Out of State Title Agents – Bad for the Consumer

Great example yesterday of why “going national” is bad for the consumer:

I received a call from a lender in Florida, closing a deal in Philadelphia and using a title agent based in Maryland.  He suspected that his client was being overcharged for title insurance and asked if, as a favor, would I provide a rate quote.  Always curious to see what’s going on in the market, I agreed.

The Maryland agent had prepared a HUD-1. He read the line items and amounts to me. After a few moments it was clear that the title agent had entirely misapplied the title insurance rates.  It looked like they were using a MD fee structure and a PA title rate.  In PA the rate is all-inclusive – search, binder, document preparation and abstract are all included in the filed rate.  The agent had not only charged separately for the items that should be included, but their charges were astronomical.  Charging $495 for a title search – on what planet?   Maybe it was embossed in gold.

The misapplication of the rate structure resulted in an overcharge to the consumer of over $1,500.   If it weren’t for a diligent lender, the consumer would have been none the wiser and $1,500 poorer.

I asked for the name of the agent (just curious).   Some quick research showed them to be what I refer to as a “title chop shop.”  They are set up to maximize production, licensed in multiple states, and use signing agents to close the deals.  

It is easy to obtain a title insurance license (honestly the bar isn’t that high) and most software “supports” the rate tables in any state.  That should not mean you are qualified to business in that state.  There’s just too much local variation.

These chop-shop agent setups are just plain bad for the consumer – consumers expect to get a quality product and fair treatment from an entity that is licensed to do business in their state.  In fact, there is no benefit to the consumer in this arrangement.   The transactions I’ve seen (and I’ve seen a few) all have higher charges, lower service, and unconscionable error rates. 

Licensing isn’t the problem, it’s the signing services. If it weren’t for the availability of signing services, the above situation couldn’t happen.  Title agents who wished to expand  to a new area would have to open a branch to service that area.   Branch personnel would be familiar with the local market. Consumers would get fair pricing and quality service. Eliminating signing services eliminates the problem.