I figured out the key to making more money in this business. I could launch a new Web site and sell this information for a profit, but I won't. Instead, I am going to share it with all of you for free. This is a very simple system - it will not take you any additional time and you won't have to do any additional work. Just follow these simple steps and start making more money today!
Just identify something you are already doing - it can be anything. For example, if you are an abstractor you are already sending your completed work back to your clients. Are you doing that for free? Shame on you! Next, you have to give it a complicated sounding name and add "fee" to the end. Such as "Electronic Digital Transmission Fee (DTE Fee)," or "Digital Destination Delivery Fee (DDD Fee)." What do you think you could charge for this "new" service? $5.00? $10.00? Well, wait a minute, we aren't done yet.
Before you start charging the new service fee, you need to set up a separate company. Call it whatever you want; i.e. Speed-E-Delivery Co. Now, you have Speed-E-Delivery return your work to your clients and you pay them the $5.00 or $10.00 fee, but you mark it up by about 300% before you bill your client. You show it on your invoice as "DTE Fee: $30 to Speed-E-Delivery Co." Now your client doesn't know what this fee is, but it looks important and because you are paying it to a third-party it must be legitimate and necessary.
Presto! All of the sudden, you have made $75 for a $45 current owner search. And, it didn't require you to work any harder. It's pure genius! But, before you try it, I should warn you that it wasn't all my idea and it could be risky - I got the idea from a lawsuit filed against First American.
The lawsuit, Jankanish v. First American, is a class action that describes, among other RESPA violations, what it calls a "reconveyancing scheme."
As part of the settlement process, whether it is a purchase/sale transaction or a refinance transaction, when prior mortgages or loans that were secured by real property are paid off, deeds of trust or liens associated with such prior loans must be extinguished and new deeds of trusts or liens associated with the new mortgages or loans must be recorded. The process of extinguishing the deeds of trust and liens associated with real property loans that are being paid off in the settlement transaction is known as reconveyance.
...
Most, it not all, major lenders handle their own reconveyance processing either at no charge to the borrower or with a charge that is included in the payoff amount due from the borrower to close the loan account. As a result, in virtually all transactions involving major lenders... the escrow company does not, in fact, prepare, process or record the reconveyance of the prior loan deed(s), it merely ensures that it has occurred. There are national companies that offer reconveyance tracking services to escrow providers.
The lawsuit alleges that one of the named plaintiffs, McFerrin, closed a refinance transaction with First American. The settlement statement included an additional settlement charge on line 1303 labeled "Reconveyance Tracking Fee" paid to "SMS Settlement Services." Apparently, First American did not disclose that SMS is owned by First American, or that the true business name of "SMS Settlement Services" is "First American SMS." Nor did they tell McFerrin that the service offered by SMS, FasTrax, is advertised on the company Web site for $35 per payoff. McFerrin was charged nearly three times more than that - $113!
When lenders charge a "reconveyance fee," it is typically around $30. It is usually the lender that takes care of the reconveyancing. So, basically, First American is charging over $100, to make sure the lender does something that it only charges $30 to do. Something just seems wrong with that.
I even have to question the necessity of the fee at all. Part of the title agent's job is to make sure that the title is clear. The title policy that they issue insures marketable title. One of the things we hear from the title industry is that the value of title insurance is derived from the "very extensive process that occurs before the policy is issued to ensure, to the extent that it can, that the title to a specific property is free and clear of defects." (see ALTA's Letter to Forbes). Shouldn't that extensive process include following up to make sure that the liens they payoff get released? If using a third-party service to conduct the follow-up makes life easier for a busy agency, then by all means, they should use those services. But, that seems like something that would be a part of the agent's responsibility and charging the consumer for it seems wrong. This would be akin to using a third-party service to type commitments and final policies and passing that fee along to the consumer. If you break out all of the functions that can be outsourced these days and pass those charges along to the consumers, what is left that would be included in the settlement fee?
And, First American isn't alone... suits have also been filed against Fidelity, Chicago, and even Old Republic. Lender's long ago figured out how to boost revenue with "junk fees," apparently the title companies are learning the ropes, as well. That is sad.... and unnecessary. The only things the title companies should be charging for are the premium for the policy and endorsements, and, if not included in the premium, the settlement fee, exam fee, and out of pocket expenses like wire fees and courier fees. Charging extra for something you are supposed to do anyway, like making sure releases get filed, is a poor way to do business - marking those fees up, especially when they are paid to another company you own, is just shameful.
Robert A. Franco
SOURCE OF TITLE