Classic Title claims Russian Mob Stole Money During Wire Transfer
PARKER, Colo. — It sounds like it’s from a movie, but a Parker family and a title company both say the Russian mafia is stealing money from wire transfers.
As a result, a Parker family may lose their home to foreclosure and they did nothing wrong.
“I don’t get why this can’t be cleared up today,” said Kim Canning, of Parker.
Canning and her husband, Tim, refinanced their home in September 2009. Canning thought it was a simple process — a few signatures and the deal was done. But a few months later she started receiving letters from Bank of America stating she had not paid her mortgage and they were going to begin foreclosing on her home. That’s when she learned the refinancing never went through and she might actually lose her home. Canning has now spent the last 11 months working the phones, doing everything she can to save her home. “We are not the ones that did anything (wrong),” said Canning. “We are just trying to refinance our home.” Canning refinanced her home with Classic Title Agency. At some point when Classic Title was transferring the funds online to Chase Bank, $900,000 disappeared.
President Ryan Rodenbeck of Classic Title said nine $100,000 transfers were stolen — $277,000 of that was part of the Cannings’ refinancing.
According to Rodenbeck, the Russian mafia intercepted it and stole the money. Bank of America, which held the Cannings’ first mortgage and was supposed to get the money, never did. Bank of America assumed the Cannings had just stopped paying their mortgage so they started the foreclosure process on the family’s Parker home.
“It has been absolutely humiliating,” said Canning. “All of these companies know we haven’t done anything.” Rodenbeck said there is “no clear cut trail as to who is responsible.” “You’ve got two people going like this,” Canning said, pointing her fingers, “and we are the only ones suffering — losing our home, losing our credit.” Rodenbeck said Classic Title is no longer wiring money online, which used to be routine practice.
But right now, the Cannings are still left in the middle, not knowing if or when they will lose their home.
“Honestly, we might be in the streets,” said Canning. Chase Bank declined to comment officially, but said its internal investigation proved they did nothing wrong. Chase Bank and Classic Title have agreed to meet on Tuesday to discuss if this can be worked out.
Reporters with 7NEWS have confirmed the Division of Insurance, with DORA, is involved. They are determining if any regulations or laws were broken during this process. They are also the ones who have encouraged the parties involved to find a solution and settle this so the Cannings are not negatively affected.
Reporters with 7NEWS contacted the FBI, which would not confirm or deny an investigation had been opened into this matter, although both Canning and Rodenbeck confirm they are investigating.
Source: http://www.thedenverchannel.com/news/24751718/detail.html
Posted in Agents by .
Prohibition Against Servicer-Specified Vendors for Fannie Mae Referrals
Servicing Guide, Part VII, Section 501.03: Allowable Attorney Fees, and Part VIII, Section 104.04: Attorney (or Trustee) Fees
Effective September 1, 2010, Fannie Mae is prohibiting servicers from directly or indirectly requiring or encouraging attorneys or trustees to use specified vendors in connection with Fannie Mae referrals, including, but not limited to, title companies, posting and publication vendors, and service of process vendors. Attorneys and trustees must be allowed to select vendors of their choice based on their assessment of factors such as the cost efficiency, quality, reliability, and timeliness of the services provided by the vendor.
Fannie Mae is also reminding servicers that their arrangements with vendors and other service providers, particularly affiliates, must not be tainted with an actual or perceived conflict of interest. Fannie Mae requires servicers, attorneys, and trustees to use the most cost-efficient and effective vendors to assist in processing Fannie Mae foreclosures and bankruptcy cases without regard to arrangements that could provide a financial benefit directly or indirectly to servicers.
If an attorney or trustee wishes to use a vendor that is either the servicer itself, an outsourcing company, or other third-party vendor utilized by the servicer to assist in servicing defaulted mortgage loans, or an affiliate of the servicer, outsourcing company, or third-party vendor, the attorney or trustee must obtain Fannie Mae’s prior written approval. Requests for approval must be directed to retained_attorney@fanniemae.com.
