I’ll call this post a public service message to buyers and sellers of real estate. You always have a choice when it comes to title companies and mortgage lenders. When dealing with a real estate agent they may suggest or recommend a mortgage or title company, but in the end the choice is yours.
When buying new construction, the builder may specify which title company the buyer will use, this is illegal, yet I have seen new construction contracts that come from builders that specify buyers title company. It is still the buyers choice.
It is not unusual for a real estate company to have an ownership interest in a title company, an affiliated business relationship. Both the state of Minnesota and Hud are cracking down on and watching affiliated business arrangements.
Under the federal Real Estate Settlement Procedures Act (RESPA), builders and realty brokers are prohibited from requiring customers to use their own affiliates or subsidiaries for mortgage, title or other settlement-related services. They are also required to use an affiliated business disclosure which names their affiliates.
Here is an excerpt from the standard disclosure: "THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES."
Twitter
Flickr
LinkedIn
Facebook
RSS
Posterous
Email
FourSquare
Yelp
SlideShare
Builders in Northern Virginia have been tying incentives and free options to the use of their mortgage and title companies for years now in an attempt to deal with RESPA. Lately though, builders are coming under increased scrutiny for those pratices as well.
I’m starting to encounter more and more builders who now offer the same incentives and free options to consumers who use their own lender as long as the builder’s lender can not come within a quarter percent of the rate using a similar loan program.
—————————————————————-
I would imagine that an “incentive” could easily become a RESPA Violation. Thanks for stopping by.
Teresa
Baby steps…