title insurance "commission" - Is it a gravy train?

I am always disturbed when I read an article discussing title insurance premiums that make it sound like the premium paid by a consumer is mostly commission. While that statement is true, the articles make the commission sound like a ripoff or a big vat of extra gravy that we don't deserve.

We operate in Pennsylvania which is a filed rate state. We write our title insurance under the TIRBOP structure which means the premium charge to a consumer is an "all-inclusive" rate.

This all-inclusive premium includes:

an expert title examination [one 60 year chain]
owner policy
loan policy, if applicable
preparation of HUD-1 Settlement Statement & disbursement of funds
preparation of legal description, affidavits & processing correspondence
settlement/closing services

A portion of the premium is sent to the title insurance company for the insurance coverage.  The remainder is retained by the title insurance agency to cover the cost of performing these services, creating the policies, and operating the agency.  It's not gravy. It's the meat and potatoes. This is HOW we get paid. In fact, premium commissions for small transactions don't cover the cost processing of the transaction, however they are offset by the larger transactions that add a bit more to the general operating pot.

In Pennsylvania we are permitted to charge for extra services which are considered optional.  These extras are what consumers should focus on when they are performing a price check between providers.  Many title agencies charge extra for signing services/notary because they do not have their own closing staff.  Also, many charge for after hours or out of office closings.  In our office, we only use staff closers and we perform closings off site and after hours without an extra charge.

working on a mystery, a title agent mystery that is

We're working with a consumer buying a commercial property who also planned to use their residence as collateral for a line of credit to make improvements on the new building. Routine process, their bank asked for a copy of the deed to their house and they can't find it. They called their mortgage lender who starting acting kinda weird and would only provide an unexecuted copy of a mortgage, so they asked me to look into the situation.

Guess, what? There is no deed on record for their residence or a mortgage.

Long story short, they were working with an out of state title agent who I'm not even sure was licensed in PA, who has since gone out of business and nobody, not even the seller has copies of a signed HUD-1 or any other documents from closing.

Thankfully, and for what reason I don't know, the seller's attorney had a copy of the signed title insurance commitment so this consumer has some basis for a title insurance claim.

Oddly, though this out of state title agent handled the entire transaction, including receipt of lender funds and disbursement, the unsigned HUD-1 has the name of a different company as settlement/title agent, supposedly a PA company that I can't find anywhere either.

In retrospect, these folks are kicking themselves for not being more diligent about getting copies and knowing who they were working with. They sort of went on automatic pilot and just trusted that they were working with professionals.

Please, folks, choose your title agent wisely. Know who they are and where they are and make certain you get a title insurance commitment to review prior to close, make certain you get a signed HUD-1 at closing, and then follow-up after closing to confirm receipt of the recorded deed and issuance of your title insurance policy.

A very large real estate brokerage is burying language

in the sales agreements of transactions in which they have the listing directing the title insurance order to their affiliated title agency.  There is no simple waiver or acceptance for this paragraph, it's just sitting in the middle of a bunch of boilerplate stuff the buyer and the selling agent skip.

I ran into this the other day on a cash transaction.  I have three title transactions in process for one buyer.  This buyer likes our Choose and Save program.  It's fast.  It's easy and it's the most affordable way to buy title insurance and settlement services in PA.

The listing company backed down and didn't pursue the matter once they understood the good deal the buyer was getting and that we had already processed the transaction, though I got the impression that they normally press the issue.

Buyer beware.  Read that contract very carefully or perhaps just add a clause to the contract stating that YOU will select your title insurance and settlement provider and any language to the contrary in the agreement is null and void.  Stay in control of your transaction.

What about title insurance and refinancing?

SHOP SHOP SHOP SHOP

Get the message?

If you are in Pennsylvania and refinancing, you'll not get a better deal than our CHOOSE AND SAVE program.

Most title companies use independent notaries and you'll end up paying a signing fee or closing fee of some kind. If you are in our market area, we'll come to you at no extra charge. We close 8 to 8 Monday thru Friday and 10 to 5 on Saturday.

So, shop for title insurance and closing services. Do not just go wherever your mortgage lender wants you to go.

Here's our easy to use title insurance premium calculator. Look at those discounts for refinancing!

money is on sale...time to buy or refi!!!

Check out our title premium calculator for Pennsylvania rates. Use our Choose and Save program and you'll get the most affordable title insurance and settlement service available in Pennsylvania.

We are determined to give consumers the best in service and value. Here's our service area map. If you are buying or refinancing in our market, we'd sure like to give you a quote.  Don't just follow the lead of your mortgage lender or real estate agent.  If they aren't leading you to our Choose and Save program, you're not getting the best deal in Pennsylvania.  YOU have a choice. It's YOUR money.

