We had a purchase where the escrow agent, which was specified by the P & S Agreement, charged a notary fee over and above the regular escrow fee. We have lender's title, settlement agent and title endorsement service providers listed on our Written List of Providers but not a settlement service escrow notary fee. The Loan Estimate went out without a notary fee on it and then the fee was added to Section C of the Closing Disclosure. I told the lenders that the fee should have been put in section B-as the fee was not listed on the Loan Estimate or itemized on our Written List of Providers. The lenders think that since this fee is related to a settlement agent that it was automatically a shoppable service. Per Section 1026.19(e)(1)(vi))C) the settlement service providers identified on the written list required by Section 1026.19(e)(vi)(C) must correspond to the settlement services for which the consumer may shop, disclosed pursuant to Section 1026.37(f)(3).

What do others think-do we owe the customer a cure or not?

If they chose a 3rd party provider, how can the bank know exactly what fees will be charged? I say it belongs in Section C and we do not owe a cure. Anyone else please feel free to weigh in as well.

We did receive the P & S Agreement prior to issuing the LE so could have called to get a list of fees. Shouldn't the fee have been listed on the LE?

I would still say it's part of the package and they did in fact, shop for their settlement provider. The regulation does address fees that were not disclosed but only in the 10% tolerance category, which this fee does not fall since the borrower was able to and did, shop.

The borrower was able to shop for the escrow agent service since you included that service in Section C and in the Service Provider list. The borrower used the provider you identified on that list, so the escrow service fee is part of the 10% bundle for tolerance calculation.

If the notary fee came in as part of the escrow agent costs, and if the increase from the total of your LE estimate of 10% costs is less than 10%, you don't have a tolerance violation.

For example, if your LE included estimated escrow agent costs of $750 and recording costs of $30,00, you start with a "bucket" of 10% costs of $780. If the only change in those costs at closing is a notary cost of $78 or less (an increase of no more than 10%), you won't have a tolerance violation even though the notary fee was not included in the LE.

See comment 19(e)(3)(ii)-2.

Incorrect, Debbie.
If the borrower is permitted to shop for a service, and you list at least one provider available to provide that service on the "Service Providers List" ("SPL") and the borrower selects a provider for that service from the SPL, that service is included in the aggregate cost subject to the 10% tolerance limit under 1026.19(e)(3)(ii), unless the provider is an affiliate of the lender (in which case, the service would be covered by the 0% tolerance limit under .19(e)(3)(i).

If the borrower selected a provider that was NOT on the SPL and that is NOT an affiliate of the lender, there is no tolerance limit, per 1026.19(e)(3)(iii), provided the estimated cost for that service on the LE was provided in good faith.

And by the way, the fact that the escrow agent is "specified" on the purchase agreement does not require the lender to include that escrow agent on the SPL. The only requirement for putting a provider on the SPL is that the provider be available to provide the service where the property or borrower is located.

Hi John,

Thanks for your response. To clarify-the borrower went off the list and used the escrow agent specified on the P & S Agreement which was not on our list. In this case, we did have escrow servicer provider on our list but did not have a notary fee provider. Typically this fee is included in a settlement agent fee.

I didn't see where the provider chosen was one on their SSPL so I assumed (maybe mistakenly) that it was a shoppable service and the borrower shopped (didn't use a provider on the list). That would make those services not subject to a tolerance.

I agree with you John, if they chose a service provider on the list and a fee was excluded, then it would just be added to the 10% aggregate.

Not subject to a tolerance limit and subject to a no-tolerance limit can be confusing. OK. In this case, as clarified by Puzzled, the borrower was able to shop, did shop, and chose a provider not on the SSPL, right? That would put those services in the not subject to a tolerance group under 1026.19(e)(3)(iii). The notarial service wasn't listed on the LE or the SSPL, correct? It wasn't a service required by the lender, so I'd consider it subject to 1026.19(e)(3)(iii) also.

Could it be argued that this notary fee should go in Section H on the Closing Disclosure rather than Section C since this fee was not required by the creditor in connection with the loan?

It could.