Of course you are quite correct that not all title agents are crooks, but it is easy to understand how we have gotten such a bad reputation.  Though it is a small percentage of title agents that have "dipped" into their escrow accounts, when it happens it is usually millions of dollars that go missing.  That kind of theft is going to attract headlines... and rightfully so. 

For a long stretch, when business was booming, underwriters seemed to sign everyone and anyone who applied.  The only criteria seemed to be "how much business you could generate."  And they really did very little to keep tabs on them.  I remember at one point, an annual audit was expected... and they came and looked through files.  Then, they just asked that we fax them a few months of reconciliations.  It became very cursory, in my opinion.  With the defalcations that have been in the news the past several years (and there have been plenty) you really have to wonder how it went un-noticed!

I have said it before, but I realized what was happening to our industry when a used-car salesman asked me what I did for a living.  When I told him I was a title insurance agent, he said... "what a rip-off."  When used-car salesmen start looking down on you, you know that your profession has hit rock bottom.

Let's hope that we start to see a change with the current market and when we rebound the good ones are the ones left standing. 

Charlene,

You should send something to the Baltimore Sun and perhaps they will print it.

What Robert says is true, recently there have been a large amount of crooked title agents written about, on SOT, in a bunch of different states, caught and imprisoned, however I agree that its not "every title agent."

The problem with Mr. Hancock's article is that it is filled with generalities, guess he was just to lazy to investigate and name the bad guys and print factual information.

Its one reason I do not read newspapers or watch TV because to me reading this crap is to upsetting.

I think you should send something into the Sun and get any friends you have in the industry in your local area do the same, so the other side is heard.

You are a very good writer, I always enjoy your postings because they are concise and filled with facts.

Jessica

Thank you for your kind words. I appreciate that you enjoy reading my rants and ravings. Its nice to have a "fan". In fairness to Mr. Hancock he did name names, I generally don't name names in my blogs but a read of the articles will give the names of the individuals and companies involved. Regarding your statement about getting my friends involved I was glad to hear that the Maryland Land Title Association did a radio Q & A on Sunday morning on a local AM station about these very articles.  So at least some folks got to hear the other side. 

I fully intend to write a letter to Mr. Hancock and will happily provide you a copy if you like.

Robert, your points are all valid. I don't disagree that the industry needs to be cleaned up. But the way in which this article was written just really rubbed me wrong. Thank you for always useful insight and information. I did get a bit of a chuckle from the used car salesman's analogy.

This is an example of the spillover occurring from the tactics of the underwriters. From the initial article in Forbes by Scott Woolley in 2006:

http://www.forbes.com/forbes/2006/1113/148.html

to the myriad of kickback findings by state authorities and fines literally in the hundreds of millions of dollars paid by the underwriters it has denigrated our industry terribly. And it's going to take a awhile to repair the damage.

I think Mr. Franco's description of the used-car salesman sensing title insurance as a "rip-off" is an example of how far we've fallen.

The other perception which is taking hold is some of these guys are flying around in 35+ million dollar Gulfstream jets while seemingly immune from the spectacle of "multiple million dollar" thefts from consumers.

http://flightworks.com/aircraft/heavy/n97ft/index.html

http://www.secinfo.com/dR7Km.tUs.u.htm#1stPage

And these high rollers are attempting to unwind from liability as the lead story in "Source of Title" outlines, "Court Decides If Underwriter is Repsonsible for Agent's Theft". If we begin a trend where there's no guarantee or quick resolution for funds stolen then we're headed for a major rethinking of how this entire process works.

Other industries have similar difficulties. I would think Brink's presents unbelievable temptations.

But in that instance you don't have kickbacks to the armed truck drivers wanting to get a piece of the "transfer fees". It's the fact that many, many sham operations were setup by underwriters in findings by the insurance authorities and even if these "sham" operations were not the ones who actually perpetrated the thefts it's indistinguishable -- it becomes this disturbing perception of breached ethics, thefts and damaged consumers.

And I still maintain that many at the top of the industry still "just don't get it"! I suppose there are those who will pat themselves on the back for finding clever interpretations without realizing the larger unintended consequences to which we all suffer!



 


 

Provided that Our Underwriters Don't let Bad ones Back in again .For some reason they have very short memories when business get good.

Wyatt I love your Brinks analogy.  You are absolutely correct in that there are many other industries in which temptation is even stronger than it may be to some in our industry.  What I took issue with in the articles is the way in which it made the ENTIRE industry sound like a group of theiving collaborators who's only goal was to see how they could steal from unsuspecting consumers.