With recent revisions to the Colorado Title Insurance regulation 3-5-1 additional consumer protections was added.
Reasonable search and exam must be performed on all orders, in accordance with written standards of the underwriter
- Guards against improper short searches
- Helps ensure adequate protection against undisclosed matters
All commitments must accurately reflect current, vested owner or the property
- Protects against mortgage fraud
- Provides full disclosure to all parties in the case of double or flip transactions
No garbage exceptions (except in very limited circumstances)
Posted in 3-5-1 Regluation by .
If you’ve been selling real estate for any amount of time, you’re familiar with the standard owner’s title insurance policy and the protections it offers to buyers. A title insurance policy protects owners and lenders against errors in deeds, forgery, fraudulent conveyances, mistakes in public record, errors in estate proceedings, and many other matters. A mortgagee’s title insurance policy also insures the lender as to the priority, validity, and enforceability of the lien. Both the lender and the owner can request endorsements to the standard title policies in order to provide additional protections beyond the standard coverage.
What is an endorsement?
An endorsement is a rider attached to a Mortgage or an Owner policy to expand or limit the policy coverage. The title policy is designed for standard real estate transactions. Attaching an endorsement to the policy adapts the coverage to meet the needs of the insured. By issuing an endorsement, the insurer may take on additional risk normally not covered under the policy. A premium is usually charged for issuing any endorsement. There are a number of endorsements that have been adopted by the American Land Title Association (ALTA) for general use across the country. Colorado requires that fees for endorsements be filed with the Division of Insurance. Most of the approved endorsements may be issued with Mortgage policies, but not with Owner policies. Additional information not disclosed by the title search may be necessary before an endorsement can be attached to a policy. This may include facts set out on a survey or a check with the zoning department.
Do all policies need endorsements?
In many cases, the title insurance company will add specific endorsements to a policy to cover additional risks based on the location of the property and the type of transaction. Many lenders require specific endorsements for certain loan types or for added coverage.
Frequently Used Endorsements FORM 100:
Comprehensive Endorsement (Lender Coverage) Insures:
• That there are no covenants, conditions or restrictions that would impair the lien insured under Schedule A;
• That there are no present violations of any enforceable covenants, conditions, or restrictions;
• That, except as shown in Schedule B, there are no encroachments of buildings, structures or improvements located on the insured land onto adjoining lands;
• That there are no encroachments onto the insured land of buildings, structures, or improvements located on adjoining lands;
• Against damage to existing improvements located or encroaching onto an easement set out in Schedule B, resulting from the exercise of easement rights; and
• Any final court order or judgment requiring the removal from any land adjoining the insured land of any encroachment shown in Schedule B. Form 100 does not provide mechanic lien protection nor does it delete any of the standard exceptions.
FORM 115.1 (ALTA 4):
Condominium Endorsement (Lender Coverage, ALTA 4.1 for Owner) Insures:
• That the estate to be insured is a condominium (that is, it complies with all condominium statutes), and that the unit and its common elements may, by law, be assessed for real property taxes as a separate unit;
• Against present violations of restrictive covenants and assures that there are no restrictive covenants that would cause forfeiture or reversion of title;
• That the mortgage insured has priority over any lien for charges and assessments provided for in the condominium statutes and documents;
• Against any obligation to remove any present encroachment or future, unintentional encroachment of the common elements upon any unit or of the insured unit onto another unit or onto common elements; and
• Against the failure of title as a result of the exercise of a Right of First Refusal.
Posted in Colorado Title Insurance by .
Per the Division of Insurance as of May 1, 2010 Chicago Title of Colorado will begin charging:
O&E’s $5.00
add a Platt Map or CCR’s $9.00
TBD’s (as of May 27th) $100.00
Property Profiles .70 cents
To assist us in maintaining compliance with the Division of Insurance and you with the Department of Real Estate, Chicago Title of Colorado, Inc., is providing our clients with a simple user friendly method to order all of the products and services you have enjoyed in the past.
