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07/01/2015

Is Owner’s Title Insurance Subject 10 Percent Tolerance?

Is owner’s title insurance not required by the creditor subject to the 10 percent cumulative tolerance?

According to the CFPB, owner’s title insurance that is not required by the creditor is not subject to the 10 percent tolerance.  The CFPB said it is aware that the preamble to the final rule contains potentially conflicting language, but advises that the final rule text is what should be followed.

The 10 percent tolerance category includes recording fees and charges paid to unaffiliated third-party service providers when the consumer is permitted to shop for a settlement service provider, but chooses a provider from the creditor’s written list of providers (§ 1026.19(e)(3)(ii)).

Owner’s title insurance is not a charge that is assigned to a particular tolerance category.  Therefore, the applicable tolerance category depends on other factors, including whether the creditor requires the insurance and, if so, whether the consumer may shop for the provider of the insurance.

To the extent owner’s title insurance is not required by the creditor and is disclosed as an optional service, under the rule the insurance is not subject to any percentage tolerance limitation, even if paid to an affiliate of the creditor.

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