And, as previously noted I don't disagree that the industry could stand another round of shake ups and wake ups as far as defalcations are concerned.  It is sad, as has been stated here by Sal,  that there are many in our industry who have actually been convicted of stealing and who have gone on in later years to open up new shops under new names and the underwriters just allow this to happen.

I can think of 3 agencies here in Maryland that were shut down some years ago and lo and behold, the owners of those agencies are right back in the game.  I would not suggest that they are "up to their old tricks" but......

I hope that the underwriters come to a point where they understand that setting up sham operations is not conducive to endearing us, the title agents, to the consuming public.  We need to be pro-active in policing our industry, but we don't need anyone making blanket statement about the entire industry just because of a few bad apples as the saying goes.

To help members respond quickly to negative media coverage regarding defalcations, ALTA has created a model letter to the editor. You can access it here: http://www.alta.org/news/news.cfm?newsID=11454.

Jeremy,

I read the "model" media letter and I would really give this some thought before wide distribution.

What it says to me is "your money is in peril"! A part of the letter reads, "While there’s always the opportunity for theft in any industry, that opportunity can be minimized when the consumer works with a professional member of the American Land Title Association (ALTA) who will safeguard their funds." -- in other words their funds are only as good as the ethics of the escrow person.

I would also characterize theft as a peril not an opportunity. One would minimize the peril not the opportunity.

How are funds safeguarded if the underwriter position is shifting to "not being a guarantor" of the receipt/disbursement process?

I would be putting out material -- if indeed guaranteed by underwriters and that's the coverage they want to provide -- which would be tantamount to FDIC insurance. If you have funds with an agent or office of XYZ Title Insurance Underwriter Company you are guaranteed your funds.

If you start banging the press with "theft is possible" stuff this will deteriorate faster than anyone can believe!

I've always questioned the "insured closing letter" and basic fidelity bonding by the underwriters. It seemed a major purpose for which they existed but maybe the losses are getting so enormous they don't want to provide this type of coverage.

Underwriters have set up shams for business, appointed agents who've stolen large sums (look at The Fund in Florida -- it's gone from defalcations) and violated RESPA and many state laws. Those are the facts.

There were many lone wolves warning of the impending damage but it went unheeded. So the industry is where it is!!

There exists within these successful, wealthy insurance organizations a sense they're beyond reproach. These negative press forces are eating away at the edges.

And I've never read nor heard of anyone in leadership in this industry stand up and say, "We made some major errors and our behaviour wasn't always the best but here's what we're implementing and the practices were modifying to insure we meet the highest standards of conduct and ethics.

But to realize how far it had gone down and may still exist was an agent found to have money missing from an escrow account. The underwriter decision makers kept the agent in business rationalizing the losses could be made up in remittances vs. shutting the agency down and taking the loss. Some years later the agent dissappeared with 10+ million missing at last count! Brilliant!!

Jeremy,

I'm curious why the ALTA Advocacy Update email of July 19th, 2010, in reference to "private transfer fee convenants" didn't include "Source of Title" in listing publications:

"With 16 states having taken action to limit or ban private transfer fee covenants or as we call them, Wall Street Home Resale Fees, more news outlets are reporting on the issue. Check out reports in: Atlanta Short Sale Facts, The Legal Description and Real Estate Lawyer Connection. We're still waiting on Illinois to pass their ban, and we expect additional state legislatures to address the issue when they come back into session in 2011."

"Source of Title" has been reporting this issue since at least November 23rd, 2009:

Louisiana Bans Private Transfer Fees
July 08 2010

Ohio Governor Signs H.B. 292 Banning Private Transfer Fees
June 15 2010

The American Land Title Association Opposes Private Transfer Fee Covenants
February 27 2010

Real estate industry professionals are rallying against a controversial new fee being implemented at two developments in Tooele County, Utah.
 
County Recorder: "It is perfectly legal, but I don't like it."
November 23, 2009        

-------------------------------

And here's the kind of press which kills our credibility --

http://www.bloomberg.com/news/2010-06-23/chicago-title-found-liable-for-employees-role-in-30-million-fraud-case.html

Not one person has been cheated or fleeced by a "Private Tax",  "Wall Street Home Resale Fee" or whatever ALTA wants to name them to decieve the public and deflect that issue that title insurance is totally out of line when you talk about cost vs. benefit.