Chicago Title of Colorado
Posted in Chicago Title by .
Standard Ownership and Encumbrance Report $5.00
Heritage Title Company Colorado
Posted in Agents Heritage Title Insurance by .
New rules for title insurance in Colorado kick in May 1, according to the state Division of Insurance.
“The recent update to our regulation recognizes the inherent value in services provided by title insurance companies and agencies, and moves to ensure these entities are compensated for valuable services, rather than passing hidden costs back to consumers in the form of higher premiums and closing fees,” Colorado Insurance Commissioner Marcy Morrison.
Here’s a breakdown of the changes.
- Free property reports – title insurance companies and agencies are no longer permitted to issue property reports without charge. Also included in this prohibition is the issuance of preliminary title commitments without charge. These products represent a considerable expense for the title industry that are passed back to consumers in higher premiums and closing fees.
- Free classes for real estate agents – while title entities may still teach classes relating to title insurance without charge, any costs associated for classes not primarily related to the business of title insurance must be passed back to the attendees. Classes such as internet marketing for real estate brokers, or how to prepare a real estate contract, may not be provided without charge.
- Title commitments and disclosures – a number of updates affect the internal operation of title entities, including clarifications on what is considered a reasonable search and exam, disclosure requirements on the title commitments regarding true ownership of properties, and prohibitions against overly broad coverage exceptions.
- Consumer funds – title entities are no longer permitted to invest the funds they hold for other parties without first receiving written approval from the parties. A title entity that earns interest on fiduciary funds must disclose that interest was earned, and give consumers the opportunity to receive payment for any interest over certain administrative fees.
Source: Examiner
Posted in 3-5-1 Regluation Colorado Title Insurance by .
Hello everyone,
I am still (!) working on getting the FAQs finalized for publishing, but hope to get them out very, very soon. However, I think one question that has surfaced needs to be addressed now, so everyone is on the same page.
We have been hearing that some real estate brokers have been pushing the idea that, rather than just paying for an O&E, they can pay the usual price for a homebook, since O&Es are typically included. This way, they are paying just about the same as they would for an O&E, but getting more information than just an O&E. While this would technically work, it should be noted that the costs associated with O&Es provided in your justifications are going to need to be factored into your homebooks as well. So, while in the time of free O&Es a homebook may have been produced for under the current cost (ten to fifteen dollars), the requirement to charge for O&Es is going to drive up the costs associated with producing homebooks.
In other words, entities may want to be looking at their prices for other marketing materials as they relate to the requirement to charge for O&Es – just because they are included in a homebook doesn’t mean the cost can be absorbed.
Please feel free to share as widely as possible.
Thank you,
Andy Helm
Title Insurance Analyst/Investigator
Colorado Department of Regulatory Agencies
Division of Insurance
Compliance & Investigations
1560 Broadway, Suite 850
Denver, CO 80202
P 303.894.2194 | F 303.869.0201
www.dora.state.co.us
Posted in 3-5-1 Regluation by .
FREQUENTLY ASKED QUESTIONS
REGULATION 3-5-1 – TITLE INSURANCE
On May 1, 2010, the new version of Regulation 3-5-1 (the “Regulation”) takes effect. This document will answer some questions about the regulation, and includes both old and new information. This will be updated with new information as needed.
Section 5 – Rates and Fees
1. Do title agencies have to file their fees through SERFF?
No. Title agencies must file their fees with the Colorado Division of Insurance (the “Division”) on paper. All filings must include a cover letter, Form TA, a list and description of fees, justification for those fees, a statement of compliance, a side-by-side comparison for amended fees, and a duplicate copy of the filing with a self-addressed, stamped envelope.
(Bulletin B-5.18, Reg 3-5-1(5)(D), Reg 5-1-10, §10-11-118, C.R.S.)
2. What needs to be in the justification for title agency fees?
All justifications must provide complete support for the proposed fees. This includes itemizations of actual expenses associated with the fee, explanations of how those expenses are accounted for in the fee, and any other factors used in developing the fee.
