For a 1-4 family residential property that is being sold by the bank out of ORE, and the bank is financing this sale (and it is consumer purpose), my understanding is that RESPA dictates that the bank cannot require title insurance (as the bank is the owner of said property being sold). In these instances, does the bank have to disclose the cost of the owner's title insurance? With no related lender title insurance, the cost would be much higher than normal. Thank goodness that this is not a common occurrence. Any help would be greatly appreciated.

OTI is optional. We disclose only OTI on a regular basis, including sale of ORE and yes, there is no exception on purchase transactions.

What is the norm in the area? Do most purchasers obtain OTI? If yes, you should include it in section H of the loan estimate marked "optional." And it only appears on the closing disclosure, of course, if the buyer/borrower has elected to purchase it. Here again, it goes in Section H.

my understanding is that RESPA dictates that the bank cannot require title insurance

The bank cannot dictate the title company - there is no prohibition against getting title insurance. But why would the bank need title insurance anyway - you either have clear title to the property or you do not. Yes, the consumer still has the opportunity to buy OTI and it should be disclosed.

1024.16—Title companies.

No seller of property that will be purchased with the assistance of a federally related mortgage loan shall violate section 9 of RESPA (12 U.S.C. 2608). Section 1024.2 defines “required use” of a provider of a settlement service.

My verbiage/understanding of RESPA was dictated by the standard practices of the bank. Our bank does not allow the borrower to shop for any service. As such, since we do not allow the borrower to shop for the title insurance company, then we would be prohibited from charging them for that service. I needed to be more clear in my explanation/question.

Since we do not allow the customer to shop for title insurance, but do have to disclose the OTI, we will need to get the cost from the closing attorney. It looks a little "funny" on the LE due to its size as compared to the normal amount disclosed.

I do appreciate the assistance.

we do not allow the borrower to shop for the title insurance company,

That might normally be the case, but it will not be when selling your OREO without a significant RESPA violation.

How will it be a significant violation of RESPA if we do not require the title insurance?

You have to allow them to shop for the owner's title policy. Even if the bank is paying for it, it would be considered that they indirectly paid for the policy through the cost of the loan.

Section 9 of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2608, provides
as follows:

2608. Title Companies; liability of seller

(a) No seller of property that will be purchased with the assistance of a federally related
mortgage loan shall require directly or indirectly, as a condition to selling the property, that title
insurance covering the property be purchased by the buyer from any particular title company.

(b) Any seller who violates the provisions of subsection (a) shall be liable to the buyer in an
amount equal to three times all charges made for such title insurance.