Emerging trend of municipalities introducing variable real estate transaction tax increases to address local policy issues poses a new TRID compliance challenge for lendersFollowing state and local elections nationwide in November, scores of new, differing rules are being put into effect quickly, greatly compressing the amount of time lenders have to respond to the changesResponsibility to monitor hyperlocal real estate transaction tax changes, which can involve complex variability, substantially increases lender exposure to regulatory risk In certain high-cost municipalities, failure to properly disclose increased real estate transaction taxes can cost lenders substantial amounts in fee cures Ernst Fee Service continuously tracks and updates the system with fee changes, helping lenders address these challenges efficiently and effectively while reducing regulatory risk, fee cures and time spent monitoring feesJACKSONVILLE, Fla., Dec. 19, 2022 /PRNewswire/ -- Black Knight, Inc. (NYSE: BKI) a leading provider of integrated software, data and analytics solutions, reports that its Ernst Fee Service solution has been enhanced to help clients address the challenges that are resulting from a growing number of municipalities requiring additional and more complex real estate transaction taxes.
Ernst Fee Service data shows that there has been a shift in the way real estate transaction fees and taxes are levied. In the past, fees and taxes were rarely increased and made at the state level. This allowed mortgage lenders to make changes quickly and accurately. Recent developments have seen municipalities implement real estate transaction fee increases to support local policy issues. Lenders find it difficult to keep track of these changes, as they are often marked by complicated, unpredictable schedules, short implementation times, and significant fee increases. To remain TRID-compliant, lenders must incorporate a large number of localized changes following the November election.
Mortgage lenders are particularly affected by the changing nature of real estate transaction taxes at the local level. TRID considers these line items zero tolerance fees. Fees that fall within the zero-tolerance category shouldn't increase beyond the loan estimate. Lenders may need to charge borrowers a fee cure if they increase fees beyond the amount they were quoted.
Rich Gagliano of Black Knight Origination Technologies, stated that the Federal rules are designed to give lenders zero tolerance for the disclosure of real-estate transaction taxes. They were created at a time when such fees were applied with great uniformity at state level. The paradigm has changed and there is a growing gap between localities that implement variable tax tiers in specific neighborhoods and lenders who have the resources to comply with these changes. The Ernst Fee Service assists lenders in incorporating new requirements into their production workflows within a short time frame.
Lenders can face severe consequences if they fail to disclose the most recent fees. Los Angeles passed a ballot measure that imposes a 5.5% tax on property sales exceeding $10 million. A $10 million property in Los Angeles will be subject to a $45,000 transfer tax until March 31, 2023. However, the same property will become subject to a $595,000 tax on April 1, 2023.
Fee cures for errors in disclosures can have a significant cost and are on the rise. Gagliano said that Ernst Fee Service is a solution to the problem of keeping up with the changes in municipal taxes and implementing them within a short time frame. The platform is particularly valuable today as there are so many localized rules, fees, and taxes that must be absorbed into the workflows of lenders.
Ernst Fee Service automates the end-to-end management of fees for mortgage lenders in order to ensure lender TRID compliance. It also minimizes zero percent and 10% tolerance fee cures. Integration with Empower, Black Knight's loan origination system (LOS), enables Ernst Fee Service to generate Loan Estimate and Closing Disclosure forms. These forms are prefilled with current transfer and property taxes fees as well as title and recording fees. Black Knight's Fee Cures Suite assists lenders in identifying costly cure trends and helping them to mitigate those cures.
About Black KnightBlack Knight, Inc. (NYSE : BKI), is an award-winning data, software, and analytics company. It drives innovation in the real estate, mortgage servicing, and lending industries, as well the capital and secondary market. Our integrated solutions are available to businesses throughout the homeownership cycle. They can help customers retain their customers, gain new clients, reduce risk, and run more efficiently.
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