Barlow pointed out that the District is not setting title insurance rates or settlement fees. Rather, the regulation simply makes illegal the prior, common practices of offering negotiated discounts at the settlement table. Not all discounts are illegal. For example, the regulations permit discounts for employees of the settlement company; to repeat customers, or for actions that improve the efficiency of the settlement transaction, he said.
Both Maryland and Virginia have regulated title insurance rates but not settlement fees. Maryland and Virginia have also limited the scope of their regulation to the title insurance premium. Whereas, the District now seeks to regulate not only the title insurance premium but also all settlement fees, including, potentially attorney’s fees incurred in connection with the sale of title insurance.
The new regulations are “absolutely not pro-consumer, just the opposite,” according to Todd Ewing, president of Federal Title and Escrow in the District. Ewing echoed the sentiment that these regulations “entrench the affiliated business arrangements to the detriment of the consumer.”
Shopping for title services could save D.C. homeowners up to $1,180 per closing, according to an independent study commissioned by Federal Title. That same study concluded that Maryland and Virginia consumers could save up to $900 per transaction when permitted to comparison shop for title services. That study, conducted in early 2011, compared Washington area-based title companies that published their settlement fees on their Web sites.
Yet the new law does not require settlement services providers to disclose their fees in writing or publish them on their Web site. The new law creates a huge disincentive to continue to publish settlement fees and costs since those disclosures could later be used by the District as evidence that those fees were not applied in all similarly situated settlements.
Violations of the new regulations carry stiff penalties of up to $2,500 for a first violation, $5,000 for each successive violation and revocation or suspension of the title insurance license. No doubt title agents will be erring on the side of strict adherence to their published fees, if any, or documenting every file to make sure to justify any variance from fixed fees for all similarly situated consumers.
Time will tell how many independent title agents will be around next year to “compete” with the affiliated title companies who now no longer need to worry about price competition.
Harvey S. Jacobs, Esq., is a partner in the Rockville law firm of Joseph, Greenwald & Laake, P.A. He is an active real estate investor, developer, landlord, settlement attorney and lender. This column is not legal advice and should not be acted upon until legal counsel has been consulted. He can be reached at email@example.com.