Title Insurance has turned into a great big scam. I would never buy a house without it, but the premiums are inflated beyond belief, there is collusion and kickbacks between the real estate agents and the title insurance companies, and the homebuyer is essentially getting ripped off..
You do not believe me, well the Washington Post did an article on it and here are some examples they found.
In Colorado, said Erin Toll, that state’s deputy insurance commissioner, “the pervasiveness of kickback schemes in the residential real estate process has created a black market that makes it impossible for those who play by the rules to compete. The cost of providing kickbacks is passed on to consumers and rolled into” the premiums consumers are charged. Toll said the situation is similar in other states, based on her observations as co-chairperson of a National Association of Insurance Commissioners task force examining title insurance practices.
• An independent title insurance agent from Minneapolis, Douglas Miller, president and CEO of Title One Inc., testified that in Minnesota, “the title insurance industry and the real estate industry have locked up almost the entire marketplace through controlled business schemes.” The arrangements take varying forms, Miller said, but they all add up to the same result: “steering real estate consumers into overpriced ancillary services for secret profits.” Miller’s firm refuses to take part in joint ventures with realty brokers or lenders and, despite charging what Miller said are the lowest premiums in the area, it struggles to attract business from home buyers. Since he doesn’t play the premium-sharing game, realty agents and mortgage companies don’t send customers his way.
• State insurance commissioners nationwide recently have levied close to $50 million in fines and penalties against title insurers and title agencies for illegal kickbacks. In Colorado alone, $25 million has been returned to consumers. In California, three large insurers paid $12.5 million to settle charges alleging illegal kickbacks and referral fees.
• At the federal level, regulators have uncovered dozens of kickback and “sham” title agencies that exist solely to funnel referral payments back to realty brokers, loan officers and builders. Gary Cunningham, deputy assistant secretary for housing, told the hearing about a $675,000 settlement recently with an unnamed home builder that used its own affiliated title company to illegally split consumers’ title premiums with a major title insurance company.
So, how do the players representatives respond? Take a look.
The president of the National Association of Realtors, Thomas Stevens, said his industry is “greatly concerned” by allegations of hanky-panky between title agents and realty brokers. Joint ventures involving realty firms and title agencies typically are bona fide, law-abiding business arrangements that benefit consumers, he testified. Realtors who “establish joint ventures with title companies do so in order to offer clients the convenience of on-site services, bring efficiency to the transaction and ensure a smooth and timely closing.”
What should you as a consumer take away from the hearing testimony? You might start by considering what J. Robert Hunter, former Texas insurance commissioner and currently insurance director for the Consumer Federation of America, had to say: Title insurance is grossly overpriced in most parts of the country. Only one state — Iowa — has banned the sale of private title insurance altogether and replaced it with a state-administered insurance fund. Guess what? Title premiums there are “less than half” what they cost elsewhere, Hunter said — and there no kickbacks, splits or skullduggery. Via The Star Tribune.
{ 7 comments… read them below or add one }
I am in the Real Estate business in Texas and I happen to know for a fact that any kickbacks offered to agents or brokers in Texas is strictly forbidden. Title Insurance companies are not allowed to do anything for Real Estate professionals that is not a paid service by the agent or broker, in other words they cannot offer to do something for an agent or broker that that agent or broker does not pay for. In other words no kickbacks or rewards for referrals. Also title companies set their fees and agents or brokers have nothing to do with it.
I too am a realtor in Texas and agree with everything Jackie said! Not happening here to my knowledge.
Hello! Just a note here from Washington State. We too are regulated by law and there are no kickbacks or rebates paid that I know of or have ever heard of. Once in awhile, the title reps come around and give everyone a pen or a pad of sticky notes, but that’s it. I can’t believe that this sways anyone to use their company over another one.
I’m happy to say that there’s no fraud here in Washington!
OK, Pollyanna, it’s good to know that all is well and right in the States of Texas and Washington, but being involved in the real estate industry in Texas, I have seen some questionable practices and I wouldn’t be surprised to find same in Washington.
I own a title agency in Ohio, where joint ventures are permitted. When that happened, my marketshare was immediately decreased by 60% – 70%. I haven’t seen one of the joint ventures who weren’t violating the regulations. They all basically REQUIRE their title company to be used by coaching the consumer to say that they want their joint venture company. Few use disclosures and consumers don’t understand what they’re for anyway. The JVs are NOT in the best interest of the consumer because they are no longer a neutral party looking out for the best interest of everyone. They obviously look out for the interest of the owners of the Joint Venture. Once the deals are closed, if the consumer has an issue, they’re told by the Joint Venture company to take them to court. A consumer who has been overcharged $400, for example, will not spend $1,000 to take the joint venture company to court. Further, the service provided by the joint venture companies is horrible, but apparantly it doesn’t matter. As far as title insurance rates being too high, I would have to disagree with that too. If I paid escrow closers $7.00 an hour, I might be able to cut my fees, but I prefer to pay very good quality people who care, because we do care about the consumer and they should be taken care of professionally and with care. My customers are very service oriented people, and they are getting fed up having to fight over the title company. They try, but when the other agent is in a JV, the other agent fights much harder. Joint Ventures need to be stopped in the real estate industry immediately.
I know for a fact that tile companies in Texas are doing it. what they will do is “sell stock” of the tile company to realtors and then they pay kickbacks to the agents. It is a sham and theyhave found a loophole to pay kickbacks. Frontier Title in Katy, tx does this.
Delaid closings happen all to often. Many times it’s because of mistakes in paperwork. Make sure you either hire your own attorney for a second opinion, or, read every last word in the mountain of documents that will be placed in front of you to sign at closing. Read first, sign second, even if it takes hours to read. The Today show had a consumer safety advacate guest speaker some months ago and said at least 20% of all R/E closings have mistakes in legal descriptions, property addresses, and many more. Hire your own attorney to review the docs, or, read every last word, especially the legal description, to make sure everything was written correctly. If you don’t review in detail, it could come back to cost you thousands and the title company used will take no responsibility. Fidelity’s “unparalled customer satisfaction” is NOT what I experienced. A one day delay will cost you hundreds, a 62 day delay will cost you thousands. I had several FNT employee’s say, “….this isn’t right…I wouldn’t pay for the mistakes.” I’ve also learned every company has a department good at pointing fingers and blaming someone else. 2 yrs after my loss, an employee of the bank sent me a copy of an email saying he could not insure the transaction because of a title mistake he found. He told no one, but FNT charged me for their services, they got paid and informed no one until it was way to late. Also, when you sign closing documents, sign both sets and have them notarize them both. That way, if they add something after you leave their office, they have to answer to it. They charge to much for their service. With today’s technology, you can easily do your own title search. Be well informed. Learn from my mistake. After 28 yrs of building, I didn’t double check the legal description I provided them for their closing docs, then wrote a second legal on the deed and wrote a third when they scheduled the closing. Double check everything. When some of their own employees told me they wouldn’t stand for the mistakes, the upper level showed me they could care less of their mistakes that cost me thousands. Be sure to read every last word, especially legal descriptions that are supposed to written correctly in several places within the closing docs.