You title folks are too funny!  Because you pay these politicians money to vote your way (to protect your totally outdated way of conducting business)doesn't make you right on the issues.

Fortunately for the American consumers, the individual states are waking up to this totally pointless, ridiculously high cost on a real estate transaction.

You know what they say about those in glasshouses don't you?

It seems as though you are still a bit sour over the many states that have decided that "private transfer fee covenants," or "reconveyance fees," or whatever you are calling them these days, are unenforceable.  Your comparison to title insurance, however, is laughable.  It's not even close to the same. 

But, keep trying... it's always entertaining.

Best,
Robert A. Franco
SOURCE OF TITLE

I enjoy this banter.

Especially with a bunch of self important attorneys and title "drones"

Really? We have to resort to name calling?  Can we try to at least to be respectful of one another's opinions?

He who stoops to that level only makes himself look bad.  Making disparaging comments on a TITLE site about title professionals isn't going to sit well with most people here.  The banter on the PTF issue has been contentious but entertaining however,  referring to most people here as drones isn't helping Paul personally.  Some may not agree with him but the lack of professionalism didn't win any fans here I'm sure.

I think "self-important attorneys and title drones" is surely a lot less offensive (and even humorous) compared to the article cited by Charlene warning readers the title industry may be a bunch of thieves with "sticky fingered title agents"!

http://www.allbusiness.com/legal/legal-services-litigation/14666677-1.html

And as the article points out, here was an agent who failed to pay the underwriter title premiums, operated without a license, settles the matter and is right back in business to perpetrate greater harm!

Who made the decision?!?! It was the underwriters!!

The problem is having all this money sloshing around from "title premiums" which gets misallocated and really harms the entire real estate transaction process.

Take the State of Washington investigation where one underwriter was paying an advertising fee to the real estate company. It was deemed, and obviously was, a kick-back. And the payment was far in excess of the normal advertising rates even if you argue the agreement for advertising was legal. Clever, I suppose, as was the idea of the re-insurance premiums with a claim never paid nor intended to be paid. But the re-insurance premiums lined the pockets of those referring the business.

Regulators in Washington State said it best, "First American offers a prime example of how illegal inducements can help a company attain superior market share."

So this particular real estate company gains an unfair advantage in the marketplace compared to the real estate company which doesn't receive any "advertising allowance". It may be that the eager, entrepreneurial real estate company can actually provide a better service, reduced rates and more efficiency but the capital flow to the other via kick-backs creates an unfair advantage.

If an underwriter forms a "sham" title operation which drains business from those operations trying to find a better and more efficient means to business processes their efforts will be ineffectual. Why would anyone enter a market and do the hard work of greater efficiency through entrepreneurial risk when the kick-back schema effectively closes the door on their ideas?

And what's the result? The processes denigrate and deteriorate because fresh ideas and risk-taking which would yield reward are nixed. They are nullified and quashed by these schemes

This happens in my neck of the woods where underwriters give software away to garner underwriting premiums. No one can compete effectively against "free" and/or "kick-backs" and the damages become monumental. These behaviors are throughout the financial history books!! Why was RESPA enacted in the first place?

When a real estate broker becomes licensed the person doesn't have to sign a "real estate agency contract" with one of several large controlling real estate companies. When a lawyer passes the bar exam and is licensed to practice the newly-admitted attorney doesn't have to sign a "lawyer practicing agency contract" with one of several large controlling law firms. And the same goes for mortgage brokers.

And would any of these groups tolerate and contract with an entity which would create and authorize a competitor subsidized with kick-back schemes?

I think the title business would be much more competitive and dynamic if you had an Iowa style system and did away with the underwriters. Take any of the underwriters' income statements and realize well over 1/2 (half) of their income is generated by independent title agents. Just imagine all of the income, together with the income generated from their company run offices, redistributed into the coffers of independent title/settlement companies!! If you regulate title premiums such that they are based upon "actual title claims" paid then the other search, settlement and escrow activities become a pure work product upon which a title agent would not pay an override, franchise fee or whatever you want to call it as part of an agency contract!!

There may be some merit to the idea that these big insurance companies can hide behind antiquated insurance statutes dating back to the depression.

And defalcations can be handled by “victims’ funds” as established in many states and their bar associations. The could be reinsured in especially egregious cases.

It seems to me as long as you have "underwriters" as the watchdogs this "name calling" may get much worse! Especially if the past foretells the future.