(Reg 3-5-1(5)(D), §10-11-118, C.R.S.)
3. What are the rules for effective dates?
The effective dates for premiums and fees cannot be fewer than 30 days from the date the Division receives the filing.
(Reg 3-5-1(5)(D), §10-11-118, C.R.S.)
Section 6 – Standards of Conduct
4. What are the new rules for O&Es?
Free ownership and encumbrance reports (O&Es) are not permitted. Beginning May 1, 2010, all title entities must charge for O&Es. All charges must be properly filed with the Division.
Any charges paid for an O&E may be credited against the final premiums or fees if a transaction closes. Title entities should keep track of O&Es in a manner that will allow for documentation of these charges and credits.
(Reg 3-5-1(6)(D)(11), §10-11-108, C.R.S.)
5. What are the new rules for TBDs?
Free TBD commitments (TBDs) are no longer permitted beginning May 1, 2010.
Any charge paid for a TBD may be credited back at the closing of a transaction. Title entities should keep track of TBDs in a manner that will allow for documentation of these charges and credits.
(Reg 3-5-1(6)(D)(5), §10-11-108, C.R.S.)
6. What does subsidizing the production of free materials mean?
Businesses that do not issue title insurance commitments or policies are not regulated by the Division. These businesses are not subject to the prohibitions on free O&Es and other marketing products. Regulated title entities may not sponsor, advertise with, or in any other way pay these businesses in order to get around Regulation 3-5-1 and give customers free products.
(Reg 3-5-1(6)(D)(12), §10-11-108, C.R.S.)
7. Are there any products that may be given for free?
Title entities may give a single copy of the last recorded vesting deed on a property without charge.
When issuing a commitment for title insurance, a title entity may give copies of the background or exception documents for the property without charge.
(Reg 3-5-1(6)(F)(1) and (2))
8. What classes can a title entity teach?
A title entity may teach classes on any subject they feel qualified to teach. The rules, however, focus on what classes may be taught free of charge. If a class is primarily related to the business of title insurance (i.e. commitments, policies, closings, or any similar matters that pertain closely to title insurance) it may be conducted without charge to the attendees. This includes reasonable expenses for food and beverage, room fees, etc. If a class does not relate to title insurance (e.g. real estate marketing, real estate forms, etc.), then any costs associated with the class must be passed back to the attendees.
As an example of passing costs back to attendees, assume you are sponsoring a class on internet marketing for real estate brokers. You spend $200 on lunch, $50 on room fees, $10 on printed materials, and $40 in speaker fees for a total cost of $300. If there are 50 people taking the class, then each attendee must be charged at least $6 for the class. Note there are no tolerances for costs per attendee under a certain amount. If it costs you anything to perform or sponsor the class, you must pass back those costs.
If the same costs were associated with a class on how to read a title commitment, or what to expect at the closing table, there is no need to pass back any costs to the attendees.
(Reg 3-5-1(6)(D)(6)(a), Reg 3-5-1(6)(F)(5))
9. May a title entity “sponsor” an open house or other real estate broker event?
No. A title entity may not give money or any other thing of value to a real estate broker or other settlement producer in exchange for an advertising benefit at an event or which results in the substantial subsidization of the costs of that event. Title entities may participate in events if they maintain a physical presence throughout the event. For example, this means a title entity may have a table at an open house with refreshments and the title entity’s marketing materials if an employee of the entity is at all times present and engaging in the promotion of the entity’s services.
(Reg 3-5-1(6)(D)(6)(a), Reg 3-5-1(6)(F)(6(c))
10. May title entities provide sponsorships or participate in trade fairs or other industry events?
Title entities are permitted to participate in or provide limited sponsorships industry events such as trade fairs or golf tournaments, provided their costs do not result in substantial subsidization of the event, their costs bear a reasonable relationship to the benefits derived, and the event is a bona fide trade fair or industry association or trade group event (as opposed to a discreet settlement producer or company).
