On the Service Provider List, we list two Settlement Agents (non-affiliates) who can do the closing and write the Lender's Title Insurance Policy. Actually, if those Settlement Agents are chosen by the Borrower, the Title Insurance is written by the Bank's Affiliate (a title insurance company owned by the Bank). The Settlement Agent and the Bank's Affiliate split the fee for writing the insurance per an arrangement (that I am told and have no reason to doubt) that is totally legal in our State. The Affiliate has nothing else to do with the closing of the loan and we do include them on the Affiliated Business Arrangement disclosure.

The issue is that our Affiliate is not listed on the Service Provider List since they only write the insurance if one of the other Providers is chosen. And the fact they issue the insurance policy is not known to the customer. The Affiliate's payment actually comes from the Settlement Agent when they are paid at closing (a pass-through). We do count the Affiliate's portion in our points and fees calculation for Ability to Repay.

How, if at all, should we disclose the fact the Affiliate is involved on the LE, Service Provider List, and CD. Also, at this point, we are thinking that their fees and charges are subject to zero tolerance.

Any thoughts and assistance is appreciated. Thank you!

Since you cannot afford to be wrong on any of this, I suggest you engage competent legal counsel to sort through the issues.