OPEN LETTER TO CONSUMERS PUBLISHED IN DENVER POST

Consumers made aware of Colorado’s outdated Regulatory environment

Consumers are informed of the importance and need to shop their title insurance and closing settlement services; so, they can save money and better protect their real estate transaction.


Homebuyers and Sellers Beware!

Cyber Criminals are Targeting your Closing Funds – Talk to the Title Company Directly

It’s extremely important that sellers and buyers communicate directly with the Title Company and not through their real estate broker or mortgage lender, when it comes to the closing process and the funds you are to receive or provide to the Title Company, as cyber criminals are trying to steal your money. Always verify any email notifications you receive, by directly calling and verifying such information with your Title Company; and do not respond or communicate in any manner with the sender of such email.


THE “SMOKE & MIRRORS” OF COLORADO’S FILED TITLE INSURANCE RATES

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Filed title insurance rates appear to be the same on the surface with little difference. For example: Filed rates for a $400,000 Owner’s Title Insurance Policy in the Denver Metro Area, among 9 title insurance companies, ranges from $1576 to $1,683 (as of 10-16-2018), a difference of $107. However, most title insurance premiums are calculated from filed rates based on various available discounted rate programs ( i.e., short term, reissue, and refinance), which effectively and substantially can create a premium difference of $1,500 or more, depending on the applicable discount program and value of the home.

Never rely on someone’s recommendation to use a certain Title Company, who says “title insurance rates are regulated and basically the same”. See through the smoke and get a comparison quote to see the real difference.


What’s the Difference, Arrangement and Compensation between a Title Insurance Company and Title Agent?

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The name “Title Company” is a generic and commonly used term in the real estate marketplace to identify a “Title Insurance Company” or their authorized “Title Agent”. However, there is a substantial difference between the two entities pursuant to Colorado law.

A Title Insurance Company is legally defined by C.R.S. – 10-11-102(10)
A title insurance company is a title insurer that protects the interests in one’s property, whether as an owner or lender. A title insurance company is also referred to in the real estate market place as a “title insurance underwriter” when associated with an authorized title agent.

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A Title Agent that is legally defined by C.R.S. – 10-11-102(9)
A title agent is basically a person or company that is authorized by a title insurance company to solicit and issue title insurance policies on their behalf. It’s important to note that a title agent may be authorized to issue title insurance policies on behalf of multiple title insurance companies/ underwriters.

The following facts should help you understand the working arrangements and compensation of a Title Insurance Company with their authorized issuing Title Agent:

    1. Many forms of insurance (i.e., homeowner’s, auto, health, disability & life) base their premiums on an unknown but established actuarial loss factor payout of 65% to 75%. Such insurance policies are all risk assumptions with minimal up-front loss prevention. Where title insurance is a form of insurance coverage that utilizes a costly up-front comprehensive preventative process to reduce the actuarial loss factor payout to 4% to 8% of the premium.
    2. With many forms of insurance, as identified above, the premiums are paid on a reoccurring basis, where the premium for a title insurance policy is only paid one time; and its coverages continue, even after you have sold your home.
    3. Title Agent typically remits 10% to 20% of the premium (premium remittance fee) to their title insurance company/ title insurance underwriter, which remittance is used to cover policy losses, reserves and operational expenses.
    4. It’s not uncommon for a Title Insurance Company to compete in the same market place with an authorized Title Agent, charging the same publicly filed title insurance rates
    5. In addition to providing title insurance services, a Title Agent or Title Insurance Company also provides real estate closing services. Such services include the preparation of the necessary legal and closing settlement documents, and the receipt, accounting and disbursement of the monies for closing the transaction.

Hopefully, this information has helped you better understand the working differences, arrangements and compensations between a Title Insurance Company and its authorized Title Agent.


Real estate brokers control their business costs, but don’t shop their client’s title insurance & closing settlement costs?

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Many Colorado licensed real estate brokers / Realtors® will balk at having to spend an additional $15 a year for their state required errors & omissions insurance, pay higher office /desk fees; and will shop their signs, lock boxes and advertising services. So why, do many brokers not care about the cost of their client’s title insurance and closing settlement services, which can possibly save them up to $1500 or more?

When asking brokers about recommending a Title Company and shopping the title and closing services and costs for their clients, their responses are as follows:

“It’s not about costs, it’s about getting good service and making sure the transaction closes smoothly”;
“The difference in cost is minimal to the value of the transaction”;
“I recommend XYZ Title Company because they have a great real estate closer / salesperson”;
“I have an ownership interest in XYZ Title Company and get a dividend check”; or,
“The title rates and closing fees are regulated, there’s not much difference”

To the contrary, many brokers will shop the title insurance and closing services for their personal real estate transactions. However, the real reason brokers don’t shop and compare services and costs when recommending a Title Company to you is because the Division of Real Estate that regulates real estate brokers states that brokers have no legal duty to do so, unless specifically requested by the client.

