Friday, July 22, 2011

title/settlement agents and the RESPA GFE provider list

We have a major national lender generating GFEs [Good Faith Estimate] on a computer model which creates a provider list containing ONLY their affiliated companies.  There is no option for a loan officer to ADD referrals to non-affiliated providers.  This wouldn't be an issue except that loan officers employed by this lender are making referrals to other providers and have no way to create a compliant GFE provider list.

Why would a consumer care?  Well, if a lender gives a consumer a referral to a provider and the consumer chooses to use the referred company, then the lender has an obligation to have given the consumer correct quotation of fees on the GFE.  RESPA rules further require the lender to back up that quotation with a 10% tolerance test and payment of a cure if they give a less than adequate quote to the consumer.

It's important to the consumer to have a record of the referral and the official record is the provider list which is part of the GFE.  If a loan officer gives a verbal referral and makes an error in the quotation on the GFE causing the consumer to pay more than they anticipated, the consumer may have trouble getting a RESPA cure if the lender has no evidence that the loan officer made the referral, right?

So, what do YOU do as a title/settlement agent when you prep a HUD and you know the loan officer referred the consumer to your office BUT you do not appear on the GFE provider list?

We take the position that if we are not on the list, we were not referred.  If the lender insists that we place the fees in the referred section of the HUD, we will comply since the act is in favor of the consumer.  We want them to put their instructions in writing and we will make notes regarding the provider list in our file in case of an audit.  Bottom line, the mortgage lender is responsible for compliance with RESPA.

My advice to consumers is to pay careful attention to the GFE provider list and if your loan officer is sending you to a company whose name is NOT on the GFE provider list, insist that the company be added to the list. This is your only evidence of the referral and will serve to help you if there is a misquote of services and you hope to hold your mortgage lender responsible.

Many lenders do not make referrals and leave the shopping of services entirely up to you.  That's OKAY - in fact that can be good for consumers because it makes you engage in the selection process and may help you understand the services your are purchasing.  In cases where the mortgage lender does not make any referrals, there will not be a provider list attached to your GFE.

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