[belandis]

We have an affiliate title company, which means that they fall into the zero tolerance category. If a borrower elects to use the title company, then the title company issues the title insurance, but outsources the title exam to another attorney (generally in the market where the property is located). The title company issues an invoice that breaks down the amount owed for the title insurance and title exam. A single payment is made to the title company, which in turn cuts a check to the attorney for the title exam work. Since the title company does not retain anything for the title exam, can this amount be considered in the 10 percent or permitted variance category (depending on whether shopping occurred)?

Also, sometimes there is a municipal tax associated with the title insurance. This is paid to the title company, but again, is passed through to the appropriate municipality. Could this be considered outside of the zero tolerance category? We are trying to figure out where/how to show this on the loan estimate since the percentage varies depending on the municipality.

Topic

[rcooper]

Even though the title company then pays another unaffiliated provider for certain services it must still be considered paid to an affiliate since that is who the payment is going to. Here is information from the preamble.

From the preamble to the final rule:
p. 345:
Lastly, the Bureau received requests from some title company
commenters that sought an exemption from the proposed general rule with respect to the
treatment of payments that affiliated title companies receive at closing that are disbursed to service providers not affiliated with the lender as payment for services performed by the unaffiliated service providers on behalf of the affiliated title companies.

p. 350
The Bureau also declines to modify the rule to provide an exemption for payments that affiliated title companies receive at closing that are then disbursed to unaffiliated service providers as payment for services performed by the unaffiliated service providers on behalf of the affiliated title companies. If a lender requires a consumer to use an affiliated company for title services, then the fees the consumer pays to the affiliate company should be subject to zero percent tolerance, even if the affiliate uses vendors to perform the title services.

[belandis]

I’m a little confused by the last sentence of the excerpt from pg. 350 of the preamble above that says “if a lender requires a consumer to use an affiliated company for title services”. We do not require the use of our title company (didn’t think we were allowed to). Title services can be shopped for and we list our title company on our Service Provider List. I’m guessing that it still ends up in the zero tolerance category. If the bank started paying for title work instead of the title company, then it would not be subject to the zero tolerance category. Correct?

[rcooper]

belandis – I’m not sure I understand your last question. Can you give me a scenario or more details?

[belandis]

To clarify, if the bank paid the attorney directly for the title work instead of through the title company, then the amount would not be subject to the zero tolerance category since it’s not paid to an affiliate.

[rcooper]

I agree. Assuming the fee isn’t paid to an affiliate, the bank is passing the fee along, and you have permitted the borrower to shop the fee would be subject to the 10% tolerance.

[jholzknecht]

Great conversation. I hope all of our members with affiliates read this.

[jholzknecht]

Great conversation. I hope all of our members with affiliates read this.

[Author]

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