the land…
Courier fees can range from $20 to $60 dollars. Again, these are third party vendor fees and really can’t or shouldn’t be “up-charged” by the closing company. Currently there is a split in the Federal Circuit courts whether up-charging is allowed or legal. So, the safe route is not to do it until the issue is resolved by a higher court. If your closer is charging $150 for courier fees for a refinance, that should be a red flag that he or she is “padding” that fee in order to make more money. That is really not the place to increase one’s profits. It can only lead to bad things.

The last place where fees are collected, charged, and disclosed on a settlement statement, is the County Clerk’s office. There, the recording fees, and any taxes will be paid. In our example, there is a mortgage to be recorded. Documentary Stamps and Intangible Tax will be collected on the full loan amount of the mortgage. If we have a 25 page mortgage, the recording fee is as follows: $10 for the first page and $8.50 for each successive page. Our total to record the mortgage would be $10 + (24 x $8.5) $204 = $214.00. The document stamps on the mortgage are $3.5/$1,000, or, $3.5 x 250= $875. The Intangible Tax is $2/$1,000, or $2 x 250= $500. So, the total money that needs to be sent to the County Clerk is $1,589.00 ($214 + $875 + $500).

As you can see, the fees required to close a loan in Florida are made up of many different items. However, these items should look relatively familiar to you. How they are calculated is really what differs. As you recall, it is RESPA that governs how we conduct settlements. But, each state will have its own quirks based upon its interpretation of RESPA and what it needs to do to protect its citizens. Here in the Sunshine State, three distinct sources of law have provided the framework to our industry, for what, how, and when to charge a borrower to close a loan. Once you have a basic understanding of what is charged, you should be able to feel comfortable in counseling and/or creating a Good Faith Estimate for your client that won’t raise their eyebrows or those of the HUD police….. If not, feel free to give me a call. I will gladly take the time to walk you through it. Thank you.



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