The RESPA forum may be more relevant, but this forum gets more action and there is a TRID reference, please excuse me if this is the wrong place . . .

It is clear from 12 CFR 1026.19(e)(1)(vi) Official Interpretation #1 that if a creditor provides a list of service provider for a particular required settlement service, then the consumer is considered to have not received the ability to shop under TRID -

[In contrast, a creditor does not permit a consumer to shop for purposes of § 1026.19(e)(1)(vi) if the creditor requires the consumer to choose a provider from a list provided by creditor.]

I was wondering how this interpretation, if at all, impacts the Affiliated Business Arrangement disclosure under RESPA. If the consumer has to pick from a list and that list contains an Affiliate, should the information about the Affiliate actually go in Section B of the model form? Is this considered "required use" under RESPA, or is the fact that there are 1, 2, or 3 other choices on a lender provided list that are not affiliates mean that the Affiliate information should still go in Section A of the model form? There may not be a definitive answer on this, but I would appreciate others' input. It seems a bit tricky because there are aspects of both shopping and required use. The consumer can't really pick who they want to, but they also are not specifically required to use the Affiliate. And, there does not seem to be any clear citation as there is in TRID.

Without out going into all the scenarios [I'd have to study them as I don't use but one], this is what I do when I list a provider for a required service who happens to be an affiliate on my shopping list.

I give an Affliated Provider notice with the Shopping List that lists that provider. Yes, they can choose whomever they want, we are not requiring that affiliate, but giving a name is or can be an implied referral, IMHO, so they get the disclosure.

If you require them to choose a provider from your list then you have not allowed them to shop.

You may disclose an affiliate on the shopping list but, as RRJ does, you must provide the AfBA disclosure.

7. Relation to RESPA and Regulation X. Section 1026.19 does not prohibit creditors from including affiliates on the written list required under § 1026.19(e)(1)(vi)(C). However, a creditor that includes affiliates on the written list must also comply with 12 CFR 1024.15. Furthermore, the written list is a “referral” under 12 CFR 1024.14(f).


Now would it be considered a "required use". In my conservative opinion, yes, because you are not allowing the borrower to shop. They have to choose from your list and your affiliate is one of several required service providers they have to choose from.

Yes, for sure I am providing the AfBA disclosure. My dilemna is does the affiliate go in Part A (Shoppable) of the model form or Part B (Required Use) of the model form? Is it a required used because there are only a few choices and the affiliate is one, or is it shoppable because the affiliate is not specifically required and the borrower does have a couple of choices that are not affiliates? @Dan - I'm probably leaning towards that as well, but, technically the borrower can shop, but they can only shop within a restricted amount of choices, rather than comprehensively being able to pick who they want.

Then they cannot shop if they can't pick someone that is not on your list.

19(e)(1)(vi) Shopping for settlement service providers.

1. Permission to shop. Section 1026.19(e)(1)(vi)(A) permits creditors to impose reasonable requirements regarding the qualifications of the provider. For example, the creditor may require that a settlement agent chosen by the consumer must be appropriately licensed in the relevant jurisdiction. In contrast, a creditor does not permit a consumer to shop for purposes of § 1026.19(e)(1)(vi) if the creditor requires the consumer to choose a provider from a list provided by creditor. The requirements of § 1026.19(e)(1)(vi)(B) and (C) do not apply if the creditor does not permit the consumer to shop consistent with § 1026.19(e)(1)(vi)(A).

@Randy - Yes, totally agree under "TRID." I cited that section in my original post. However, for the sake of the AfBA disclosure under RESPA, there is no similar citation. Should it be understood similarly?

What different does it make? The affiliate is a third party and not the creditor or loan originator. The fee would not go in Section A.

Not Section A of the LE/CD. I am talking "Section A" of the AfBA disclosure (the model form in Appendix D). Sorry for the confusion, I figured I might confuse people by using the same name, i.e. "Section." Maybe for the AfBA we can just call it "Part A."

[A.] Set forth below is the estimated charge or range of charges for the settlement services listed. You are NOT required to use the listed provider(s) as a condition for [settlement of your loan on] [or] [purchase, sale, or refinance of] the subject property. THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.

See the following: https://www.consumerfinance.gov/eregulations/1024-D/2015-18239#1024-D-h1

This area is fraught with danger and regardless of any of our opinions (which I don't have on in this case as RESPA does not define required use in the same terms as TRID) you should be sitting down with legal counsel and determining your strategy.

you should be sitting down with legal counsel and determining your strategy

You should do the above but I will offer a non-legal opinion that for RESPA they would not be a required provider for the purpose of the AfBA. However I want to stress you should consult your attorney.

1024.2

Required use means a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service. However, the offering of a package (or combination of settlement services) or the offering of discounts or rebates to consumers for the purchase of multiple settlement services does not constitute a required use. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices that are otherwise generally available, and must not be made up by higher costs elsewhere in the settlement process.

Yeah @Dan, that was the definition that tripped me up for purposes of the disclosure. Doesn't seem to technically fit the definition of required use.