When you choose The Closing Specialists, you get an expert title search and examination performed by experience human beings.  Does that sound like a hilarious and ridiculous pitch?      Got news for you.  There are lots of title agencies out there who have little or no experience and they order their searches by computer and let someone else do the thinking for them.  Lots of that work is outsourced to foreign countries.  Can you believe that?  It's true.

We only use experienced abstractors who work in the county where the real estate is located. We do our own title examination and we use only on-staff closers.  Our staff is experienced and we consider YOU, the consumer, our customer.  YOU pay for our services, not the mortgage lender or the real estate agent.  It's YOUR transaction.  We focus on YOU.

WE STAY OPEN SO YOU CAN CLOSE.

I think we share the same goal but I have a differing view on the new RESPA rule.

ClosingCorp says:

Under the Good Faith Estimate provision of the new rule, a mortgage lender can "guarantee" to its customers that the price of its designated vendors' settlement services will not increase by more than 10 percent at closing. If, however, borrowers elect to shop for their own real estate closing service providers, they have no such protection. "It should be no surprise that a borrower, when faced with this choice, will decline to shop for settlement service providers and be relegated to use those vendors preselected by the lender," the company said in its comments on the rule filed last May. ClosingCorp urged that HUD provide consumers who prefer to shop for their own real estate settlement services with clear information as to what services they can shop for; explain that they may find lower rates or more acceptable providers on their own; and even refer consumers to online or other resources that will assist them in comparing vendors and prices, or even initiating a transaction. Alternatively, HUD could provide these links and references on a newly-created consumer assistance page on its own Web site.

I agree that consumers should be encouraged to shop but I think the folks at ClosingCorp are missing the value the 10% tolerance brings to the GFE. Loan originators have had very little motivation to get their settlement service quotes right. These new tolerances at least pull the quotes into some sort of reality when the loan originator is making a referral.

Remember, that just giving a quote doesn't obligate the consumer to use that company BUT having this price quote in hand will give consumers reliable figures with which to go out and comparison shop. Isn't that great? It's a major step forward in consumer centric disclosures.

Loan originators who would prefer not to make a referral, don't have to give an accurate quote, they just tell consumers to go find someone to do the job.

Either way, the consumer has more information and more power than they did under the old rules.

THANK YOU HUD!

The Pittsburgh Post Gazette has it totally wrong on this one.

Here's the headline:

Home buyers can now purchase title insurance directly

Here's a link to the article.

First of all, any regular reader of Title Insurance Talk knows that consumers have ALWAYS been able to buy their title insurance directly.

I am a pro-consumer title insurance advocate and so when I heard of the ENTITLE marketing plan, I was interested. I have been encouraging my fellow title professionals to market directly to the consumer for years.

When I looked at the details of the ENTITLE offer, I found that they have a set of flat fees which consumers must pay in additional to the title insurance premium. Unless the consumer is involved in a high priced transaction, say, over $200,000, they pay MORE in flat fees than the so called 35% savings implied in the advertising.

In PA - most transactions are under $200,000 and so consumers who fall for the 35% savings ploy are being ripped off.

I have contacted both the Dept. of HUD and also the PA Dept. of Insurance and complained that ENTITLE is misleading consumers.

The best tactic for any consumer is to shop around and get your quotes in writing. Compare the entire transaction - title premium and flat fees.

Our Choose and Save program is the least expensive way to buy title insurance and settlement services in the Commonwealth of PA.

The folks at ENTITLE must be laughing all the way to the bank - at the expense of our citizenry and that MAKES ME REALLY MAD.

query: what If I dont agree with the charges in HUD and walk away from closing

That's a good one. If it's a refinance, that's easy, just rescind, but if you are thinking about walking away from a purchase it raises all sorts of issues.

There are several parties to every transaction besides the seller and the buyer. All parties have a duty one to another to act in good faith. I would hope that a buyer would be a good consumer and get quotes from all settlement service providers up front. Remember, you don't go shopping at the closing table. You make all of your selections up front. If you skip the shopping obligations, don't expect sympathy from anyone at the closing table. Even if you have shopped and gotten quotes, there are always unforeseen circumstances. Be patient and listen to the explanations. You may find that there is a valid reason for an additional charge.

So, if you are acting in good faith and not just trying to weasel out of costs you had already agreed to absorb, and a provider is not living up to their agreement, you can threaten to walk away.

Making the threat will often push the bad actor into making good, especially when all other parties in the transaction are looking at them and wondering if they are nuts.

If no one agrees to change the figures and you want to walk away, I would advise taking a break and getting legal advice from your own attorney, not the attorney working for the title company or real estate agency or the seller or the lender. Walking away from a closing is potentially defaulting on a contract and you may have legal obligations.