Questions and answers about the Section 32 Truth In Lending Act (TILA):

Q: If a mortgage brokerage that has a warehouse line owns an interest in a title agency, does the brokerage need to include all fees collected by the title entity in the Section 32 TILA calculation for deals insured through that title entity?

A: Only loans closed in the brokerage’s name (which makes it a creditor under Section 32) must be counted.

Q: Can the brokered deals be excluded from the calculation since they are not in the name of the brokerage?

A: The brokered deals can be excluded as long as they are not closed in the name of the brokerage.

Q: Are calculations required for all of the warehoused loans, even if there is a firm buy-out commitment from the ultimate lender?

A: Calculations are only required for loans that are closed in the name of the brokerage.

Q: If a brokerage that is required to make computations on title fees only owns a percentage of the title agency, does this change the computation? For example, if a brokerage owns a 25% interest in a title agency and fees paid to the agency are $600, should the amount calculated for Section 32 be $600 or $150?

A: $600. The ownership interest of the broker is immaterial. There is no provision for a pro-rata computation.

Q: Are "pass-through" charges (i.e., fees collected in the name of the title entity but passed through to a separate entity, such as a title abstracting company) exempt from the computation if they are listed in the name of the recipient on the HUD-1?

A: If a title entity charges a fee directly to the title searcher, as opposed to the title agency, that fee need not be included as part of the TILA computation.

Q: Should the fee paid to the underwriting title insurance company, if segregated on the HUD-1, also be eliminated from the calculation?

A: Fees paid to the title underwriter can be excluded if, as reported on the HUD-1, they are paid directly to the title underwriter and not to the agent.

Q: If interest in a title agency is owned by the owner(s) of a brokerage, rather than the brokerage itself, does this change the Section 32 requirements to include the title fees in the computation?

A: It is an indirect interest. As such, the fees must be included.

Q: What if the ownership is in a trust or deferred compensation vehicle (i.e., a 401k or profit sharing plan)?

A: It is an indirect interest. While the law does not address this situation specifically, it is extremely aggressive and, as such, not advisable.

Q: What if ownership interest is held by the spouse or children of the owner of the brokerage?

A: It is an indirect interest. Again, while the law does not address this specifically, it is not advisable.