We provide our loan customers with a list of service providers that includes the local office of a national title insurance company. The title insurance company has many locations, and they do not all charge the same fees. If a customer chooses a different location of the company than the one on our list, has that customer “shopped” for the service provider? When this happens, on which sections of the Loan Estimate and Closing Disclosure should we list the services?

Whether your customer has “shopped” for the service provider when they use an office of a national title insurance company other than the one on your list depends on whether the chosen office is a separate legal entity from the one on your list. If the office location chosen by your customer corresponds to a separate legal entity, we believe the customer has “shopped” for the service provider for purposes of Regulation Z.

When we presented this issue to the CFPB in the past, we were advised that whether to treat two separate office locations as the same service provider depends on their corporate structure. If the two offices are part of the same corporate structure, they would be treated as the same provider, meaning the customer did not “shop” for the service. Conversely, if the two offices are separate legal entities — even though they may share the same name — they should be treated as separate providers, meaning your customer “shopped” for the service.

Consequently, you may wish to contact the title insurance offices to determine whether they are part of the same company or operate as separate legal entities.

Loan Estimate:

Under Regulation Z, when a customer is allowed to shop for a settlement service, the lender must provide the customer with a written list identifying at least one available provider for each settlement service for which the customer is permitted to shop. The good faith estimate of the cost of the service should be listed in the “Closing Cost Details” section of the Loan Estate, under subsection C, “Services You Can Shop For.”

Closing Disclosure:

Generally, if a customer picks a service provider that does not appear on your written list, the service and its cost should be listed in the “Closing Cost Details” section of the Closing Disclosure (CD) under subsection C, “Services Borrower Did Shop For.”

For resources related to our guidance, please see:

Regulation Z, 12 CFR 1026.19(e)(1)(vi)(A) (“A creditor permits a consumer to shop for a settlement service if the creditor permits the consumer to select the provider of that service, subject to reasonable requirements.”)

Regulation Z, Official Interpretations, Paragraph 19(e)(1)(vi), Comment 1 (“Permission to shop. Section 1026.19(e)(1)(vi)(A) permits creditors to impose reasonable requirements regarding the qualifications of the provider. For example, the creditor may require that a settlement agent chosen by the consumer must be appropriately licensed in the relevant jurisdiction. In contrast, a creditor does not permit a consumer to shop for purposes of § 1026.19(e)(1)(vi) if the creditor requires the consumer to choose a provider from a list provided by the creditor. Whether the creditor permits the consumer to shop consistent with § 1026.19(e)(1)(vi)(A) is determined based on all the relevant facts and circumstances. The requirements of § 1026.19(e)(1)(vi)(B) and (C) do not apply if the creditor does not permit the consumer to shop consistent with § 1026.19(e)(1)(vi)(A).”)

Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2T (“No person, firm, corporation, partnership or association which may extend credit or make a loan secured by an interest in real estate which is or is to be improved with a single family residence or any residential condominium unit occupied or to be occupied as a principal residence by either the borrower as an individual or, if the borrower is the trustee of a trust, by a beneficiary of that trust, shall require, either directly or indirectly, as a condition precedent to making such loan or extending such credit (a) that any seller, borrower, mortgagor or debtor to whom such money or credit is extended negotiate, obtain or contract for title insurance through a particular insurer, agent or broker; . . .”)

Regulation Z, 12 CFR 1026.19(e)(1)(vi)(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, 12 CFR 1026.37(f)(3), Loan Estimate (“Services You Can Shop For. Under the subheading ‘Services You Can Shop For,’ an itemization of each amount and a subtotal of all such amounts the consumer will pay for settlement services for which the consumer can shop in accordance with §1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker. (i) For any item that is a component of title insurance or is for conducting the closing, the introductory description ‘Title –' shall appear at the beginning of the label for that item.”)

Regulation Z, 12 CFR 1026.38(f)(3), Closing Disclosure (“Services borrower did shop for. Under the subheading ‘Services Borrower Did Shop For’ . . . an itemization of the services and corresponding costs for each of the settlement services required by the creditor for which the consumer shopped in accordance with §1026.19(e)(1)(vi)(A) . . . the name of the person ultimately receiving the payment for each such amount, and the total of all such itemized costs that are designated borrower-paid at or before closing. Items that were disclosed pursuant to § 1026.37(f)(3) must be disclosed under this paragraph (f)(3) if the consumer was provided a written list of settlement service providers under § 1026.19(e)(1)(vi)(C) and the consumer did not select a settlement service provider contained on that written list.

Regulation Z, 12 CFR 1026.38(f)(2),Closing Disclosure (“Services borrower did not shop for. Under the subheading ‘Services Borrower Did Not Shop For’ . . . an itemization of the services and corresponding costs for each of the settlement services required by the creditor for which the consumer did not shop in accordance with § 1026.19(e)(1)(vi)(A) . . . the name of the person ultimately receiving the payment for each such amount, and the total of all such itemized amounts that are designated borrower-paid at or before closing. Items that were disclosed pursuant to § 1026.37(f)(3) must be disclosed under this paragraph (f)(2) if the consumer was provided a written list of settlement service providers under § 1026.19(e)(1)(vi)(C) and the consumer selected a settlement service provider contained on that written list.