Tuesday, July 26, 2011

required use and affiliated title agencies

There is a title insurance agency in Pennsylvania called Bankers Settlement.  It's owned by several community banks.  We do closings and title insurance on occasion for some of these community banks. Though they may not send us direct referrals, if a consumer wants to use The Closing Specialists, that's always been okay. Since our advertising is consumer focused and we have a terrific deal in our Choose and Save Program, consumers often call us directly to shop for services.

One of the affiliated banks, S & T Bank, is now refusing to give consumers the option to use any other title insurance agency.  This was confirmed yesterday when a consumer who wanted to use Choose and Save called his loan officer and was told they don't do business with The Closing Specialists.  I called the mortgage department and queried the reasoning and was told flat out that they require all borrowers to use Bankers Settlement.  I said to the fellow that they can't require use of an affiliate.  He said their attorney looked into it and disagrees with me.
Hmmmm.....I have a call into the manager at Bankers Settlement.  I have no beef with them but I am hopeful that he can resolve this crazy situation.  Will report back.  ;)


Diane Cipa said...

Have received a friendly response from management at Bankers Settlement. They are taking the matter to the compliance department of S & T Bank.

Diane Cipa said...

This is the email I sent to the title agency with a copy to the bank and CFPB.

"Following your raising the matter with S & T Bank's compliance team I received a phone call from Joanne Duggan of S & T Bank to clarify their position. She stated unequivocally that they do not require use of Bankers Settlement. They do, however, maintain an approved provider list. Their criteria for approval to be on the list is that the provider sign up with Bankers Settlement. They are of the opinion that requiring providers be a part of their affiliated title insurance agency - Bankers Settlement - is not a RESPA violation.

I really don't see how this all works within the presentation of the Good Faith Estimate which clearly is meant to encourage consumer shopping. If the only options given to the S & T Bank borrower is to select from the list of providers and these providers are all required to be participants in the Bankers Settlement program, how likely is it that a consumer would shop in such a way that they might end up anywhere other than at Bankers Settlement. At face this appears to be an indirect method of requiring use. In addition, the exclusive membership on the provider list being tied directly to participation in Banker Settlement is a disturbing quid pro quo and steering program which is not transparent nor likely to be understood by the consumer.

So, there's my two cents, Rick. I realize you are not in a position to overrule the legal advice S & T Bank has been given by their compliance counsel. I am, however, bringing the program to the attention of the RESPA staff at CFPB with these emails. S & T Bank is a large regional bank and serves many consumers. As CFPB rules are created for examination, having real world examples of conflicting opinions of compliance may be helpful."

Diane Cipa said...

Happy to report we received this consumer's Choose and Save order this morning. He opted to take a HELOC on another property an so our transaction is CASH and his bank has no control over his purchase transaction. ;)