How to compare title insurance service providers

Pending home sales in the Washington, DC metro area are nearly as high as they were two years ago when the $8,000 federal first-time homebuyer tax credit was still in effect, another sign that the market is poised for a turn-around.

That's good news for sellers. More buyers hopefully means homes are spending less time on the market and fetching offers closing to the initial asking price.

Happy birthday, REAL Credit™

This month, Federal Title & Escrow Company’s innovative REAL Credit™ will celebrate 10 years of providing substantial closing cost savings to home buyers.

Ten years ago, against the pressures of sharing our revenues with real estate firms, we bucked the trend, remained an independent settlement service provider, and decided to give the money back to the home buyer instead of the referring real estate firm. We named it the REAL Credit™.

While most of our competitors, at the expense of the home buyer, were jumping into bed with referral sources through Affiliated Business Arrangements, Federal Title got busy figuring out a way to reward the home buyer instead of the referral sources. Seems only fair – right? I mean, after all, it’s the home buyer who pays the costs, not the referring real estate firm.

The REAL Credit™ has served over 20,000 home buyers during its ten years, saving home buyers over $8 million dollars.

Let me repeat, unlike most other title companies, Federal Title has shared over $8 million of its revenue with home buyers instead of sharing that same $8 million with a referral source in exchange for the referral of business.

YES, it’s legal.

Our competition, most of who are beholden to their affiliated referral partners and, as a result, cannot compete with the costs savings realized by home buyers using the REAL Credit™, continue to spread falsehoods to real estate agents and others within the marketplace that the REAL Credit™ is somehow illegal.

It is not illegal.

The respective insurance commissions for DC, Maryland, and Virginia have all reviewed the REAL Credit™ and given it a “Thumbs UP.” Not only is it legal, it’s the right thing to do for the consumer.

Combined with Federal Title’s advanced technology and superior customer service, the REAL Credit™, after 10 years, remains the most innovative and consumer-friendly approach to improving the title insurance industry.

RESPA reforms golden opportunity for title agents to ramp up direct-to-consumer marketing efforts

There's been a push to improve consumers’ ability to shop for title services and encourage price competition since about April 2007, when the U.S. Government Accountability Office released its Report on Title Insurance.

More recently, the RESPA reforms of 2010 were intended to lend more transparency to consumers for easier price comparison among settlement service providers.

Independent agencies reject affiliated business arrangements: Washington Post

Over the weekend, the Washington Post Real Estate Section published an article by nationally syndicated columnist Ken Harney describing a sea change in the title insurance industry where transparency and honest rates are becoming more commonplace.

Toward the bottom of the story was a nice mention of Federal Title and our REAL Credit program as shining, local example of a title company rejecting the old practices of the title insurance industry in favor of a business model that benefits consumers.

Needless to say our office was pretty thrilled.

We believe consumers should know they have the right to choose their title company based on factors such as price, customer service, years in business, responsiveness and reliability.

We encourage homebuyers to shop for title services and offer them a breadth of information on our Web site to help them make the decision that is best for their situation. For years we've published our rates on our Web site and offered homebuyers and their agents a free online closing costs calculator to help them gauge how much money will be needed for settlement.

If Harney's article is any indication of the future of the title insurance industry, then it seems Federal Title's business model is finally becoming the norm instead of the brow-raising exception to the rule.

And the rest of the pack is following suit, as Harney writes: "A handful of agents in states where regulations permit discounts off closing-packages are now offering them. Plus growing numbers of title agencies are gearing up software platforms to provide services to consumers: online rate quotes, transaction updates ­notifying customers about the status of their title order. Some are even e-mailing documents in advance of closings for customers’ inspection, rather than hitting buyers with last-minute settlement surprises."

REAL™ Credit O.K.'d by D.C. government

REAL™ Credit O.K.'d by D.C. government

We've caught a lot of flack lately over our REAL Credit™, with some of our competitors saying the progressive program is a violation of D.C. Code.

After consulting the District of Columbia’s Department of Insurance, Securities and Banking (DISB) for guidance, DISB released a bulletin clarifying their position. According to DISB, a title company may provide a settlement discount (e.g., REAL Credit™) to a homebuyer so long as the credit is tied to an "action that improves the efficiency of the settlement transaction, such as applying electronically."

Real Credit™ is allowed

Federal Title’s REAL Credit™ is perfectly legal since it is awarded to a homebuyer only when a homebuyer or the homebuyer’s agent orders settlement services through the online order system.

DISB approved Federal Title’s REAL Credit™ on the basis that it:

  • 1) improves the efficiency of the settlement transaction;
  • (2) does not rebate any of the title insurance premium; and
  • (3) is awarded to a homebuyer exclusive of whether the homebuyer elects to purchase owner’s title insurance coverage

Federal Title’s proprietary online order & workflow system allow for a more efficient, transparent and error-free closing. In regards to ordering settlement services, scheduling and notification, the online system:

  • (1) Automatically confirms an order notifying all parties to the transaction together with a guaranteed quote for costs of title charges and transfer/recordation taxes.
  • (2) Automatically disseminates e-mail correspondence, with embedded online forms, to all parties (e.g., title abstractor, land surveyor, real estate agents, lenders, homebuyers, and sellers)
  • (3) Automatically delivers a preliminary HUD-1 to the lender to assist in the preparation of an accurate Good Faith Estimate

What's not allowed

Essentially, a title company may not offer a discount or credit unless it provides a "reasonable basis" for doing so. In other words, a title company may not rebate, or provide a credit against, any cost of the title insurance premium or provide a credit to a homebuyer which is contingent on the purchase of owner’s title insurance.

According to our contact at the DISB, who is tasked with aggressively monitoring title insurance activities and enforcing D.C. Law, the following are examples of discounts or practices that would be prohibited:

  • A title company may not offer to match or beat any competitor’s fees
  • A title company may not offer to purchase a home warranty on behalf of a homebuyer
  • A title company may not offer a settlement discount that requires a coupon
  • A title company may not offer a settlement discount “at the closing table” as a result of negotiations by any party during settlement
  • A title company may not offer a settlement discount only if a settlement client does not qualify for a reissue rate

DISB is charged with the enforcement of a recently enacted statute (D.C. Official Code § 31-5041.07), which prohibits a title insurer from inducing a homebuyer to purchase title insurance.

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Our blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. Rate tables and figures that appear on our blog are deemed reliable but not guaranteed. For current rates & policies, refer to our Quick Quote and Consumer Guide. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on our blog.