Saturday, November 28, 2009

what about lien letters?

I posed the question to an attorney following his presentation on RESPA and here's what he says:

"As to your question, it seems like the lien letters would be something like the title search.  It seems like it would be a necessary component to rendering title and settlement services.  If that is true, then the amount of your reimbursement should be included in the lump sum included on line 1101.  But since this would be a reimbursment as you describe it, then it would be payable to the settlement agent; consequently, it would not be itemized out on line 1109 or thereafter.
Whether or not it is subject to the 10% tolerance or subject to no tolerance at all depends entirely on whether the consumer picked the settlement provider recommended by the loan originator on "the list" accompanying the GFE.  If the consumer picked the settlement provider from the list, then all fees charged by that settlement provider, including the reimbursement you describe, would be--in the aggregate--subject to the 10% tolerance.  If, however, the consumer selected a settlement provider not on "the list", then those fees are subject to no tolerance at all--sky's the limit."

I have to say I agree and I am VERY concerned that lien letters are OFF THE RADAR of mortgage lenders.

In PA local custom dictates who pays for the municipal lien letters.  In the metro Pittsburgh area, Allegheny County and contiguous counties, it's not a problem because the seller pays for lien letters.  Mortgage lenders doing business in the outlying counties may be super surprised when lien letter charges show up in the title services tally.  If it's only $5 for a tax claim certificate, no problem but what if it's $200 bucks including a dye test? That'll knock some out of tolerance.

I'll be chatting with our regular lenders to make certain we're all on the same page.  Frankly, I think this is a good time to start having the sellers cover the cost in all counties.

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