Monday, March 30, 2009

comment on rate filing

Dear Mr. Romberger:

I am writing concerning the proposed changes to the TIRBOP rate structure. I do hope my comments will be considered as I did not learn of the rate filing until last week, having received no notice from my title underwriters or PLTA.

I am a licensed title insurance agent. I have over 30 years of experience in the fields of real estate, mortgage lending and title insurance. Prior to starting a title insurance agency in 1991, I had worked for 13 years in mortgage lending including as a FHA direct endorsement underwriter and VA approved underwriter. I managed retail and wholesale lending departments for two large Pittsburgh based savings institutions. I was also responsible for regulatory compliance and assisted in the creation of quality control audit programs. Having to train personnel, manage the ever changing underwriting guidelines and regulatory compliance issues gave me a unique perspective when I entered the title insurance field. My first observations were that title insurance agents don't read guidelines, have no clue, handle lots of money and nobody is watching. Frankly, I was astounded.

I have since realized that state insurance regulators rely mainly on title companies, underwriters, to self police their agents. This would seem logical and probably did work for many years, as a company responsible for the acts of its agents, you would think, would be motivated to maintain quality. I have learned, however, through repeated observations that title companies work hard at maintaining the APPEARANCE of quality in its written procedure manuals and the TIRBOP manual while in reality the day to day business of title insurance largely ignores these standards.

Title companies, it seems to me, took a calculated risk that increased revenues generated by creating more agencies, mostly through affiliated businesses with real estate brokers and mortgage lenders, and generally tossing credible training and underwriting out the window to close and insure more transactions would make up for increases in claims. It was a bad bet. Judgment day has arrived.

I know from first hand experience that the TIRBOP manual is rarely covered in continuing education. The fact that title agents have trouble getting the premium correct and have left title companies exposed to class action law suits and regulatory penalties is NOT because the rules are too hard to understand but rather that title companies do not teach agents or monitor compliance in any way that would be effective.

I sit in continuing education sessions in which I am one of very few paying attention to the instructors. Most people in the room are reading newspapers, novels, working on their computers, texting or talking on their cell phones. It seems to me that CE credits should be worth more than simply showing up. I'm certain you agree, however, know that the instructors in charge of most of these sessions are title company attorneys. They are salesmen for their title company and afraid of enforcing discipline because the people in these classes are their CUSTOMERS or perspective customers.

The solution, if you want to make training meaningful, I think would be to have a moderator charged with enforcing discipline who is in the room. Sounds ridiculous, I know. I've never seen anything like it.

As to the SALE versus NON-SALE rate change, I don't care because other than the PHFA borrowers losing their discount, making the system easier because title agents are ignorant and title companies refuse to teach and monitor, I guess it's sort of revenue neutral and not a big deal.

I do STRONGLY object to the increase of the cost of the Closing Services Letter to $75. Losses covered under the CSL, defalcations and failure of an agent to follow lender instructions, can and should be reduced by legislative changes that introduce quality oversight where none exists.

Defalcations are largely self created losses by title companies who have failed to police and monitor their agents. Once again, because agents are perceived to be referral sources and, hence, customers of title companies, there is an inherent conflict of interest that I believe cannot be surmounted by title companies. I RECOMMEND LEGISLATIVE changes to create rules for the management of title agent escrow accounts including independent annual audits by a CPA. This way you prevent mismanagement of funds and likely defalcations and you do it without the reliance of the title companies and without increased cost to the consumer.

Failure to follow lender instructions - well you might be interested to know that in many cases, the title agent isn't the one receiving or signing the instructions. Many title agents in PA use independent, unlicensed contract closers who received these instructions and make the delivery to the mortgage lender. I am appalled that this system has evolved and RECOMMEND LEGISLATIVE changes to bring the performance of the closing, the actual signing and delivery of documents to the lender, under the umbrella of licensing by creating the requirement that the closer is an employee of the title company or agent.

I do not object to the extension to the consumer of the CSL coverage, however, charging $40 per insured transaction to me is highway robbery unless steps are taken to solve the REAL problems causing these claims.

I read with interest the Attorney General's press release and comments concerning title insurance premiums in PA. I, too, would love to see public hearings and would welcome an opportunity to testify.

Consumers in PA are not well served by the system. I follow the underwriting guidelines and earn the portion of the title insurance premium I retain. I have a full search performed by an expert abstractor. I do my own professional title examination and prepare the title insurance commitment myself. Closings are performed by trained employees. We spend much of our time searching and identifying potential title problems and resolving them prior to the issuance of the title policy. Even after the issuance of the policy, we work hard to resolve title problems that surface before they turn into formal claims, those that show up in the title company reports. We, as a TRADITIONAL title agent, earn every penny in our split of the all inclusive rate.

NON-traditional title agents, on the other hand, are nothing more than referral sources for the title company and, in my opinion, are not performing core services of title agency. These non-traditional agents take a title order and transmit it to the title company who then obtains the abstract and electronically delivers to the agent a fully examined and prepared title insurance commitment. Most of these non-traditional title agents don't even perform the closing or delivery to the mortgage lender, they contract that job out to independent closers, often hired again, by the title company.

If we were to compare only value added to the transaction TRADITIONAL versus NON-traditional title agents, we could argue that consumers are paying for services they are not receiving from NON-traditional agents even if we looked only at promulgated rates, however, if you look at the HUD-1 forms you will find that consumers are being robbed in the OPTIONAL fee category as well.

Take a close look at closing fees and settlement fees and you will find NON-traditional title agents who give the consumer no choice but to use a mobile notary, contract closer and that consumers are paying big bucks for these closers. If the all-inclusive rate would purport to include the services of closing and preparation/copying and stacking of documents to the lender, then how do you view situations in which the consumer has no choice but to use an out of office closer? Are consumers in PA well served by remote title agents who NEVER have the option of closing without paying the extra fees?

If you are looking for a way to give consumers a better deal in PA, I would eliminate or cap optional fees. We can argue over a $40 average increase to the consumer in this rate filing but it seem ludicrous when consumers are routinely charged hundred of dollars over the promulgated rates in optional fees. Title companies don't keep this money and so they aren't talking about it, but it's a major source of income to many title agents and one that flies under the radar. You can fix it.

I welcome an opportunity to discuss title insurance at any time.

Diane Cipa
General Manager

204 West Main Street, Ligonier, PA 15658
888-680-5177 x104
724-238-7830 fax

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