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Source of Title Blog : California Legislation

Licensing Sales Reps in California
by Robert Franco | 2007/07/30

California S.B. 133, sponsored by the California Land Title Association, will require title insurance sales representatives to be licensed, if it is passed. I was a bit surprised to hear that this bill was pending - I thought sales reps were already required to be licensed. Apparently California, and New York, are just now catching up to many other states.

"We need clarification of the law given the uncertainty title companies face in terms of what is prohibited marketing behavior," said Mark Bogetich, a CLTA spokesman. "That may sound strange, but the law right now is mostly gray areas, meaning companies don't have clear guidelines as to what they can and can't do in terms of marketing activities. That leads to situations where companies get fined and publicly accused of violating 'kickback' laws."

If California is able to provide clear direction to the licensed sales reps, it may help clean up some of the problems. The real problem, which seems to be common across the country, is that the regulations are a bit vague. They are open to interpretation and they aren't "officially" interpreted until someone is accused of violating them. The CLTA is quite correct... those violations are then presented publicly and it tarnishes the reputation of the industry.

Licensing sales reps is a good idea and it is nice to see the CLTA taking the lead on this bill.

Robert A. Franco

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Categories: California Legislation, Title Industry

Source of Title Blog :: 2 comments ::

Poizner: The Title Industry Is Broken
by Robert Franco | 2007/06/07

Steve Poizner

Steve Poizner, the insurance commissioner for the California Department of Insurance, recently stated that "the title industry is broken." I can't say that I disagree with that much of what he announced on June 1, 2007. It is broken.

(PHOTO: Steve Poizner, California Department of Insurance Commissioner)

He also said that he "intends to fix it." I also think that is a positive sign. Fixing the problems with the title insurance industry needs to happen on the state level. All of the talk about RESPA enforcement by the Department of Housing and Urban Development (HUD) is a farce. Expecting HUD to enforce RESPA is like expecting your local school crossing guard to raid crack houses: they are woefully ill-equipped to deal with the problem.

However, I respectfully disagree with the direction of Poizner's plan of attack. He stated that, "faced with pending regulations, I expect the industry to propose and implement a series of fundamental reforms including licensing of sales agents, rate reduction and simplification, and increased direct marketing to consumers to create more choice."

The licensing of sales agents is definitely a good idea. I'll give him that one. Sales representatives need to know what they can and can't do in the pursuit of business. Many RESPA violations likely occur when sales reps offer special deals or provide gifts to customers in return for repeat business. What a good salesman may just consider "schmoozing" Realtors and loan officers, may be a violation of Section 8 of RESPA.

Rate reduction and simplification is not such a simple issue, especially when you look at it in combination with his goal to increase direct marketing to consumers. Title insurance rates are very reasonable - they are far less than most lenders' loan origination fees and a mere drop in the bucket compared to the Realtors' six percent commission. If the goal is to get the title companies to market directly to consumers, that may increase operating costs. It may be difficult to get the title companies to spend more money on marketing in the face of rate caps. Fortunately, Poizner has delayed the implementation of the rate cap until 2011.

I think that instead of concentrating on the cost of title insurance, Poizner should be focused on the value of title insurance. I don't think the consumers are being over-charged, I just don't think they are getting what they are paying for anymore. The title industry has pretty much gone to short searches for most closings and they are paying less for them. However, the savings have not been passed along to the consumers. A thorough title search has been replaced with blanket exceptions on the title policy. Thus, the consumers are getting less coverage for the same money.

Worse yet, more and more of the current owner searches are not even completed by professional abstractors anymore. Many are completed by untrained abstractors, over-seas title plants, or instant title products compiled from incomplete databases.

Attacking title insurance rates is a sure way to gain public support. Everyone likes to hear that their government officials are going to save them money. The problem is that the public doesn't understand title insurance, nor the difference between a quality policy and one stitched together from unreliable sources with blanket exceptions. Fighting for lower prices is gimmick to gain political clout; it sure worked for John Garamendi who turned his battle with the title insurance industry into a position as Lieutenant Governor. However, it does not create any meaningful change that will improve the industry or protect the consumer.

Before we start to address the cost of the product we need higher standards for issuing title insurance that will protect the consumers and "really" provide them with the peace of mind that title insurance used to offer.

As I have stated many times in the past, meaningful change means regulating the title industry from the bottom up. Each title policy issued must be based on a thorough and accurate title search prepared by a knowledgeable title professional. With no regulation of the title abstractors, this cannot happen. Cheap title searches and alternative online products are shaking the foundation of our industry and it will eventually collapse no matter how heavily the top layer is regulated.

Robert A. Franco

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Categories: California Legislation, Title Industry

Source of Title Blog :: 1 comments ::

If Its Worth Doing, Its Worth Doing Right
by Robert Franco | 2007/02/23

The California Office of Administrative Law (OAL) has rejected the California Department of Insurance's (DOI) proposed changes that would have capped title insurance rates at the rate that was charged seven years ago; a decrease of 16 to 27 percent. Although the AOL has not yet published its decision, initial indications reveal that the rejection was due to technicalities in form rather than substance. The DOI is expected to try again.

In explaining the need for the rate reduction, Steve Poizner, Commissioner of the DOI, made an interesting observation:
"As a result (of inducements for referrals), over the past 10 years, even though technology has lowered the costs of title searches and document production, title and escrow charges have not come down. In fact, title insurance on the average home in California costs roughly double what it cost 10 years ago, despite the fact that companies' production costs have plummeted."

However, I would politely suggest that Mr. Poizner take a more in depth look at the guts of the title industry. While I can clearly see where he could get the impression that technology is driving down production costs, I don't think that is entirely accurate. Though this is the mis-information that is reported in the news, mainly through corporate press releases.

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Categories: Abstractors, California Legislation, Title Industry, Title Standards

Source of Title Blog :: 1 comments ::

Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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