A recent interview on Marketplace at publicradio.org again highlights the biggest issues in the title insurance industry. In the interview Tess Vigeland talks to LA Times reporter Scott Wilson about the problems in title insurance. Some of the highlights.
Discussion on Pricing
"Vigeland: So, what do people want to see happen? Should there be some national standard for what we're paying on title insurance?"
"Wilson: One of the key things that needs to be addressed is kickbacks. There's a history in the title insurance industry of paying kickbacks to real estate agents, lenders and builders to bring customers. Those kickbacks can be cash. They can be gifts. Sometimes they're concert tickets, trips and so forth and those actually drive the price up rather than having price competition drive it down, so the consumer ends up paying for all those kickbacks. It's an illegal practice and it's widespread."
And on how it can be fixed
"Vigeland: And that would be, for example, you're using a certain real estate company and when you get to closing on the house, you are using whatever title insurance company they tell you to?"
"Wilson: Exactly. The consumer rarely chooses the title insurance company that they're using. If you're buying an existing house, you use the one your real estate agent chooses. If you're refinancing, it's the lender that chooses. If you're buying a new house, it's the builder."
"Vigeland: You have no legal obligation to go with that title insurance company that works with your real estate company?"
"Wilson: Federal law gives you the right to choose your own title insurance company, though sometimes the pressure is so heavy, it's hard for consumers to realize that."
There are some other good points (as well as a few that I don't necessarily agree with. You can read the transcripts here. The more the mainstream press discusses these issues the sooner the general public will understand that they do have a choice and should exercise that right.
5 comments:
The Solution. A National Law that states that if you are fiduciary, or your employer, or broker, etc... are fiduciaries and your clients rely upon your advice or your employer, broker, etc.., then it is illegal to own an ancillary business for which you refer your clients or get paid any kind of incentive in exchange for referring business to any sort of ancillary business.
The law already exists in most states and it is called Commercial Bribery. We need a national law with stiffer penalties for Realtors, Loan Officers, and attornies.
The law needs to be a criminal statute with heavy penalties. Enough penalties to pay for the investigation and legal fees of prosecuting.
Here in Oregon, we're heavily regulated.
Generally, there are no kickbacks, and we have set rates we charge for title insurance that each title company must follow. The escrow fees have a filed minimum that we must be above, and most escrow officers stay pretty close to that as the competition demands it.
We (as marketing reps) have daily spending limits that we must stick with. They raised it this year to $2.70 cents(roughly) that we can give to each person as an "item of value" wether that be leads, or candy bars, pens, or bagels.
Lunches and other marketing events have limits as well. Roughly $12 per person.
So, if all the other states would play by these same rules, that would pretty much solve the problem, as it has here in Oregon.
We still hear people trying to bend the rules and find loopholes, but it's becoming less common as people accept that we needed something like this to even the playing field.
I am president of an underwritten title agency, and honestly the large national underwriters have done this to our industry. The title marketing rep that talks about a 2.70 per day budget is not telling the whole truth. 2.70 per day X 250 agents X 365 days per year = that is an easy 200K per year per RE office, but to get that all of your business must come to FirstAm, ORT, Fidelity or associated brands, etc ... If Foley or the other National CEOs would play by the rules not just how can we raise stock price the industry would work so much better
Doug, you are right. The laws are on the books but they are either not enforced or the returns are so high that the fines are just a cost of doing business.
Jeff, the regulations in most states are pretty stringent but the enforcement is not enough a deterrent to eradicate the nefarious actions.
Troy, excellent point. When you look at things at the individual level it does not seem like a big deal. Stepping back and looking at the entire situation paints a much different picture.
I agree that the public needs to be more aware of what is going on. However, my question is, is a reporter for the LA Times the best person to be answering these questions about "what is title insurance". Shouldn't they be interviewing a nonbiased title professional?
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