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When providing a written list of settlement service providers to the borrower of a residential loan, do we have to customize the list for each transaction or can we use a generic list for all transactions? For example, if our generic list indicates that a pest inspection is a service that the borrower can shop for and that it is required, but it is not required for a particular transaction, is that a violation? Also, if we list a surveyor in the provider list but do not disclose that service as a service the borrower can shop for in the Loan Estimate under “C. Services You Can Shop For,” is that a violation?

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We recommend against using a generic written list of service providers for all your residential loan transactions. Both examples you provide highlight the potential problems in using a generic list.

In your first example, a generic written list of service providers would reference a service — pest inspection — that is not required for the particular transaction. We believe including this service would violate Regulation Z, which states that the written list of service providers should include services “required by” the lender and disclosed as required settlement services in the Loan Estimate. You effectively would be listing pest inspection as a required service, which it is not, while potentially misleading a borrower into unnecessarily spending money on a pest inspection.

In your second example, a generic written list of providers for services which the borrower may shop would include a service — surveying — for which the borrower may not shop. Regulation Z requires the written list of providers for services which the borrower may shop to correspond with the services listed in the Loan Estimate under “C. Services You Can Shop For.” As noted in your question, you do not list surveying services in Section C of the Loan Estimate.

Note that Section C of the Loan Estimate also should be customized so that it provides information on services that is specific to each transaction (as should most of the information provided in the Loan Estimate). For example, if a borrower may shop for surveying services, that service should be listed in Section C.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.19(e)(1)(vi)(C) (“(C) Written list of providers. If the consumer is permitted to shop for a settlement service, the creditor shall provide the consumer with a written list identifying available providers of that settlement service and stating that the consumer may choose a different provider for that service. The creditor must identify at least one available provider for each settlement service for which the consumer is permitted to shop. The creditor shall provide this written list of settlement service providers separately from the disclosures required by paragraph (e)(1)(i) of this section but in accordance with the timing requirements in paragraph (e)(1)(iii) of this section.”)
  • Regulation Z, Official Interpretations, Paragraph 19(e)(1)(vi), Comment 3 (“Written list of providers. If the creditor permits the consumer to shop for a settlement service it requires, § 1026.19(e)(1)(vi)(C) requires the creditor to provide the consumer with a written list identifying at least one available provider of that service and stating that the consumer may choose a different provider for that service. The settlement service providers identified on the written list required by § 1026.19(e)(1)(vi)(C) must correspond to the required settlement services for which the consumer may shop, disclosed under § 1026.37(f)(3). . . .”)
  • Regulation Z, Official Interpretations, Paragraph 37(f)(3), Comment 1 (“Items included under the subheading ‘Services You Can Shop For’ pursuant to § 1026.37(f)(3) are for those services: That the creditor requires in connection with its decision to make the loan