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Source of Title Blog

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.

Source of Title Blog ::

From a NextACE press release:
[The] Title EDGE process has saved the title industry over $4.5 million by significantly reducing the manual hours required to produce a preliminary report or commitment.

(A figure that is based on an average savings produced from 1.5 hours of labor and overhead reductions associated with every order processed through Title EDGE.)

From a PropertyInfo Corp. press release:
(PropertyInfo Corp. is a wholly owned subsidiary of Stewart Information Services Corp.)
“We are placing ATS under the direction of Tom Abbate, a 29-year title professional who is president of PropertyInfo’s title services division,” added Vaden. “We are confident that the newly acquired search application will add dynamic strength to our current title-service offerings, and fits in well with our larger plan to reduce title-search costs and fully integrate the title-search process.”

From Magazine:
"First American has doubled its prices in a decade, to an average charge of $1,472 per home for a title search and insurance. Meanwhile, thanks to computerized record-keeping, the cost of searching fora homes ownership records online has fallen to as low as $25. Technology has also helped make mistakes rarer..."

The nation, our government, and even the higher-ups in our own industry seems to think that automation is the key to reducing costs associated with title insurance. However, there are still thousands of people who actually go to the courthouse and sift through millions of records to compile a title search. This human element accounts for the vast majority of title searches.

The reason that the cost of title searches has plummeted to as little as $25 is not because of automation and electronic records - its simply a matter of pressure from higher up the chain for abstractors to deliver the product faster and cheaper. Part of the reason the lower costs are possible is that the standards for title searches have been "dumbed down," and there is no regulation in most of the states, allowing inexperienced competition to flourish.

Unfortunately, this means that (1) Mr. Poizner's conclusion is still accurate - the cost of the the title search has decreased and the savings have not funneled down to consumers; and, (2) the quality of many of the title searches have degraded as well. Therefore, not only are the consumers still paying more, but they are not getting what they used to. This hurts consumers as well as the thousands of professional title examiners who are finding it more difficult to remain in the business.

The longer this is allowed to continue, the worse the problem will become. Who will train the next generation of title searchers? What will happen when the title insurance industry can no longer find a skilled, professional to conduct a thorough title search? Who will pay the price?

So, Mr. Poizner, I would again make a polite suggestion. Visit some of the local court houses and speak with some of the "grunts" in the field. Learn for yourself what they do to protect the nation's public records and the consumers from title defects. In addition to placing more regulations on the pricing of title insurance, you should take a serious look at regulating the title searching to ensure that the integrity of the title search is not further harmed and the thousands of people who make their living searching titles are able to continue to provide their services with diligence.

After all, placing more pressure on the top of the chain, will cause them to place more pressure on the searchers in the field to further reduce prices - something that can only be accomplished by further eroding the quality of the search. That would truly be devastating to the title insurance industry and the consumers who rely on the process for clear title to their homes.

Any attempt to clean-up the title industry needs to account for the whole process. The title search has been ignored for too long already. Focusing all of the efforts at the top level of the industry may get headlines, but it will be a futile effort to make any meaningful change. As my father always used to tell me, "if its worth doing, its worth doing right."

Robert A. Franco


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

1296 words | 2845 views | 1 comments | log in or register to post a comment

Well said, Robert. Mr. Poizner is ...
Well said, Robert. Mr. Poizner is going in the right direction, but you are correctly pointing out that the increase in costs to consumers isn't coming from the search product. It's coming from the layers of fat needed to feed the ABA referral network no value added machine.

Traditional search costs, if they remained static and unchanged with full human integrity would range $75 to $150 per chain. That's nothing when compared to the fees being charged to consumers.

Thank you for this post. It will help our regulators, we hope, to focus on the real cost to close problem which has nothing to do with technology and everything to do with degradation of standards, ethical and procedural.
by Diane Cipa, General Manager, The Closing Specialists® | 2007/02/24 | 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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