(Reg 3-5-1(6)(B), Reg 3-5-1(6)(D)(6)(a), Reg 3-5-1(6)(F)(6))
11. What are the rules for sharing office space with a real estate company or mortgage company?
Title entities, whether engaged in an Affiliated Business Arrangement (AfBA) or not, are permitted to share office space with settlement producers, subject to the following conditions:
• Rent must be equal to the fair market value of comparable space within the geographic area. This means the price per square foot must conform to other available space for any other business in the area. The amount a real estate brokerage could get in desk fees from another broker is not acceptable as a determination of fair market value.
• The space must be clearly identified through appropriate signage as belonging to the title entity.
• The space must be able to be locked and secured independently from the settlement producer’s space.
• The space must be directly accessible to the public without passing through the primary workspace of the settlement producer. Office space off the main reception area is acceptable. Consumers should not have to pass through the settlement producer’s desks or other workspace to get to the title entity’s office.
• All consumers must be given a disclosure telling them that an office sharing arrangement exists. The notice also shall notify the consumer of their right to shop for and use a different title entity or settlement producer. This requirement applies for both AfBAs and independent entities.
(Reg 3-5-1(6)(D)(6)(e), Reg 3-5-1(6)(F)(7))
Section 7 – Consumer Protections
12. What constitutes a “reasonable search and exam”?
All title insurance companies (underwriters) are now required to create written standards for search and examination for use by title entities (underwriters and agencies). These standards must comply with sound underwriting practices. While it is difficult to place a set standard on search and examination (for instance, not every transaction may require a search back to patent), it should be understood that practices that do not allow for a reasonable view of a property’s history are not permitted.
(Reg 3-5-1(7)(A), §10-11-106, C.R.S.)
13. What are the rules on Generic Exceptions (“garbage” exceptions)?
A generic exception is any overly broad exception that is not a standard or preprinted exception. A generic exception does not refer to a specific recorded document (e.g. Any and all roads, easements, rights of way, etc.). These exceptions are only permitted in cases where the proposed insured on a commitment has made a written request for a policy form that makes use of them. For practical purposes, it is expected that generic exceptions will only be used for such transaction as junior liens or lines of credit. It is anticipated that very few purchase transactions (i.e. owners’ policies) will make use of these exceptions.
Aside from the standard or preprinted exceptions, all exceptions on a title commitment or policy must refer to the specific recording information on the document. If a document is not recorded, the title entity should reference any identifiable information on the document. The identifiable information may include dates, names of parties, case numbers, etc.
(Reg 3-5-1(7)(D), §10-11-106, C.R.S.)
Section 9 – Fiduciary Duties
14. What are the general rules for holding money?
All money belonging to others must be deposited in a bank account that is separate from other funds (although one account may be used to hold all money belonging to others – you do not need a separate account for each transaction). Examples include portions of premiums that will be sent to an underwriter, earnest money, loan proceeds, escrows, etc. This account must be labeled or named “fiduciary account”, “trust account”, “escrow account”, or other similar name that identifies the account as one to be used solely for holding these funds. A title entity is prohibited from mixing these funds with any others, such as business or personal funds. A title entity is also prohibited from using the funds for any purpose other than that set forth in writing for a specific transaction.
(Reg 3-5-1(9)(A), Reg 3-5-1(9)(B), §10-2-704, C.R.S.)
15. Can I use a sweep account for my escrow account?
A title entity may deposit fiduciary funds (money belonging to others) into a sweep account or any type of account that uses that money as an investment or revenue generator. The title entity must get written authorization from the owner of that money before depositing it into the account. Not getting written authorization, or getting it after the money is in the account, will be viewed as a violation of the Regulation.
(Reg 3-5-1(9)(E))
16. Can I earn interest on my escrow account?
A title entity may earn interest on fiduciary funds as long as a disclosure is provided to all parties that interest has been or will be earned. The title entity must provide a means for payment of any earnings over and above an administrative fee. The disclosure may be given at any time up to and including closing. The disclosure must clearly state that a consumer may have the right to some of the interest earned (again, any money over any administrative fees involved in figuring the amounts earned). Any administrative fees charged by the title entity for this service must be on file with the Division before use.
