RESPA to affect REO?

RESPA to affect REO?

RESPA Section 9 covers the rights of the buyer to choose the title company in a purchase transaction.  Sec. 2608 of RESPA under the heading of Title companies; liability of seller states:

(a)    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, that title insurance covering the property be purchased by the buyer from any particular title company.

(b)    Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

 This obviously not how the REO market has been run in the last several years with Sellers choosing the title company 99.9% of the time.  On the side of the Seller, this has made closing a large volume of transactions much easier since systems are put in place to handle this volume.  Does RESPA agree? 

FNMA must have finally heard this loud and clear because they have now made a dramatic change to their REO addendum on Section 2B, page 1 line 4 to state, “The closing shall be held at a place so designated and approved by the Purchaser.”  I would imagine we will start to see many banks follow FNMA’s lead in the future.  We’ll see…