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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.

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