TRID Rules: Lenders List

Do you want to be on the list of settlement agents given to borrowers by the lender?

Dear Member,

As we get closer to the implementation date of the new TRID rules, I hope to address very specific topics every week that you find helpful. This week’s topic focuses on whether you want to be on the list of settlement agents given to borrowers by the lender. Similar to current rules, if the consumer selects a provider on the list, that provider’s fees are subject to the 10% in the aggregate variance rule for their fees. (Unless they are affiliated with the lender, in which case there is a 0% variance rule for those fees.)

Déjà vu: this was one of the hottest topics with the 2010 roll out of the HUD/GFE rules. However, members who wanted to be on the list were frustrated by lenders who only wanted the list to reflect providers which were not likely to be chosen; and the GFE rules permitted that to happen! In that way lenders were able to avoid the application of tolerance rules for that service.

The new rules require lenders to list providers who are much more likely to be chosen. For that reason, lenders are much more likely to be receptive to member marketing of settlement services. The lender must provide sufficient information to allow the consumer to contact the provider, such as the name under which the provider does business and the provider's address and telephone number. The lender will also need to provide the settlement agent’s costs and fees.

Bottom line: if you are on the list, the lender will want your fees charged at closing to be exactly the same as what they quoted on the Loan Estimate. They do not want to risk a variance issue.

Here is the rub, however. In most areas in Florida the seller pays for the owner’s title insurance and selects the closing agent. If the borrower selects a different closing agent, then confusion will result because the borrower is going to want the benefit of the simultaneous issue rate for the lender’s policy. I am not sure how all of this is going to shake out.

So it is hard to say whether being on the list is a good thing. This is an area where you need to educate your realtor partners so they know how to guide a buyer in selecting a closing agent.

Different topic: Consider signing up for the free ALTA Webinar: TRID Ready? This Is What It Looks Like on August 27 from 2:00 pm to 3:00 pm EDT. Here is the link: alta.org/titletopics/. See how others in the industry have prepared – lenders, settlement agents and technology folks.

As always, thank you for your support of The Fund!

Best Regards,

Melissa Jay Murphy
Senior Vice President and
General Counsel