A Deafening Silence

Doug Miller has a great series about Controlled Business Arrangements (let’s all start calling them what they are). As Doug points out the sole defense of the arrangement is the consumer’s need for “one stop shopping.” I have yet to hear another rational explaination for their existence. And while rational, the one stop shopping argument isn’t very persuasive. We need to look no further than the actions of the supposed beneficiaries.

Did I Just See a RESPA Violation?

Recently, while photo copying HUD1 Settlement Statements at a real estate office, and for all eyes to see (my eyes were not wandering!), there on the wall was taped an advertisement, a glossy pitch from a mortgage lender soliciting the real estate agents. I have summarized below:

Individual Goal

Refer 4 loan applicants from August 1 through November 1 and get a $200 gift certificate for personal marketing

Office Goal

Just one referral gets you invited to a group dinner:

Refer 9 loan applicants – dinner at the “not so exciting” restaurant

Refer 18 loan applicants – dinner at the “okay this is getting better” restaurant

Refer 27 applicants – dinner at the “yes, I have arrived, fancy “schmancy” steak house

Does this advertisement violate Section 8 or any other section of RESPA? I would appreciate your opinion, maybe I am missing something.

Every day the independent title insurance agent struggles to compete with others who are not playing fairly and with the controlled businesses.

At this time, I have to direct you to Ethical Practices in Real Estate. Douglas R. Miller’s superb writing and on-the-mark insight into CBA’s, kickbacks, and ethics in the real estate industry is phenomenal. An absolute must read!

Looking the other way

The real estate transaction is made up a conglomeration of professionals, each one with a real or a preceived duty to the parties at the settlement table.

Through our inattention to ethics and principle, we, the real estate industry, find ourselves surrounded by a vast quagmire of self-dealing, failed duty, and ethical breaches.

No surprise – claims are increasing

From the LandAmerica 1st Quarter 2007 results discussion section:

The provision for policy and contract claims as a percentage of operating revenue was 6.5% in first quarter 2007 compared to 5.6% in first quarter 2006. The increase in the claims provision ratio was primarily due to an increase in the frequency of claims reported which resulted in upward development in policy years 2004 through 2006. Since the Company is subject to liability on claims for an extended time period, slight changes in claims experience for more recent policy years can have a significant effect on the amount of liability required for potential claims.

If you read this and other title insurance blogs, this shouldn’t come as a surprise – the industry is having pay the piper for the problems ignored in the past few years.   Claims have a long tail – it takes years for them to materialize.  Expect to see more reserves and claims going forward.

Also don’t be surprised to see that two of the culprits – sham ABAs and signing agents quickly fall from favor with title insurance underwriters.