When the realtor selects the closing agent rather than the mortgage company employee, does the closing agent have to be listed as a required provider on the GFE? I think not since the reg says "when the lender requires"

You let your realtors select the closing attorney? On what do they base their selection?

I don't know. The mortgage company is new to me.

I think it should still be included on the GFE. You are still requiring the use of this entity, although you may not be choosing it.

I'd also suggesting checking in to why the realtor chooses this entity. It doesn't sound like a good practice to me.

As I read these posts, I started wondering if we're doing this wrong on our GFE's.

We list in the 'required providers' section only those provides that we truly require. For example, we have one credit reporting agency, flood cert company and tax registration firm, so we list them as required providers.

Then we have a list of title companies and appraisers from which the borrowers can choose. If they don't choose, we'll select from the list based on location, pricing, deadlines, etc. We don't list the chosen provider as 'required' since the borrower could have selected anyone from the list. Then we have on our GFE a section that says we maintain a list from which the appraiser and title insurance company will be selected (I'm not quoting exactly).

Am I okay?

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Then we have a list of title companies and appraisers from which the borrowers can choose.

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I hope this is a misquote.

Susan - RESPA does permit the type of required provider disclosure that your bank is giving when you permit the customer, or the bank, to choose from a list (copied below). But (yes, there is always a "but" with RESPA), the examiners will check to see that you have at least 5 providers in each category that are used fairly equitably. In other words, even if there are 15 appraisers, using only 2 or 3 of them most of the time will require that you begin specific disclosure on the GFE required provider section.

"3500.7(e)(4) If the lender maintains a controlled list of required providers (five or more for each discrete service) or relies on a list maintained by others, and at the time of application the lender has not yet decided which provider will be selected from that list, then the lender may satisfy the requirements of this section if the lender:
(i) Provides the borrower with a written statement that the lender will require a particular provider from a lender-controlled or -approved list; and
ii) Provides the borrower in the Good Faith Estimate the range of costs for the required provider(s), and provides the name of the specific provider and the actual cost on the HUD-1 or HUD-1A."

I think what Randy was referring to is that appraisal regulations clearly state that the borrower may NEVER choose the apprasier. Only the bank, and only someone independent from the loan itself.

Wow! Am I glad I asked the question... I can see we need to revise our process asap. Thanks everyone...

I called Kirchman and was told that we do NOT have to show the service provider if the realtor is the one who is picking. We only have to show those service providers who the bank/mtg. co. actually picks/requires. I was told by the mtg. people that often times the sales contract has in it who the closing attorney will be and if the mtg. co. does not have that particular attorney "approved" then they contact him to get insured closing letters and then they use him. It seems to be a common practice in this area with certain realtors.

I, being the untrusting sole that I am, would worry who the attorney would protect more - the realtor or the bank.

In my neck of the woods (actually there are no woods here), it is a fairly common practice for the realtor to pick the title company. (We aren't an attorney state.)

3500.16 carries some ramifications for "seller required" title companies. Therefore, if the Realtor "recommends" a title company, we make sure our applicant/borrower is aware they have a choice to choose any title company and/or attorney they wish.

But Dan, doesn't that depend on local law and custom? When I bought my house in Indiana, I was told by my realtor that under Indiana law, the seller chose the title company. This is different than any other state I have purchased real estate in.

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I was told by my realtor that under Indiana law, the seller chose the title company.

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Paul, I have never heard this. I'll have to do some research and get back to you on this. But that sounds like a direct violation of RESPA.

In this area, the Deed Preparation is customarily an expense of the seller; as such the seller can hire his/her own attorney to prepare the Deed. The seller can also hire an attorney to represent them at the closing, review documents and otherwise, well, practice law.

The lender can hire the attorney for title work, settlement services, etc. The lender can pay for this, or pass this cost along. The lender can require a particular attorney or maintain a list of approved providers. The lender can choose from the list, or MAY say Mr/s. applicant, the following providers are suitable to me, do you have a preference?

Just because a seller hires an attorney, doesn't mean the lender must hire the same attorney.