Since this blog should put me over the 100K total, I'll revert to my 'roots' and rant about ABA's (or correctly, AfBA's) and how....... I HATE THEM.

What is an AfBA?  "An AfBA is an arrangement to share or refer business between two different companies involved in providing services in the closing of a real estate transaction. There may be ownership interest of a party in both the business referring out the service and the business receiving the referral.

The practice is not illegal, but is regulated by RESPA to assure full disclosure to the consumer of any relationships where business is referred in this way.

Examples: When a real estate broker has a 25% ownership in a title insurance company and refers business to that company for her real estate transactions, this is an AfBA." http://realestate.about.com/od/thetransactionprocess/g/afba_respa.htm

My Title company, Bertrum Settlements, does not engage in such a business arrangement. Perhaps we will or perhaps we won't down the road...this post is my personal opinion and 'hatred' of such blatant steering and use (abuse) of a consumers lack of knowledge regarding Title Insurance and Closing costs.

Personal interviews with 30 + Re/Max Realtors in Berks County PA revealed an overwhelming response regarding use of Bertrum Settlements or ANY other Title company than their 'in-house'.  "Why would I use someone else when I get paid from my own Title company..."

At least 8 agents I've personally spoken, and many more I heard second hand from a KW agency in Lehigh County in PA indicate a kicker on top of the money they receive.  They overwhelmingly "...hate (their word) their in-house Title Company because they are incompetant but are pressured by the broker owner to use them."

Then I remembered our buddy Ed Rybczynskiwho posts on ActiveRain and has been outspoken regarding a few things regarding the Title Industry in general and I recalled his position on AfBA's I read awhile ago.  Ed and I do not agree on everything, but we do agree on most issues and he articulates an opinion better than most. Check out this link to TITLE-OPOLY and Ed's enjoyable blog.   http://title-opoly.squarespace.com/title-opoly/2007/3/10/a-culture-of-greed.html  In it, you will see comments from a couple respected and active AR people like Fran the Title Man and Diane Cipa. You will also see this sentence..... "Think about it, the Coldwell Banker Burnet case is about the abuse of trust, victimization, and theft.  It's worse than armed robbery because it involves active abuse by highly paid professionals who voluntarily assume fiduciary responsibilities."

OK, I bolded the fiduciary part. Why?  Isn't that what the Realtor is accountable for regarding his/her client?  Despite rumors on the street... all Title companies are NOT created equal. Why not give the consumer a little education and  SOME  choice in the matter.  After all, who's truly the person paying

And from RESPA LEGAL today...(the free snippet of info)..that popped up in my email today...

"When P. Wesley Foster Jr., CEO of Long & Foster, learned that his agents were sending thousands of loans to lenders other than the company's in-house mortgage provider, he sent a memo to all of the agents asking them to support their affiliated service providers. That action has now sparked industry debate over whether the memo put undue pressure on agents to put the best interests of the company over those of their customers."

Just shoot me.

 

24 Comments on LET MY PEOPLE ....errrrrr AfBA's GO !!!!

NOV
14
2007
160,612 Points 7 Featured Posts Outside Blog
You may rant all you want (and rightfully so) - but until agents are willing to go back to 50-50 splits, affiliates are the profit center for the broker side of the business...
10:17am • #1
115,358 Points 1 Featured Post Outside Blog
Sad, sad time when kickbacks are the profit center of a business. Legal kickbacks, but kickbacks none-the-less ...as a business model.
10:53am • #2
479,909 Points 151 Featured Posts Outside Blog

Rob....  Fran just wrote about this a little the other day also. I am with you. I hope more letter's like the one Wesley Foster wrote and gets publicized. This alone will make more clients aware and possibly make their own choices. But what stinks are companies as Weichert. They have in their brochure if the consumer uses all 4 of their major services and if one of them delays their settlement, then Weichert will pay for $2,500 (something to that matter) of their closing costs. And the sad part is that is about how much more Weichert is probably making on the consumer from using all 4 of their services.  The realtor, the mortgage side, the title side, and their homeowners division.  We just need to educate more people out there.  Good job.

On another note, CONGRATS on your 100,000 pts....  did you join the silver group by Neal Bloom?

