Our team was wondering about how the selection of the escrow company on the purchase contract affects what is considered a "fee the borrower may/did shop for." I can't seem to find anything in the rule that discusses this. On most of our loans, the seller chooses the escrow and the buyer either accepts this as the part of the purchase contract, or counters with a different escrow company.

Since RESPA currently states that a borrower has the right to shop for their escrow and title companies on the purchase contract, are we to assume that even though the seller may have chosen the escrow, the borrower had the opportunity to counter this and therefore could shop? From the lender's perspective, this comes over as an executed purchase contract in which the escrow company has been agreed upon.

We were concerned that the CFPB might see this as the lender not permitting the borrower to shop, therefore putting it into the zero tolerance bucket. However, we wouldn't prohibit a borrower from changing the company mid-loan (provided they had an amendment to the purchase contract). Also, we're concerned about how to go about providing the written list of service providers if this company has already been decided on.

It obviously doesn't make sense that a lender would be held to a zero tolerance for an escrow company that was agreed upon in contract (unless it was an affiliate, of course), especially if we would let them change it with an amendment later if they wanted to. However, I can't find any guidance that confirms this logic so any assistance would be appreciated!

I recently heard one presenter state they thought if you had the purchase agreement where the buyer agreed to use a specific title company that the creditor would have to include that in the "can not shop for" category because the buy no longer has the ability to shop for the service.


The Commentary to 1026.19(e)(1)(vi)(3) starts out:

Written list of providers. If the creditor permits the consumer to shop for settlement services.........


The creditor has no control over what the buyer and seller negotiates in the purchase agreement. If the creditor allows the buyer to shop for the settlement service then it is my opinion that any service provider chosen in the purchase agreement and is off the Written List of Providers would not be subject to the tolerance. The buyer (consumer) had the opportunity to shop but they chose not to and to go with the suggested title company by the seller and/or Realtor. I do not see the purchase agreement between the buyer and seller negating the creditor allowing the consumer to shop.

Other opinions are welcomed and encouraged.

I agree with Dan.

In Georgia, there is a notice and it is specific to the borrower, giving them a right to choose. It's my understanding that we can't even require a specific settlement agent if we wanted that to be our policy:

I understand that I have the right to select a qualified attorney to conduct the title search and loan closing, provided the
attorney I select is acceptable to the lender. If I do not choose to select an attorney, the lender will choose a qualified
attorney to conduct the title search and my loan closing.
Please check ONE of the following:
l I elect to have the lender choose a qualified attorney to search title and conduct my loan closing.
l I elect to choose the attorney to search title and conduct my loan closing. I may choose an attorney from an approved
list or I may select my own attorney, provided the attorney I select is acceptable to the lender......

Thank you both! I appreciate the input.

As a related topic, is it a correct understanding that unless you provide a list with a service provider, the service listed would be a Service the borrower Cannot Shop for and would be zero tolerance? In other words, for it to be a "shoppable" service, a provider list with a servicer provider for that service must be provided?

So if, for example, a pest inspection was required by the loan program/creditor, and a provider list was given but it did not list a pest inspection company, the pest inspection would be zero tolerance? If that's the case, then it seems lenders will need to list all possible servicer providers in order to not have a zero tolerance item.

You don't have a choice. You have to provide at least one settlement service provider if the consumer can shop for the services or you have an automatic violation:

Written list of providers. If the consumer is permitted to shop for a settlement service, the creditor shall provide the consumer with a written list identifying available providers of that settlement service and stating that the consumer may choose a different provider for that service. The creditor must identify at least one available provider for each settlement service for which the consumer is permitted to shop.

How many possible services do you require a consumer to use and can shop for - is it really that many?

No. The lender will have to list at least one provider for every settlement service that the consumer will be permitted to shop for. And your estimate of the cost for that service will need to be as accurate as possible just in case the consumer (1) uses the provider from your list, or (2) fails to choose, in which case you will make the selection.

I suppose I was mostly thinking of the title services. I know some lenders do not currently provide a settlement provider list for the title services and are simply always bound to the 10% tolerance. So in order to retain the 10% treatment under the new rules for title services, at least one title company must be listed on the provider list?

And my apologies for the imprecise language - "all possible servicer providers." I meant more along the lines of different types of services that could be shopped for (title, survey, pest inspection).

Thanks for the all the replies so far though. Having BOL as a sounding board is invaluable.

The rules really are not changing. If you allow a consumer to shop and don't provide a list, it is a violation even under the current regulation. So if there are lenders out there not providing lists, they already have issues.