(NOTE: These rules apply to voluntary CARHOF accounts; however, they do not limit or prohibit the requirements of attorneys to hold trust funds in COLTAF accounts.)
(Reg 3-5-1(9)(F))
17. What do I do if I receive earnest money without written instructions?
The new 3-5-1 provides a set of default instructions for title entities to follow if they receive funds without proper instructions. These instructions direct the entity to deposit the money into its escrow account and hold it pending receipt of instructions. If a deal fails, the instructions direct the entity to:
1. Release the money as directed by any instruction signed by both buyer and seller, or;
2. If there is no argument over who the money belongs to, hold it for 180 days, then return it to the original payor, or;
3. If there is an argument over who the money belongs to, either interplead all parties to the courts (i.e. turn the money over to the courts and let them decide who gets it), or send notice to all parties that the money will be returned to the original payor in 120 days if there are no court cases filed.
(Reg 3-5-1(9)(G))
Fee Filing and O&E specific questions
18. If a title agent or agency performs closing services in Colorado, does that individual or entity have to file closing fees, and closing fee justifications, as described in Section 5 of Regulation 3-5-1?
Yes. While the requirement is modified somewhat in the next question, any title agent or agency providing closing and settlement services in Colorado must have their fees on file with the Division, per 3-5-1.
19. May such agents or agencies use their underwriters’ filed closing fees? If they can, are they exempt from the above closing fee filing requirement?
Yes. If an underwriter has filed closing fees (and indicated they may be used by agents or agencies), it is permissible for the agent or agency to use their underwriter’s filed fees. However, agents or agencies should be careful in cases where they have more than one underwriter, as they cannot use one underwriter’s fees for another underwriter’s file. Additionally, if the agent charges any fees not on the underwriter’s filing (e.g. tax certificates), they must have those fees filed with the Division.
20. Is the O&E fee, and O&E fee justification, to be filed by agents and agencies that furnish O&Es?
Yes. As with closing and settlement fees, agents or agencies are expected to have their O&E fees, with justification, filed with the Division.
21. May such agents or agencies use their underwriters’ filed O&E fees? If they can, are they exempt from the above O&E fee-filing requirement?
If an underwriter files a fee for O&Es for use by their agents or agencies, it is acceptable for agents or agencies to use these fees without filing their own. However, there are many cases in which an underwriter may not be able to account for the individual expenses of their agents or agencies, so it may be preferable for the agents or agencies to file their own.
22. Since the performance of closing services and O&Es are service related and the justification must include an itemization of actual costs, how does an underwriter determine what the agent’s fees should be?
As stated in the answer above, it may be preferable for agents or agencies to file their own O&E fees, since they are best suited to determine their costs. Cases where an underwriter might be able to determine the costs of their agents or agencies could be situations in which an underwriter is actually producing the O&E for the agent, then forwarding the information to the agent for final delivery to a customer.
23. If an agent is permitted to use the fee filing of their underwriter, must they disclose which underwriter’s fee filing they are going to use, in the event of that agent has a contractual arrangement with more than one underwriter?
Yes. The same with publishing schedules of rates or fees, the name of the underwriter must be disclosed when using that underwriter’s filed fees. In cases where an agent has a contractual relationship with more than one underwriter, and intends to credit back any charge paid for an O&E upon closing of a transaction, it is best for the agent to have on file their own fees, since it may not be possible for the agent to determine the final underwriter when producing the O&E.
In general, with all of the questions above, it is preferable for an agent or agency to file their own fees with the Division, since they are the ones best suited to know and justify their expenses. However, the Division recognizes there are many contractual relationships in the industry that allow underwriters to produce products and maintain a control on and knowledge of the expenses of the agent or agency. In these cases, the underwriter may file fees for use by their contractual agents. It should also be noted that if an underwriter files fees for use by an agent or agency, they must be available for use by all agencies.
