Kenneth R. Harney’s Aug. 16 The Nation’s Housing column, “Is your broker receiving a kickback on the fee you pay for title insurance?” [Real Estate], reported that the Consumer Financial Protection Bureau (CFPB) has stepped up its investigations and enforcement actions against brokers and title companies and that the bureau “recently settled with one large realty broker for $500,000.” For title insurers and regional realty brokerages, such a penalty is just a cost of doing business and is an ineffective deterrent.
In 2007, the Government Accountability Office reported to the House Committee on Financial Services that 80 percent to 90 percent of premiums on title insurance are retained by title agents. The GAO provided recommendations on how to change this arrangement, but by then the House member who had requested the report, Rep. Michael G. Oxley (R-Ohio), had left Congress, and his replacement as the chairman of Financial Services, Rep. Barney Frank (D-Mass.), had different priorities.
The GAO observed that “complaints from consumers have been rare because . . . they generally do not know enough about title insurance to know that they have a problem.” If the GAO’s road map were followed, homeowners would become aware of the diversion of their premium dollars and demand that it end. The GAO’s recommendations were directed to state regulators, but surely the CFPB, now the federal overseer of title insurance, could use them. It would be fitting if the CFPB, whose very existence owes much to Mr. Frank, were to build on the GAO’s excellent work and deliver meaningful reform.
Steve Adkins, Fairfax