Charge listed in wrong section of CD

The charge for a pest inspection was placed in Section B and should have been in section C. Does this require a corrective CD?

If this is a portfolio loan, at this stage of the game, if you are going to allow the consumer to shop, I see no real reason that you could not do that. Just note the file that an error was made and you wanted to let the consumer to shop for the service. If this is an investor loan, you need to check with the investor if making the change will impact salability. I also assume, the pest inspection is a requirement to obtain the loan.

It is a portfolio loan and we do not require a pest inspection.

Then it would not go in either Section B or C.

So then I'm guessing the only other section it could go would be Section H (Other) since its not required?

If you are aware that the consumer is going to obtain a pest inspection, that would be correct. If you are not aware that they are, it does not go on the LE.

I'm going to alter the question a little. We list three pest inspectors and three surveyors on our service providers list even though neither one is routinely required to obtain credit. Chief Loan Officer wanted to leave these on the list incase one of the services is needed based on the property. Since we list them anyway and a customer chooses a pest inspection on their own, does it still go in H or B-C based on who they chose?

This seems harder than it should be.

If it is not a service required by the lender as a condition of making the loan (such as an appraisal or title work), it goes in H. If the bank determines that it's required, but as a shoppable service, it goes in C on the LE.

So it goes in H no matter if we list it or not as long as we are not requiring the service in order to obtain credit.

Thanks for the help.

We list three pest inspectors and three surveyors on our service providers list even though neither one is routinely required to obtain credit.

If charges for these services are not listed on the LE, then you can't list providers for non-existent services on your provider list.

Randy's right. Part of comment 19(e)(1)(vi)-3 reads: "The settlement service providers identified on the written list required by § 1026.19(e)(vi)(C) must correspond to the settlement services for which the consumer may shop, disclosed pursuant to § 1026.37(f)(3)."

Just a head's up,but we experienced the same problem. Title work fees were moving from C to B. I finally detemined that what was making them move was the loan processor selecting the check box--"Providor selected from Lender's List."

After a short conversation with our examiners, I was told to call our loan processing vendor and inform them of the error.

However, the vendor informed me that if the customer chooses the lawyer from our list, then they were not actually "shopping".

I made a quick call back to my examiners who performed more research and came back with the same conclusion.

This has me dumbfounded. However, after several discussions with our examiners and the OBA, we have continued to allow the title fees to move to B.

I'm not sure why anyone is dumbfounded, it is stated plainly in the regulations that the required services to obtain the loan provided by a provider on the lender's list moves to Section B:

1026.38(f)(2) 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.

Welcome to the BOL Forums, mccurtain03,

I guess what's confusing me are the headings. Did shop for and Did Not shop for. We do not require a specific lawyer, therefore our customer is able to shop for the lawyer that they would like to perform the title work. However, if they choose one that happens to be on our list, they aren't actually "shopping"? I was under the assumption that we were providing them the list in order to help the customer "shop" for certain services?

Thanks!

I've been a member for several years, just not under this username. The bank changed e-mail hosts and I no longer have access to my old e-mail. I wasn't much on posting back then, so I'm not losing much.

mccurtain03, you were under the wrong assumption.
You're not providing the borrower with a shopping list.
You're providing them with the name of the provider that will do the job at the fee you show on the LE.
If they chose that provider, you did the shopping for them.
The only time the borrower actually 'shops' is if they go out and find a provider you do not have on your list.

I'm bringing this topic back up to see how to perform a little CYA here. I passed along the info from above that if we do not require a service to obtain credit, that service can not be listed on the providers list. Our Chief Lending Officer said that he "never said never" that we would never require these services and instructed our Loan Ops to list things like pest inspection, home inspection, and survey on the providers list although we don't require them per policy. What would be the ramifications of this? Possible UDAAP?

Not a UDAAP, but a definite regulatory violation. Now, it would be one that the bank had knowledge of and failed to take corrective action. While it is a stretch for something as petty as this, a knowing violation that is allowed to continue does bring about the possibility of a cease and desist and CMPs.

One more follow up question, we don't require a home inspection, but the purchase and sale agreement has it listed. Would we list the home inspection fee estimate in Section H WITHOUT the word optional, since its a condition of the purchase and sale agreement? Or would we include the word Optional, since it's not required by us the lender?

Yes. If the borrower has contracted to pay and the creditor does not require, the designation of 'optional' is appropriate.

the designation of 'optional' is appropriate.

What is this statement based on??

The regulation calls for the "(optional)" tag to be added to the description of "items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products" -- for example, OTI, which isn't required by the lender for completion of the transaction even though it may be required under the purchase agreement. There's no provision in the rule or commentary suggesting the use of "(optional)" for other costs.

I read this 3 times and missed 'not' in the commentary. My mistake.

(ii) The parenthetical description “(optional)” shall appear at the end of the label for items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products.

Commentary 4. .... Although the consumer is obligated for these costs, they are not imposed upon the consumer by the creditor or loan originator. Therefore, they are not disclosed with the parenthetical description “(optional)” at the end of the label for the item, and they are disclosed pursuant to § 1026.37(g) rather than § 1026.37(f).

Along the similar lines of what category a fee falls under, I also have a question. We disclosed an appraisal fee to be completed by an outside appraiser on a loan estimate. We are unable to get an appraiser (listed on our appraisers list) to do the appraisal for property outside our area. We are sending out an internal appraiser. On the LE we listed the fee in Closing Costs "B" as a service that the customer could not shop for. On the Closing Disclosure it will be listed in "A" as a charge paid to the Bank. I know these are both in the category where there is no tolerance, but does that mean per line item? The 10% tolerance states "cumulative" but the no tolerance guidance does not. I am getting varying opinions from different sources. I have got to be over thinking this!

0% tolerance items are by line item.