 

jeff belonger

 

12:44pm • #3
115,358 Points 1 Featured Post Outside Blog

Thks Jeff,

I don't remember if I saw Fran's post or not... (we've been moving some offices around at Bertrum and I may actually have..... a muscle starting)...heck, I may have even posted in it....now that would be embarrassing.

Fran and I are in sync on the subject as we've discussed it before..but i do apologize if my 'rant' regurgitates his recent info and blog.

On your other note - thus far I am protesting the 'point groups'.  But I have absolutely no problem with Neal.  I think he's pretty funny.

Speaking of points... I haven't posted recently in my 'how to get 200 point thread'.... have to do that today.

Also.. track down some of yours Jeff. You go into hiatus.... then burst back onto the scene with gusto...love it.

2:04pm • #4

Great post!  Finally, something I can comment on.  It just seems there are so many good folks offering services that are boxed out unfairly.  Where are the ethics in these types of transactions, I ask you?  <Looks under the bed>  Nope <closet>  Nope

 

sad sad sad.  Hope it somehow gets fixed.

2:28pm • #5
479,909 Points 151 Featured Posts Outside Blog

Fran just wrote it a few days ago.,.... in any case, yes, I am spitting several out this week. See you around.

 

3:01pm • #6
263,157 Points 59 Featured Posts Outside Blog
I think you know how I personally feel about this Rob, you articulated it well.  I'm pulling the trigger:-)
6:11pm • #7

Hey Chris P.

I'm sorry your industry hasn't figured out how to be profitable on it's own. Those of us in the title industry really enjoy laying off good hard working employees and overworking the ones we have so we can share up to 50% of our profits with real estate brokers for whom we provide a free service of great value to. We put your transactions together, close them, dispurse them and you don't pay us a damn thing. The buyers and sellers pay us. How would you like to pay half of your commission to any individual that gives you a referal. I really miss the days when title companies competed based on service and hard work not on who kickes back the most money to the broker.

Chris V.l

Chris
8:21pm • #8
NOV
15
2007
115,358 Points 1 Featured Post Outside Blog

Chris P. - THanks for pointing out that some brokers are clueless as to how to build a profitable agent and clientle base.

Jeff B. - Always a welcome site when you stop by.  The Weichart example makes me wanna vomit.

Jeff S. - Ethics and AfBA's ... interesting to see both discussed in the same comment :^) Right on bro.

Jason - Someday I may be proposing an ABA if that's where 'forced' (ouch)... but it sure as heck makes me scratch my head as to why companies feel it's not a problem using extortion (kickbacks)in order to have that company offer their client the opportunity of choice through consultation. (Again, the choice may be there TECHNICALLY - but from a consumer standpoint - not REALITY).

Chris - THanks for stopping in. I LOVE the analogy of a Realtor giving up a chunk of his/her commision for each referral. 

7:49am • #9
422,978 Points 36 Featured Posts Outside Blog

Rob,

This certainly tells it like it is...some won't want to hear this, but need to! BTW, Thanks for the plug!!! Thanks,   Fran

6:45pm • #10
115,358 Points 1 Featured Post Outside Blog

Fran....  we have yet to meet, but methinks I can learn a BUNCH from you.

Think you can make the AR meet in Philly in December?  Jeff Belonger is setting it up.  I'm planning on a train ride frpm Qtown to meet.....  you have time, access?

 

9:26pm • #11
422,978 Points 36 Featured Posts Outside Blog

Rob,

I saw Jeff's notice, and I'm trying to accommodate but I'm not sure...my mother's health has been a problem...touch and go...If you're ever in our area, we are real accessible...seconds off the 'rt. 422 bypass' at Limerick Exit, minutes east of Pottstown, please stop in any time...no appointment necessary! Thanks,   Fran

10:48pm • #12
NOV
19
2007
42 Featured Posts

Rob

I appreciate the mention, but disagree with you vehemently on one important point.  You and I would most likely agree on every issue if we were sitting together and talking face to face.   Title agents like what I have to say.  It's the underwriters that would like for me to fall silent.  It's not going to happen.

6:48am • #13
115,358 Points 1 Featured Post Outside Blog

Holi crapoli.... one of my last brain cells must have taken a nap.  Underwriters came up in one of your fascinating blogs, I believe the one about sweep accounts...and who keeps the $$$.... and lack of disclosure.

My apologies for any misrepresentation of your position(s) and I also believe we are on the 'same page'... at minimum, the same book.

