Settlement/closing and Settlement

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Question:

Settlement/closing fees are calculated in the APR. If the borrower chooses his own settlement company, which is not on our list, and they have a flat rate closing fee that kicks the APR into HPML status, and we don't do HPML, can we require the borrower to use another settlement company?

Answer:

RESPA allows you to reject any provider. However, the basis of RESPA is that you don't believe the provider is qualified. You say "we don't do HPML". I'm not sure how a bank can make this statement. You can try to avoid the HPML threshold, but as you can see, you're caught in a tough situation because of this practice. I don't feel comfortable saying you can require the borrower to use another settlement company just because you want to avoid a consumer protection requirement.

First published on BankersOnline.com 8/23/10