Posted in 3-5-1 Regluation by .
Mar 10
28
Regulators look into title kickbacks
Source - Garrison Wells
Colorado regulators are conducting an industry-wide investigation into illegal kickbacks in the title insurance industry, and expect to take a “significant” number of enforcement actions in 2010. The Division of Insurance plans to wrap up the investigation into payment of referral fees and inducements by midyear, said Andy Helm, title insurance analyst and investigator leading the investigation. The probe likely also will spark “a couple more offshoot investigations,” he said. “We think there will be more enforcement actions this year than last year,” Helm said. “Now, there’s less of a tolerance against going against procedures” because of a new state law that more closely regulates title companies. Last year, the division took seven enforcement actions against title insurance firms, according to its annual report to the state Legislature. There were 15 in 2008 and four in 2007. The most common actions are fines, license revocations and shutdowns.
In his investigation, Helm said he fired out 400 letters to title firms and received about 370 responses. He asked for every bank statement, checks and activities for every bank account for 2008. Helm said he looked at 500,000 checks. “It took me about three months to go through them all,” he said. “We were looking for checks that were cut to other title agencies or real estate companies that didn’t quite fit. As you go through a bank statement, you can see these checks are obviously from one file, but there would be other checks here and there that didn’t quite look like a commission.” Northern Colorado title professionals said they support the tougher stance. “I think the consumer needs to be totally confident that the close, on the biggest transaction they do in their entire life, is handled by a professional firm that has good financial backing and is not trying to do anything underhanded with other parties that could put their transaction at risk,” said Jill Mann, regional vice president for Heritage Title in Fort Collins. Heritage is owned by Fidelity National Financial.
Investigations nationwide It’s not just a Colorado issue. The title industry has garnered considerable attention from regulators and in courtrooms across the country. On the federal level, illegal kickbacks are investigated by Housing and Urban Development under the Real Estate Settlement Procedures Act or RESPA. Violators face a fine of up to $10,000 and a year in jail. Several states are at different stages looking into illegal referrals in the title industry.
Pennsylvania’s investigation is ongoing, and Washington State officials are now clarifying state law regarding kickbacks to real estate service providers after investigating illegal title insurance referrals. “We have a law that says it’s illegal to do a lot of the things that they were doing, things like free tickets, free dinners,” said Stephanie Marquis, spokeswoman for the Washington office of the insurance commissioner. “It was so pervasive that for us to take action against them, it was too time-consuming and expensive. So we said we are going to give you some time, but then we will go after you.”Doug Miller, a Minnesota lawyer and executive director for Consumer Advocates in American Real Estate, provided testimony to the U.S. Congress on illegal kickbacks in the title industry in 2006. In his opinion, the problem is rooted in Affiliated Business Arrangements, in which real estate service providers form entities to provide “one-stop shopping” for homebuyers. “I think they are all bad for consumers,” Miller said. “Any time you take competition out of the equation, they have no reason to provide great service.” Not everyone agrees with Miller’s stance, however. RESPRO, Real Estate Services Providers Council Inc., a national nonprofit which represents ABAs, takes the position that such arrangements provide lower rates and better service to homebuyers. “RESPRO members would tell you that there is greater accountability,” said Susan Johnson, RESPRO executive director. ABAs that follow the law, she added, are competitive on rates and service with independent title companies. “When you look at all illegal referrals there is no more likelihood of them in affiliated businesses,” Johnson said. “Because legally compliant businesses bend their resources to make sure that they are compliant with RESPA and other appropriate state laws, when illegal businesses enter their market, they are as frustrated as anyone.” She noted that RESPRO supports enforcement of laws banning illegal kickbacks. Chris Hardy, managing broker for Coldwell Banker Residential Brokerage in Fort Collins, also supports tougher regulation and enforcement. Coldwell has an affiliated business arrangement with Title Resource Group. “I think the division of insurance has the consumer in mind as they put together their regulatory environment,” he said. “I think that’s a good thing. You can see what happens in an unregulated environment.”