Skip to content
GeoDataVision
Thread Options
#2267628 - 03/14/22 08:19 PM Borrower doesn't choose provider
terpsfan Offline
Diamond Poster
Joined: Feb 2007
Posts: 1,979
If the borrower is allowed to shopped but does not have a preference and the creditor selects a provider that is not on the list these charges are still consider charges the borrower did not shop for correct?

Return to Top
TRID - TILA/RESPA Integrated Disclosures Rule
#2267634 - 03/14/22 10:03 PM Re: Borrower doesn't choose provider terpsfan
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
If the lender chooses the provider, then it is in the 10% aggregate test whether ihey are on the list or not.


Official Interpretation
19(e)(3)(ii) Limited increases permitted for certain charges.
3. Services for which the consumer may, but does not, select a settlement service provider. Good faith is determined pursuant to § 1026.19(e)(3)(ii), instead of § 1026.19(e)(3)(i), if the creditor permits the consumer to shop for a settlement service provider, consistent with § 1026.19(e)(1)(vi)(A). Section 1026.19(e)(3)(ii) provides that if the creditor requires a service in connection with the mortgage loan transaction, and permits the consumer to shop for that service consistent with § 1026.19(e)(1)(vi), but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to § 1026.19(e)(3)(ii), instead of § 1026.19(e)(3)(i). For example, if, in the disclosures provided pursuant to §§ 1026.19(e)(1)(i) and 1026.37(f)(3), a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to § 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of § 1026.19(e)(3)(ii). I
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2268111 - 03/23/22 04:17 PM Re: Borrower doesn't choose provider terpsfan
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,349
How can the lender even chose a provider that's not on their list???
The whole idea of the list is to tell the borrower who the creditor is going to use if the borrower doesn't chose to use someone else.

Return to Top
#2268192 - 03/24/22 08:20 PM Re: Borrower doesn't choose provider terpsfan
Jen J Offline
100 Club
Joined: Dec 2015
Posts: 138
I get where terpsfan is coming from. There are two challenges here: tolerance and which section (B or C) to put the provider in on the CD. Unfortunately, these things do not line up exactly.

Randy already hit the tolerance piece. If the borrower didn't shop, it's a 10% tolerance item.

The correct section on the CD is a little more convoluted in my opinion. It would make sense that the provider should be listed in section B if the borrower did NOT shop, but we found out that's not how the examiners are handling it. We received "clarification" wink from the FDIC on this recently. They made it clear that the provider only goes in section B if it is on the settlement service providers list. If the provider is not on the list, it goes in section C, even if the borrower chose not to shop.

Why would the bank choose a settlement service provider that is not on the list? I think it goes back to when TRID first came out. At that time, it was common to hear the advice, "only put one provider per service on your settlement service providers list so anyone used outside that list would be subject to unlimited tolerance." That was a misinterpretation corrected by the section of Reg Z Randy quoted above. Reg Z makes it clear that unlimited tolerance does not apply if the borrower allows the bank to select a service provider. Unfortunately, many banks (mine included) have continued to list only one provider for each service on the settlement service providers list despite the fact that there are three to four title companies we work with on a regular basis.

So, to sum up, if the borrower does not have a preference and the creditor selects a provider not on the list:
1. 10% tolerance
2. Section C on the Closing Disclosure (per the FDIC.)

Return to Top
#2268194 - 03/24/22 08:32 PM Re: Borrower doesn't choose provider terpsfan
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
Unfortunately, the FDIC has absolutely no power to interpret TRID. That is left solely to the CFPB. So, unless you have contacted the CFPB and talked this over with the CFPB attorneys, you are free to follow whatever your specific exam crew told you, but I would hesitate for any other lender to do so.

I would also like to add that I doubt you can get any LOS to treat fees that are entered in Section C as subject to the 10% aggregate tolerance, so that would all be manual.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2268195 - 03/24/22 08:36 PM Re: Borrower doesn't choose provider terpsfan
Jen J Offline
100 Club
Joined: Dec 2015
Posts: 138
Good point, Randy. Thank you for pointing that out. I personally did not agree with the FDIC's interpretation, but it was not a hill I was ready to die on.

Return to Top
#2268265 - 03/28/22 01:47 PM Re: Borrower doesn't choose provider terpsfan
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,616
I can see the FDIC's point, but as Randy said you would probably have to trick the system. The CD guidance does refer back to a part of Reg. Z for Section B that only mentions that the borrower was permitted to shop, not that they actually did shop.

[(2) Services borrower did not shop for. Under the subheading “Services Borrower Did Not Shop For” and in the applicable columns as described in paragraph (f) of this section, an itemization of the services and corresponding costs for each of the settlement services required by the creditor for which the consumer did not shop in accordance with § 1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker, the name of the person ultimately receiving the payment for each such amount, and the total of all such itemized amounts that are designated borrower-paid at or before closing. Items that were disclosed pursuant to § 1026.37(f)(3) must be disclosed under this paragraph (f)(2) if the consumer was provided a written list of settlement service providers under § 1026.19(e)(1)(vi)(C) and the consumer selected a settlement service provider contained on that written list.]

As far as the tolerance, if a creditor cares about it, then they shouldn't be selecting providers not on their list when the borrower chooses not to pick.

Return to Top
#2268267 - 03/28/22 01:53 PM Re: Borrower doesn't choose provider Compliance NABW
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
Originally Posted by Compliance NABW
As far as the tolerance, if a creditor cares about it, then they shouldn't be selecting providers not on their list when the borrower chooses not to pick.

It doesn't matter who the creditor chooses, whether on their provider list or not, the services would be subject to the 10% tolerance test either way.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2268272 - 03/28/22 03:13 PM Re: Borrower doesn't choose provider terpsfan
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,349
I agree with Randy's 10% tolerance/Section B determination. But I'm still struggling with the bank choosing a provider not on their SSPL. To me, that smacks of not disclosing in good faith. You told the borrower the cost shown on the LE came from using Provider X. But then you go and chose Provider Z?

If you use multiple title companies, then list them all on the SSPL and make sure their fees are the same across the board. If the fees differ by title company, how do you justify charging one borrower more/less than another based on what I assume is a rotational use of title companies?

Return to Top
#2268280 - 03/28/22 04:55 PM Re: Borrower doesn't choose provider rlcarey
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,616
Originally Posted by rlcarey
Originally Posted by Compliance NABW
As far as the tolerance, if a creditor cares about it, then they shouldn't be selecting providers not on their list when the borrower chooses not to pick.

It doesn't matter who the creditor chooses, whether on their provider list or not, the services would be subject to the 10% tolerance test either way.

Yes, I was agreeing. I was saying in an off handed way that it would be stupid to select the provider that wasn't used for the estimates on the initial LE.

Return to Top
#2268282 - 03/28/22 05:03 PM Re: Borrower doesn't choose provider terpsfan
Jen J Offline
100 Club
Joined: Dec 2015
Posts: 138
There is no difference in fees between the title companies we use regularly. We plan to update our settlement service providers list with all four options in the near future.

Return to Top
#2268285 - 03/28/22 05:46 PM Re: Borrower doesn't choose provider terpsfan
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
If there is no difference in the fees - why bother. It just means that you need to routinely follow up with all title companies to make sure you have the most recent charges. It is a waste of time and effort to include more than one.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2268308 - 03/28/22 08:34 PM Re: Borrower doesn't choose provider rlcarey
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,616
Originally Posted by rlcarey
If there is no difference in the fees - why bother. It just means that you need to routinely follow up with all title companies to make sure you have the most recent charges. It is a waste of time and effort to include more than one.

Agree

Return to Top