Maryland's title insurance industry, which annually does $15 million worth of business on real estate settlements, is waging a fierce lobbying battle here against legislation that would allow the state to investigate the industry's controversial practices for the first time in 32 years.
After nearly a month of consideration, the General Assembly's House Economic Matters Committee voted Friday to approve a bill that would force the title insurance companies to disclose their rates, fees and profits to the state's insurance commissioner, who could then order changes in the rates or recommend new regulations to the legislature.
The committee's vote represented, in effect, a draw between consumer advocates and the title insurance lobbyists, who battled over the measure and the committee's votes on it during a series of hearings and work sessions during which the bill was nearly killed, postponed, or gutted three times.
In the end, two influential title insurance lobbyists -- including one who is a former House speaker -- managed to weaken the legislation during a closed meeting with committee members last week to which the sponsor of the bill was belatedly invited.
Now, the lobbyists are focusing on the full House and Senate, where they are attacking changes in the bill that they endorsed in the closed meetings. "A lot of squirrely things are happening to this bill," said its sponsor, Del. Luiz Simmons (R-Montgomery). "It's almost a miracle that it's still alive."
Simmons introduced the controversial bill after his staff completed a lengthy study of title insurance companies, which issue policies that protect home buyers from challenges to their property ownership.
Title insurance is usually required by lenders as a condition of any mortgage loan. For a onetime payment of several hundred dollars, the insurance guarantees that the title to the property is clear of any claims and that if a dispute over the title arises, the home buyer and the mortgage lender will not lose their investments.
A two-month investigation by The Washington Post last year revealed many questionable practices in the title insurance business, including the fact that $75 of every $100 collected goes to lawyers, bankers, developers and real estate people who serve as middlemen and do little more than refer home buyers to insurance firms.
Simmons' study showed that the premium earnings of Maryland title insurance companies have increased by an average of over 100 percent a year since 1946, while their losses remained at a fraction of those common to other insurance businesses.
Much of these earnings are commonly doled out in large commissions and fees for lawyers, bankers, and real estate brokers who steer home buyers to particular title insurance companies.
Meanwhile, the state's insurance commissioner, who theoretically should regulate the industry, has been unable to do so because of a law requiring insurance companies to disclose their commissions and profits only when they apply to the state for rate increases.
Since 1948, it has been unnecessary for title insurance companies to apply for such increases because their rates are tied to the rapidly escalating prices of homes.
Simmons' original bill would have required title insurance companies to disclose their earnings to the state once every two years, allowing the insurance commissioner to alter their rates or propose other regulations if he wished.
The measure immediately ran into opposition in the Economic Matters Committee, however, as the panel's influential chairman, Del. Frederick C. Rummage (D-Prince George's) said he thought the bill was unnecessary and should not pass.
Rummage was supported by several other members of his committee and by two powerful lobbyists, J. Cookman Boyd and John Hanson Briscoe, a former speaker of the House who was hired by the Title Guarantee Co. to work against the bill.
For days after the bill's first hearing in late January, the lobbyists competed over votes in the committee chambers and Statehouse hallways with Simmons, an aggressive and shrewd first-term delegate with a talent for attracting political and media attention to his causes.
Eventually, Simmons managed to collect commitments from a majority of the committee members before the bill was scheduled for consideration. It was that success, several committee members said, that derailed a plan by Rummage -- announced several days in advance -- to send the bill to a summer study group, effectively killing it for this year.
Instead, after meeting with Simmons, Rummage assigned the bill to a subcommittee headed by the committee's vice chairman, Del. Casper Taylor (D-Cumberland). It was in Taylor's office, after two closed meetings with Briscoe, Boyd, and Insurance Commissioner Edward Birrane Jr., that the final measure was drafted.
In those meetings, the subcommittee decided to delete the biannual reporting requirement for the title insurance companies, and instead force them to make a onetime disclosure of their business practices by September.
The information would be used by state officials for a study on industry practices that would be due by the 1981 Assembly session -- along with recommendations for any new regulations the state feels are needed.
The most controversial portion of the bill would allow state commissioner Birrane to fund the study by assessing the title insurance companies. The title insurance lobbyists supported this idea in the closed subcommittee meetings, according to committee members, but now are publically using it as a primary argument against passage of the bill.
Simmons, who was invited to the drafting meeting only after the new bill had been agreed on, is now saying that the title insurance companies are "deliberately trying to pull the rug out from under the bill by negotiating in bad faith."
Some committee members are wondering if the funding provision -- which narrowly survived one attack at the Friday voting session -- will eventually cause the legislation's downfall in the full House or Senate, with the help of the title insurance lobbyists.
"It's a reversal-double-reversal type of thing," said Del. David Shapiro, one of the bill's leading supporters in the committee. "The title insurance people supported this provision, and now it's given them the out they need to kill the bill."