I had an interesting discussion come up on an e-mail group I participate in. I have more respect for the expertise here and would like to get some thoughts. Here is the question:

Lender provides the name of a title company on their SSPL. Applicant does not shop. The title company farms out some of the services to sub-contractors to fulfill other title services. The sub-contractors are not on lender’s SSPL, but applicant were not able to shop for these services. Where should lender disclose fees performed by the subcontractors? In Box B or Box C of the Closing Disclosure?

My thoughts are that if the applicant shopped for the Title company, they shopped for all services that the title company farmed out and should be reflected in Box C of the Closing Disclosure. If applicant did not shop, then all services that the title company farmed out are considered to be ‘Did Not Shop’ for and be placed in Box B…even though those sub-contractors were not on the lender’s SSPL.
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This was my post in response:

For CD purposes you have to display the end recipient of the charge, so it is correct to disclose the sub-contracted companies. I would hazard to say though that if the lender knows they contract out these certain services, then they should be listing those companies as providers for said services. In essence, it could be looked upon as that your SSPL is not compliant, because your selected provider can't actually provide the service you are listing. I wanted to be brief on this, but the more I think about it, the more I have an issue with it. I see it as similar to, let's say you list me as a Radon inspection provider. I don't actually perform Radon inspections myself, I actually just do well inspections, but I can contract out the Radon inspection to another party, and maybe get a piece of the action for doing so. In essence, I'm not actually able to provide the service (Radon inspection) that I was listed on your SSPL for. That's problematic to me. I agree with the disclosure placement based on what you have stated, I don't see how you would do it otherwise, but I believe your SSPL might be an issue in these situations. The SSPL should flow to the services on the initial LE. If you are saying XYZ title can perform the Title - Closing Letter fee or whatever, then they should be able to provide that service. Otherwise, you should list the subcontractor who can actually perform that service on the SSPL.

Thoughts???

but I can contract out the Radon inspection to another party, and maybe get a piece of the action for doing so.

Section 8 violation.

This is sort of a grey area that the CFPB has not really addressed. The title company might charge a doc prep fee - maybe they don't have an attorney on staff, so they have Joe Esquire complete the docs and pay Joe the doc prep fee. I am really not too sure how deep you have to drill down. You cut the check to the title company for the service - not sure if you have to drill down to the second or third layer. They might charge a overnight fee - do you list Fed Ex or USPS or Joe Courier for running docs back and forth. You could take this to the nth degree. I don't think it is worth losing much sleep unless the information is readily available through the documents or invoices in the file then you are going to have to make a business decision as to how you want to handle.

Yeah, I was thinking of the RESPA issue when I wrote it, lol. But, just trying to show an example.

It's a tough call. Generally, I do see the Overnight fee or Courier Fee listed separately and shown and Fed EX/USPS, etc., but I understand your point. Thanks for the input.