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It Must Be The Hot Sun
by Robert Franco | 2007/09/07 |

It must be the hot sun that has baked the brains of a group of people in New Mexico. They call themselves Think New Mexico, an "independent think tank." They group wants to scrap the state's price-regulated title insurance market. It also suggested that lenders, rather than home buyers, should be responsible for obtaining title insurance because they would be able to negotiate better prices in the marketplace. They assume that the savings will be passed along to consumers.

"When airlines and long distance phone services were deregulated, prices fell 37 percent and 73 percent, respectively. It's time to put money back in the pockets of home buyers by letting the market determine the price of title insurance," Fred Nathan, executive director of the group, said in a statement Tuesday.


Hmmm... Let's think about that for a minute. How many times have various airlines filed for bankruptcy protection since the industry was deregulated? Northwest, Delta, United, and US Airways (twice) have all filed for bankruptcy. How many airlines have gone out of business? According to Wikipedia, "in the U.S., over 200 airlines have merged, been taken over, or gone out of business since deregulation in 1978." How many times has the government had to discuss bailing out the airline industry? Surely, that is not the fate we want for our nations title insurers. What good would it do to offer title insurance at lower prices if the companies collecting the premiums aren't around to pay the eventual claims?

Source of Title Blog ::

As for the telephone industry, I suppose the argument could be made that deregulation has worked. However, even there small telephone companies have been swallowed up by the big players in the industry. How many of the "Baby Bells" are still operating independently? Besides, the thought of the title industry operating like the phone companies just makes me cringe. I detest dealing with the phone companies!

And why would anyone want to see the banks responsible for ordering title insurance? Isn't all the buzz these days about marketing directly to the consumer and allowing them to choose their settlement services providers? That seems to be the main goal of the California Department of Insurance. Steve Poizner, commissioner of the CDI, has advocated direct marketing to consumers to create more choice.

Banks are allowed to own title companies and the prevalence of affiliated business arrangements makes it unlikely that banks would refer title orders in the best interest of their borrowers. I have seen it happen. When a lender is a partner in an AfBA that is where they send the title order. I inquired with the bank I dealt with a few years ago about them send me a few of their orders. I wasn't asking for all of them, but since I did ALL of my business with that bank, I thought it was reasonable to ask. The branch manager said, "Sorry, I can't do that. We have our own title company now." Needless to say, another local bank handles ALL of my business now.

There is no need to scrap the entire system in New Mexico. If this group thinks that the established rates are too high, lobby the state to reduce them. If the state believes that the current rates are necessary to promote sound title insurance practices and stability in the industry, who are these "baked brains" to say otherwise?

Leave title insurance to the experts. Think tanks should stick to global warming and other such issues that can be debated for decades and never resolved. And, if I could be so bold as to make a suggestion... find a nice cool place in the shade!

Robert A. Franco



Categories: New Mexico Legislation, Title Industry

894 words | 2226 views | 2 comments | log in or register to post a comment

From the site:

From the site:

"Think New Mexico will seek to leverage lenders' knowledge and buying power by having banks and mortgage brokers, rather than homebuyers, purchase the policies. While the lenders will pass the costs along to the homebuyer, they are in a much better position to comparison shop and buy policies in bulk to keep the prices down."

Hilarious. There seems to be a really large disconnect between their knowledge of the way the business works and how to fix the problem of high rates (if they are indeed too high). Apparently the right to have a mortgage is now also in the constitution.

The current problems are a result of consumers letting other people make the decision of the title insurance for them in the first place. Turning the choice over to another segment of the market instead of to the consumers just means a different set of problems and perhaps an increase in the rates. If rates are higher than the costs of doing business and the costs of claims combined, then deregulation of the rates can be done in such a way that the competition increases while still keeping a sufficient minimum reserve to cover future losses. You still need to keep the industries separate to ensure the banks don't cut corners on the title insurance.

Robert, I think your analogy of the airlines and phone companies is not quite accurate in this case since the reason we need to regulate insurance rates is to make sure they have sufficient funding to cover future claims. With airlines and telephone companies, once you've made your purchase and had your service delivered, you are done with them until the next transaction. You can change your phone service easily or switch to a different airline for your next flight.

Companies going in and out of business is a by-product of capitalism. Southwest has done what an airline needs to stay profitable even in rough times. The rest waste money, make bad decisions, and get taxpayer bailouts because they can buy votes in Congress. Deregulation that increases safety hazards might be a problem. Deregulation that encourages efficiency and competition is not.
by David Jenkins | 2007/09/07 | log in or register to post a reply

You are exactly right, David. That...
You are exactly right, David. That is a poor analogy. I thought about that too. However, it wasn't MY analogy - that was in the quote from the executive directory of Think New Mexico. I just wanted to point out that deregulation didn't fare to well for the airline industry, regardless.

That just reinforces your point that they don't have a sufficient knowledge of the way things work in our industry to be lobbying for such nonsense.
by Robert Franco | 2007/09/07 | log in or register to post a reply
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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