WE’RE HEARING about our sister industry, the title insurance industry, from California, Illinois and Washington. For the most part what we are hearing is aggravation for title underwriters relating to their title agents. In case you are not familiar with the minutiae of title insurance there are a few main title insurance companies out there and they all have a lot of agents. Think of the agents as branch offices. Maybe as an oversimplification think of it as parent and child.
In the great state of Washington the Supreme Court recently decided a case relating to marketing by a title agent. All businesses have to market to stay in business. Some businesses are more regulated than others and in Washington there are rules that title insurers and their agents have to follow. Oddly this Supreme Court decision overruled another Washington Appellate Court that had sided with the parent title insurance company.
The Supreme Court held that the parent title insurer was responsible for its agent’s regulatory violations under both statutory and common law theories of agency. Basically you have to keep an eye on what your agent is doing otherwise it will bite you in the behind. The court’s decision referred to the title insurance business model as one of “reverse competition” and that “title companies spend nearly all of their marketing budgets wining and dining middlemen in order to gain referrals.”
Well that statement by the court probably applies to a lot of different industries. Today there is a lot of competition in the title industry especially with Realtors opening their own title insurance related businesses. Many title insurance industry websites are promoting marketing techniques such as the web for independent title agents to use to gain market share. As I have said many times it just keeps getting harder and harder out there.
Over in Illinois a law was just passed which seems like a no brainer and one you would have thought was already in place. Anyway as of Jan. 1, 2014 a title agent may not have an owner, officer director manager etc who has been convicted or plead guilty to a crime (felony/misdemeanor) involving theft or dishonesty. Also if you were one of those persons and are licensed and then get convicted or plead guilty either you have to go or the title agent’s license is going to go bye bye.
In California Gov. Jerry Brown signed into a law a bill that was supported by the California Land Title Association. This one may seem like a consolation prize in light of the above matters but a win is a win as they say. In California there is legislation to protect consumers in foreclosure and encourage workouts, etc. With the bill that was signed into law a title insurance company cannot be fined for recording a document relating to a foreclosure that should have not been recorded during a workout period.
Also in California Brown signed into law Assembly Bill 1091 which relates to the mortgage industry. If a state regulated mortgage licensee (lender, broker LO) is violating the prohibition on false or misleading representations about the terms of a loan or false advertising in general then expect a citation (not a good one) with a fine up to $2,500 and or a cease-and-desist order. Now would be a good time for California licensees to review their policies about these prohibited practices.
Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at firstname.lastname@example.org.