We do lots of closings for lots of different lenders. Sometimes we are "on the list" and sometimes we're not. By "on the list" I am referring to the Provider List given to a borrower with the new GFE. When a lender gives a borrower the name of a title service provider, they have to put the provider on the list. This is a referral and when the lender gives a name to a borrower and also gives the borrower a GFE, the lender should be familiar with the fees charged by that provider, and so the rule requires that the figures on the GFE must be subject to the 10% tolerance test. Now, if the borrower goes out and selects a title service provider who was not mentioned by the lender and is not on the list, the lender can't be expected to give any guarantee of pricing.
When we prep the HUD-1, our software prompts us to indicate whether or not we are on the list. If we ARE, then our title services fees are a part of the 10% tolerance calculation. If we are NOT, then our fees are not part of the tolerance.
For the most part, everyone has been on the same page and in the few instances where we have found an intolerance, the lender has done an immediate cure.
Yesterday we had an interesting FIRST. We alerted the lender to an intolerance. The lender's response was that it wasn't a problem because they had over quoted title services and that covered the difference.
The lender did not have our company on the list. Our fees were significantly lower than those quoted on the GFE, however since we were not "on the list" our fees could not be used to offset an under quote of another fee.
We had a bit of a back and forth and asked the lender to take a close look at the RESPA FAQs pages 12-14, with a special emphasis on page 14.
Turns out their compliance team had given them incorrect direction. The supervisor cured the intolerance, thanked us for the help and said they would escalate this up the chain so company policy could be corrected.
If you are in a position prepping HUD-1 forms, please make sure you have read the RESPA FAQs and don't be shy about sharing information with your lender. We always do this in a way that demonstrates we are all on a learning curve. By having discussions about compliance, using the FAQs as a guide, we have often been able to think through scenarios and work out situations together as they are discovered. We are learning from lenders and visa versa. The point is that we should be able to understand clearly what we, lenders and title insurers, are doing and why rather than just taking direction mindlessly.