I guess my main concern is that currently the "Shopping for Your Home Loan, HUD's Settlement Cost Booklet", on page 17 states, "If your loan originator fails to provide a list of settlement service providers, the 10% tolerance automatically applies." However, under the new rules, if you do not supply a list, then the 10% tolerance doesn't apply - the zero tolerance applies because they were not allowed to shop. If that's true, that may catch some by surprise.

Or am I completely off base here?

That would be why the CFPB released Your Home Loan Toolkit which replaces the Settlement Cost Booklet beginning on 8/1 when TRID becomes effective.

First, shopping to me is a no-brainer. 0% (no shopping) vs generally 10% (could be 0% if it's your affiliate) or unlimited tolerances (shopping). Let them shop!

Second, IMO there are many that are missing the boat on the subject. One of the latest is lender's simply wanting to provide "canned" lists. This may work some of the time but not 100% of the time. The lender needs to put some effort into the list to make it "meaningful" and "in good faith". If lender is going to let them shop, the recommended provider needs to be transaction specific. For example, if a survey will be required for a property I"m buying in Phoenix, AZ, don't recommend a surveyor in Omaha, Ne just because that's where the bank is located.

I can relate to what TomTom is asking here. Currently, we provide a list of settlement agents (attorney's) that can issue title insurance and leave it at that. We were of the impression that we had met the requirements for the list with just listing the Attorney information. Under the new regulations however, I am thinking now we need to add, for example, Investor's Title Insurance Company as the provider of title insurance? It doesn't make sense to me as the borrower is not going to call a title insurance company to shop for insurance. The attorney will issue the title insurance as an agent. So can we still list the Attorney as the service provider rather than list a title insurance company? I'm sorry if I am talking in circles. This is making me dizzy.....

Attorneys issuing title insurance as an agent sounds like a state specific thing. Around here, we deal with title companies, not attorneys.

Beyond that, it sounds like your list, Luv2run, has multiple providers on it for each service you're allowing the borrower to shop for. That's going to work against you even more when 8/1 rolls around. Why not just list the one that you know will charge only what you put on the GFE? That way, if your borrowers chose any other attorney, you don't have to worry about tolerances.

Well, now I understand a bit why Title Companies are being mentioned in this process. I have spent the last 22 years in PA and I guess I forgot things are a bit different here sometimes. I am thinking then that the Settlement Agent (Attorney) would actually be the provider of the service and I can not worry too much about listing a title company.

The reason our list is as extensive as it is, dealing with attorneys, they do business by county. We need to list a settlement service provider for each county we serve. It would be nice to have one big title company to list, but again, PA is a bit different. Wish me luck! Thank you for helping me sort through this Truffle Royale!

One required service, one recommended provider, specific to the transaction not necessarily the counties you serve.

Jerod, we base our per county service provider on 1026.19(e) that provides that the creditor must identify settlement service providers that are available to the customer. These providers are only available per county. They generally do not provide services for more than one county. So our list consists of one provider per county with the availability per county noted on the list.

I understand what you are saying but I think your extensive catch all list is too much.

FWIW Here's my take, I submit a covered application. You then get three days to do your homework and submit a Loan Estimate an applicable Shopping list based on the best information known at the time. Based on the application information submitted (including the. property location) identify any recommended service providers for required services based on where the property is located. Generate and provide the list within 3 days of receiving my covered application.

The catch all list you describe IMO is too much information and doesn't really catch all, maybe most but not all.

I will take your comments into consideration Jerod as I continue to ponder all the changes we will need to make by August 1st. I appreciate the perspective and feedback. This page has been extremely helpful as I continue to try to unravel this new regulation.

Besides Jerrod's explanation, consider this point. Just because an attorney 'generally doesn't do business outside that county' doesn't mean they can't or won't. So instead of giving a one attorney per county list, you are actually giving a list of many attorneys, all of whom are now in the 10% category.

All you really need to do is give a list with a single attorney that you know will do business in the county where the property is located. One and done. If the borrower choses anyone else, even an attorney who might be on your list for another county, the tolerance doesn't apply.

It's far better to have a separate list for each county rather than one list for all counties.

You have given me something to think about Truffle Royale. I will need to look at this with our operations area. Thanks.

Just so I'm clear on this because the original question asked about completing the list:

If they chose the seller's selected settlement company AND that settlement company happens to be the one on the Written List, the 10% tolerance applies. If they are not on the Written List, No tolerance applies.

If they are not on the written list and they are not an affiliate, increases over a good faith estimate of the cost would be acceptable (with no percentage limit).

If they are not on the written list and ARE an affiliate, a 0% increase limit would apply.