discounts - reissue and substitution rates

I just got off the phone with a mortgage broker called "Ideal something or other", closing a refinance transaction tomorrow, who is working with a title insurance agency who refuses to give his customer the reissue rate or substitution rate unless the customer proves that they bought an owner title insurance policy. I think the name of the title insurance agency is "Independence something or other."

Wow, I feel sorry for all the customers dealing with that "Independence something or other." How much money are they being overcharged? The regulations were revised back in August of 2005 - I'm pretty sure - and that means this "Independence something or other" has been overcharging for over a year now.

If you are a consumer reading this blog, please be advised that title insurers in Pennsylvania MUST give you the discount if they find evidence in your title search (within the applicable discount time-frame) of a deed to a bona fide purchaser for value, or an unsatisfied mortgage to an institutional lender. They have to ASSUME based upon this evidence that a title insurance policy was purchased. You are under no obligation to provide a copy of a policy or a HUD settlement statement as evidence.

Now if the title search does not show either of those instruments and you still feel you are entitled to a discount, then of course the title insurer is permitted to require additional documentation.

This "Independence something or other" also told the mortgage broker and the consumer that they are not entitled to a substitution rate if the loan amount is different or substantially larger than the mortgage they are paying off. That's a bunch of hooey.

Our rates manual clearly states that the consumer is entitled to a reissue rate if we find evidence of a prior policy - as stated above - within the last 10 years. We give 10% off the basic rate automatically, period.

Refinance consumers are given the substitution rate which is either 70% or 80% [70% 1-2 years, 80% 3-4 years] of reissue automatically if we find an unsatisfied mortgage of record during the last 4 years.

The mortgage broker, "Ideal something or other" said we had closed a mortgage transaction for these folks in November of 2004. He didn't give me their loan amount so I can't be specific on the discount but let's just say they are closing a $100,000 mortgage tomorrow. Let's compare costs:

"Independence something or other" will charge a basic rate of $858.75 unless the consumer provides a copy of their title policy or HUD settlement statement. They also said they will only give a reissue rate - not substitution - so at best these folks will get a reissue rate of $772.88.

If they had gone to any legitimate (using PA regulated rates) title insurer, they would only be paying a substitution rate of $618.30.

If they had come back to our office they would also have been able to use their $75 off coupon they got with their title insurance policy on the last transaction.

But alas, they decided to use Mr. "Ideal something or other" mortgage broker who likely referred them to Ms. "Independence something or other" title insurance agent.

Once again we get to say, please shop around before selecting your title insurance agent and YES you do have a choice - even when refinancing.