The CFPB provided guidance to the industry on the negative amount for owner's title insurance policy question during their webinar on April 12, 2016. Below is the question and response from the CFPB during the webinar.
Q7: The calculation of the owner’s title policy premium in accordance with the rule might result in a negative number. Does the creditor disclose this negative number for the owner’s title policy on the Loan Estimate and Closing Disclosure?
Dania Ayoubi, counsel in the CFPB’s Office of Regulations, said that in this situation, the creditor would disclose the premium for the owner’s policy as a negative number. “When a simultaneous issue rate or discount is used—mostly in purchase transactions—the cost of an owner’s title insurance policy is disclosed as the incremental cost of that owner’s title insurance beyond the standard non-discounted cost of the lender’s title insurance policy,” Ayoubi said. “When disclosed in this fashion, the disclosure conveys to the consumer that it is less expensive to purchase both owner’s title insurance and lenders title insurance together than it is to purchase just lenders policy by itself.”
She referenced Comment 37(g)(4)-2 of the rule, which states “The premium for an owner’s title insurance policy for which a special rate may be available based on the simultaneous issuance of a lender’s and an owner’s policy is calculated and disclosed pursuant to § 1026.37(g)(4) as follows: The title insurance premium for a lender’s title policy is based on the full premium rate, consistent with § 1026.37(f)(2) or (f)(3). The owner’s title insurance premium is calculated by taking the full owner’s title insurance premium, adding the simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage.” Ayoubi stated that there are no provisions in Regulation Z that would prohibit the cost of owner’s title insurance from being disclosed as a negative number.