Spring-Summer 2018 Hot Topics – South Carolina Is “On The Prowl” Regarding Adherence To The Attorney-Insurance Preference Requirement!

Last year, the South Carolina Board of Financial Institutions, Consumer Finance Division issued guidance on the attorney-insurance preference disclosure. Creditors need to beware that the Department is “on the prowl” looking to enforce the requirement! For consumer purpose mortgage loans, the creditor must ascertain [prior to closing] the borrower’s attorney and insurance agent preferences. The creditor must comply with such preference. There is a safe harbor if the form provided to borrowers is substantially similar to the Department’s sample form and is fully completed, signed and dated by the borrowers.

A creditor has complied with the disclosure requirement when the form is complete with requested selection information, signed by the borrower(s) and dated. In the event the selection information is not present on the form during state examinations, creditors must provide documented proof to substantiate that the borrower affirmatively selected his own legal and insurance service providers. Such selections are not to be communicated to creditors via third-parties (i.e. realtors, and MLOs). Notes in companies’ systems are not sufficient to verify that borrowers chose the legal and insurance agents, absent any influence from outside sources. Information should only be obtained directly from the borrower.

Provider information from borrowers is acceptable in the following situations in lieu of the model form being fully completed by the borrower as long as:

• The e-mailed information from the borrower displays a clear e-mail address associated with the borrower;
• The e-mail is received after the date the borrower received and signed the notice;
• The e-mail clearly indicates the borrower’s wish to employ the attorney/insurance agent;
• The attorney/insurance agent is specifically identified in the email; and
• The attorney/insurance agent indicated in the e-mail is actually utilized.

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