WA State Cracks Down on Title Insurance Company Inducements
June 18th, 2008 • Related • Filed Under
Mortgage brokers, loan originators, and real estate agents have all been warned NOT to accept any inducements from title insurance companies. Giving OR receiving an item of value in exchange for a referral of a federally related loan is already illegal under RESPA. However, HUD auditors do not routinely wander around inside real estate offices and mortgage companies checking out the latest title insurance company give-a-ways. A law without inforcement is basically like having no law at all. Most of the enforcement has been left up to state regulators. Read this blog post for more details.
Do you believe this new law will help level the competitive playing field within the title insurance industry? If yes, why? If no, why not?
There must have been some particulary serious violations that prompted this law. Wouldn't it have been easier just to make ...
When the issue of fudicial responsibility began coming to the forefront I felt a sense of relief. I guess I ...
Comment by Rita Green on 10 August 2008:
I do not believe this new law will help level the competitive playing field within the title insurance industry,in fact it may make it less competitive. Brokers/LO’s are going to use Title Companies that they have built relationships with. To gain and attract new business a Title company will have to entice the LO’s/Brokers to try them and if I already have a company that I enjoy working with, the only way to get me try a differnet company might be to entice me with a some sort of incentive. I try you and determine if your service was up to par with my preferred Title Company.
Now I may as well stick to my preferred Title Company. If ain’t broke, why try another company?
Comment by Kevin Haynes on 8 September 2008:
No, I don’t think it will matter. It is all about relationships that have been built up over time. For the newer people in real estate or mortgages it will be up to the title company to provide good service and value to attract new business.
Comment by Stephanie Grosely on 10 September 2008:
I think that the relationship between broker and title company should be based on service. With that said, I think this will level the playing field, in that brokers will be forced to focus on the service that they’re getting rather than the gifts they were receiving in the past. I really doubt if the title reps. can no longer provide perks, that the brokers/LO’s will continue to send them business if their office isn’t cutting it for time and accuracy. I can’t count the number of times I’ve been forced to use the listing agent’s title and/or escrow company, who can’t tell their left from their right. It gets very frustrating.
The blog also said that using the same title/escrow company may target you for an audit…but why would you use anyone else if you’re happy with the service you’re receiving? A good, reliable escrow company is VERY hard to come by.
Comment by Jay on 22 October 2008:
I strongly disagree with Stephanie that “a good, reliable escrow company is VERY hard to come by.” I know of several in Western WA, and each one would welcome ethical brokers/LO’s to direct business to them.
And by the way, stop looking for “good, reliable escrow” services in companies that have their hands in another pot that is part of the transaction, i.e., the mortgage broker or the title company that also do escrow in addition to their main cash cow business.
The “good, reliable escrow” companies tend to have several characteristics in common: (1) they are licensed (title companies are not); (2) they are owner-operated, and the owner is usually also the Designated Escrow Officer; (3) the licensed, owner, Escrow Officer tends to have somewhere around 10+ years experience in closing; (4) they very likely have never had a claim … ever; ask them; and (5) they tend to be service-oriented, over the top givers for the well being of their customers. Finally, (5) they understand the meaning of “neutral third party.”
By their own admission, the WA State Office of the Insurance Commissioner admits it has not audited a single title company escrow operation in 2008 … falsely and lamely claiming they don’t have the authority. Give me a break!
Comment by Michael Belisle on 3 November 2008:
Mortgage companies use escrow and title companies that are good at what they do and are honest. The relationship is built on time and trust not kickbacks. I am sure some companies were making a lot of money off each other by steering clients but I have not seen it where I work.
Comment by Jeff Rafuse on 4 November 2008:
My first impression of this law, before researching further was that it likely wouldn’t make much of a difference. Perhaps that is because I didn’t realize the extent that some people were benefitting from these these title company gifts. Yes, I think this law should help create a level playing field in the title industry. It may take some time, as past gifts likely cemented a lot of relationships that will continue for some time, but over time, I feel this regulation will promote an environment where relationships are based on services, which is as it should be.
Comment by John Mayfield on 5 November 2008:
Well, this could get tricky. Yes, it is going to curb enticements to some degree but this is only talking about monetary value. What about time. Can’t this force Title & Escrow to ‘push’ certain LO’s files in front of others. They could certainly entice an LO by having their files move faster than others. Title & Escrow know how important it is to LO’s to close quickly. This form of inducement is not mentioned but should have been addressed. They will find ways around it.
This might be off topic but what about appraiser’s offices? They bring in gifts, lunches, etc. Shouldn’t they be subject to the same law of doing business in WA?
Comment by Denise Swafford on 10 November 2008:
I don’t think that this will change the playing field. There are only a certain amount of title companies in the area. I have never paid attention to the goofy trinkets that are showered upon brokers by vendors. It has always come down to service and fees. Key chains and coffee doesn’t matter if I can’t get the them to the closing table.
I think that this will be difficult for the state to monitor and correct.
Comment by Sandi Paradiso on 14 November 2008:
I don’t think this will change a thing. It’s all about relationship and the ones who want to take a chance are going to take that chance another intergrity thing. like Denise it’s not about the trinkets, it’s about service and fees. I don’t know how the State thinks it can monitor all of it. I’m sure allot of this goes on and nothing will change for those who want to continue bucking the system
Comment by Catherine Rawlins on 18 November 2008:
There must have been some particulary serious violations that prompted this law. Wouldn’t it have been easier just to make all title/escrow company owners take a 30 hour class on RESPA?
Like the other comments above…my choice of which company to use for a refinance transaction has always been based on the quality of service and competitive fees. The playing field has always been level in my community.
It seems like the State has bigger problems to worry about right now.