One would assume, that getting the best price when selling or buying your home, would also include paying reasonable associated closing costs, including your title insurance and closing services. It’s for this reason that CompareTitleCompanies.com was designed to educate and empower consumers with the ability to easily shop, compare and select their Title Company; or clearly request their broker to shop these services and costs.


The “Annual Report of the Commissioner of Insurance to The Colorado General Assembly on Title Insurance” fails to make needed consumer protection recommendations

 

Since January 1, 2009 and pursuant to C.R.S. §10-3-207(1)(f)(IV), the various Commissioners of Insurance have failed to make any legislative consumer protection recommendations to the Colorado General Assembly, in spite of the following reported title company defalcations and cyber -thefts that have cost consumers millions in losses that were never mentioned in these Annual Reports.

2017 Annual DOI Title Insurance Report

2016 – Williams Title & Foresight Title – Owners embezzles $600,000
2014 – American Title Services – Owner embezzles $4,700,000
2011 – Premier Title – Owner embezzles $600,000
2011 – Quantum Title – Owner embezzles $3,000,000
2010 – Classic Title Agency – Cyber theft $900,000

It’s is interesting to note, that in each of the Annual Reports since 2009 including the one the 2017 report issued in January 2018, the Division of Insurance makes the following statement in their opening letter to the legislative committee members stating, “Our mission is consumer protection and we appreciate the opportunity to report the activities of our title insurance regulatory team, and how we respond to consumers’ needs.”
It appears the Division of Insurance does not understand what it takes to protect consumers. Also, how can the Colorado General Assembly, unless properly informed, take the necessary legislative action to correct any problems in how the business of title insurance is regulated, for the benefit and protection of consumers?


Colorado Title Insurance Commission created in 2015, fails to make much needed consumer protection recommendations to Commissioner of Insurance

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Colorado Senate Bill 15-210 (C.R.S. 10-11-102) created a new Title Insurance Commission (TIC), which included the following identified powers, duties and functions:

(1)(c) PROPOSE, ADVISE, AND RECOMMEND THE ESTABLISHMENT OF ADDITIONAL CONSUMER PROTECTIONS IN STATUTE OR RULE RELATED TO THE MISAPPROPRIATION OF FUNDS, MISUSE OF PERSONAL INFORMATION, CLOSING AND SETTLEMENT SERVICES, OR OTHER CONCERNS. ADDITIONAL CONSUMER PROTECTIONS RECOMMENDED BY THE COMMISSION SHALL BE PROVIDED TO THE COMMISSIONER AND INCLUDED IN THE ANNUAL REPORT OF THE COMMISSIONER ON TITLE INSURANCE PROVIDED UNDER SECTION10-3-207 (1) (f) (IV).

For some unknown reasons, this new advisory Commission to the Commissioner of Insurance, has failed to make any consumer protection recommendations to the Commissioner of Insurance for inclusion in the Annual Reports of the Commissioner of Insurance to The Colorado General Assembly on Title Insurance. How will the Colorado General Assembly ever become aware of the need for more legislative consumer protections regarding the business of title insurance, especially after numerous defalcations by title company that has caused harm to many consumers?

The Title Insurance Commission doesn’t appear to understand its expectations and duties, which is a failure for consumers who need to be better educated and protected regarding the business of title insurance and closing settlement services.


A “CLOSING PROTECTION LETTER” (CPL) PROVIDES CONSUMERS WITH ADDITIONAL ASSURANCES AND PROTECTIONS

Closing Protection Letters (CPLs) are permitted and available in Colorado to buyers, sellers, borrowers and lenders; and surprisingly at minimal ($25) or no additional costs.  A CPL is issued by a title insurance underwriter that provides assurances and protections regarding their authorized title company/agent’s failure to comply with closing instructions and disbursement of funds to effectuate title; and against fraud, dishonesty or negligence of the issuing title company/ agent in the handling of funds or documents in connection with a real estate closing.

What is interesting and not known by many is that these CPLs are only issued when requested.  For some unknown reason Colorado title companies, don’t see the need to openly promote the availability of CPLs to real estate professionals or consumers.  On the other hand, most lenders know to request and obtain a CPL before they will ever fund a loan to a title company.

So, remember to ask your real estate professional when they order your title and closing services to request a CPL for you.

More protection is always better!


SELLING, BUYING OR REFINANCING YOUR HOME, SHOP AND SAVE THOUSANDS?

It’s an open and competitive market place for real estate commissions, mortgage loans, title insurance & closing services, homeowner’s insurance, and home inspection services, which when properly shopped can add up to thousands of dollars of potential savings.

In fact, according to data recently released by ClosingCorp, the national average closing costs (i.e., lender’s title policy, owner’s title policy, appraisals, closing settlement fees, recording fees, surveys and transfer taxes) for a single-family property totaled $3,438 excluding real estate taxes.

If your real estate broker or mortgage lender recommends a particular Title Company, always ask it they shopped and compared the services, protections and costs.

Remember, it pays to shop and compare.