ISSUE:

Can the seller choose the title company provided that the seller pays for the buyer’s owner’s title policy and not require that the buyer purchase their lender’s title policy from the same title company?

ANSWER:

See Discussion.

DISCUSSION:

Section 9 of RESPA provides: “No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, which title insurance covering the property be purchased by the buyer from any particular title company.” See 12 U.S.C. § 2608.

The Department of Housing and Urban Development (HUD) has indicated that it will not enforce Section 9 of RESPA against a seller who selects the title insurance company if the seller is paying for the owner’s title insurance policy and does not require the buyer to use the title insurance company for the simultaneously issued lender’s policy. HUD would take action under Section 9, however, in situations where a seller required a buyer to pay the seller an amount towards closing costs and the seller used a portion of the buyer’s paid closing costs for the owner’s title insurance without providing the buyer with a choice of that title company.