Q: On the Service Providers List on my GFE, is the mortgage lender required to disclose more than one provider for attorney, surveyor and pest inspection, or can they just provide one for each service?
A: Real Estate Settlement Procedures Act (RESPA) issues are always thorny to interpret, and the regulations did just change a couple of years ago.
In the instance of providing a list of service providers, it can be a little complicated.
If the lender allows you to shop for certain services, they must provide you with a list of providers at the time of the GFE, according to HUD. That list need only have one firm per shoppable item, and will likely most often be the service provider the lender typically works with. There may be more on the list, but the lender should not be seen as "endorsing" these providers in any way; rather, they merely point out possibilities for you to explore.
If the lender does not allow you to shop for a service, the lender will be bound by a "fee deviance rule," where the fees stated to you in the disclosure can rise by no more than 10 percent from the stated cost on your disclosure.
If the lender allows you to shop, and you pick a provider that is not their preferred service provider, the lender is not bound by the 10 percent fee deviance rule. That is, if a settlement provider the lender prefers charges $500 for a service, your cost will never be more than $550. However, if you choose your own provider, that cost will be whatever the provider charges, and the lender is not responsible for fees which may be higher than those charged by their preferred provider.
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.