California toughens requirements for title marketers
September 26, 2008
• Will now have to be licensed
• Designed to end payoffs
Representatives of title marketing firms will have to get a license of they plan to work in California under a new law.
The requirement is designed to put an end to payoffs that often raise the cost of title insurance for new homeowners, says state Sen. Sam Aanestad, R-Grass Valley, author of the measure.
“Investigations by state regulators have shown that representatives from title insurance firms take advantage of the fact that most people do not shop around for title insurance, as they would shop for the best deal on a new car or television,” says Mr. Aanestad. “Instead, what has developed over time is a business practice by some in the industry that involves payoffs and other inducements to real estate agents, lenders and homebuilders to obtain the homeowner’s business. Those costs are then passed on to the unsuspecting homeowner.”
The legislation addresses the problem by creating a formal registration process for title marketing representatives and requiring title insurance companies to provide training to their marketing representatives on the illegal rebate statutes.
The new law also authorizes the California Department of Insurance to take enforcement actions against individual title marketing representatives and discipline those who violate the law by suspension, restriction, and revocation of their certificate of registration. This would be a change from existing law that presently allows actions to be taken against title companies but allows the representative to move to another company.
Title insurance is a contractual obligation that protects against losses that occur when a property is not free and clear of legal defects such as liens, encumbrances and defects that are unknown when the title policy was issued.
“It is pro-business and it is pro-consumer. By curtailing the practice of some real estate agents and brokers who recommend a specified title insurer to clients due to the use of incentives offered by some title marketing representatives, it promotes real competition in the title insurance marketplace,” says Mr. Aanestad. Competition among insurers can transfer into lower rates and a better deal for home buyers.”
The title industry says it likes the new law.
“SB 133 enhances consumer protection while maintaining the healthy, competitive title insurance marketplace in California,” says California Land Title Association Executive Vice President Craig Page.