We are a small community bank that do not allow our borrowers to shop for closing services. Occasionally, after we have contracted for attorney services, the applicant will decide they do not want to proceed with the loan and the attorney will bill us for the legal services incurred. Does RESPA prevent me from entering into an agreement with the attorney that if the loan does not close that the bank would only be responsible for a discounted portion? It does not seem fair that the bank would not only have to eat the "soft cost of doing business" but it also has to pay money to an outside company. We require the applicant to pay the appraisal fee up front. Unfortunately, we probably can not make the attorney fee payable at application.

Does RESPA prevent me from entering into an agreement with the attorney that if the loan does not close that the bank would only be responsible for a discounted portion?

What less work are they doing for you if the loan does not close?

Unfortunately, we probably can not make the attorney fee payable at application.

Hopefully, not at application, but why not?

You can't impose it at application, but you could do so at the time the applicant issues an intent to proceed.