7:20am • #14
115,358 Points 1 Featured Post Outside Blog
And in other news....

First American settles kickback charges with HUD, Florida for $5M

"HUD and two Florida regulators have announced a settlement with First American Title Insurance Co. for alleged violations of RESPA and similar state laws. The settlement will require First American to shut down 84 alleged sham title LLCs with a number of real estate agents, mortgage brokers, builders and others that were allegedly created for the purpose of funneling illegal kickbacks."

I like it when the big dogs get kicked.

9:00am • #15
NOV
22
2007
Outside Blog

I really hate that my first ever post on Active Rain is in reference to such a minor point.  That is, Rob's assertion that AfBA is the correct acronym for Affiliated Business Arrangement.  It's just not logical.  Unless the "f' stands for #%*!^ (which it may, and in that case I agree) only the first letter of each word would be used.  That would be ABA. 

Anyway, I agree with your take on the Af(?)BAs.  Around here (IL), they are pretty much no more than a kickback scheme.  The title agent does more work, the "agent" sets and collects the premium (having added no additional service) with a % to the underwriter, and the borrower pays for it.

There are honest Af(?)BAs, I believe, in which a real estate attorney has an agency agreement and issues title insurance as well as legal services.  If they are actually examining the title from raw data, I have no problem with it.  I think it's the exception to the rule, though.

12:33am • #16
2 Featured Posts

I was one of the agents who got Wes Foster's missive....  I choose to do what's right by the client first and everything else falls into place.  If the affiliate works out for them great but there are always other choices as well.

I've settled at many places and experienced a consistent level of great service.  But one of those stands out with his availability.  He emails updates to the laws, he teaches classes, he provides phone support for any question.  Is my client better served by this?  Yes.  He just happens to be a title partner.

I've yet to get paid a dime from any affiliate nor should I ever.  What a way to scam the consumer.  But it's certainly eye opening to see how this is perceived by so many others and to see where the abuses are.  I recognize there are many hands in all these transactions but if my client pays no more for the service and gets a better outcome then it serves them well. 

Wes shouldn't have sent that note.  But if he must, then he should have touted the benefit to the client first.  Instead he whined that he can't make a profit center work and tied it back to advertising, igniting RESPA concerns and leading back to commentary that agents are getting paid to use an affiliate over another choice.  Great.  Yet another way to make us look greedy.

I think I need to read more of the title folks' blogs.  So much to learn!

8:54am • #17
422,978 Points 36 Featured Posts Outside Blog

Rob,

I would like to direct this comment to something that Josette said. First off, Josette is a great Active Rainer and a true professional...I have seen many of her comments! I thank her for her comment above as it addresses a perception that many agents espouse:

"if my client pays no more for the service and gets a better outcome then it serves them well".

My comment: There is no way that any agent anywhere can know the outcome of a closing or transaction performed by another title service provider...that said, RESPA guarantees the consumer the right to 'choose' their own provider...don't deny the consumer of that right and let the consumer decide about cost and outcome!!! If you want to assist the consumer in making that decision...fine...but please don't presume to know or evaluate every title service provider! Thanks,   Fran 

P.S. Happy Thanksgiving, Rob!!!

2:02pm • #18
NOV
23
2007
6 Featured Posts

Bravo Rob!  **clap clap clap**  It is a shame when people (REALTORs®, LO's, etc.) are forced to use companies.  If you need to strong arm your employees into using a company, make sure that company is superb.  Otherwise, you are doing everyone an injustice.

Oh, and just to clarify, not every company that has an AfBA shares the profit with their employees. 

 

1:17pm • #19
2 Featured Posts

Fran, thanks so much for your kind words.  I had no idea you even knew who I was...  But to address your point, I do give the consumer the choice.  But who do you think they look back to for help?  And I give them my answer the same way each time which is among the companies I've used this one has consistently provided great service.  It's exactly the same thing I do with lenders and any other service provider I'm asked about.  They do this once every 5- 7 years and have no idea how to pick out the ancillary services.  Far from taking the choice from them or trying to evaluate every title provider I can only speak to past experience as an indicator of future success. 

And it's no less than what I want those clients to do for me.  Refer.  Not because someone forced them to use me but because I was better and the entire team behind served them well.  I think the gist of this post is that's what you'd want me to do for you.... refer to you because you are the best.  Not because I was forced to use you.  It just so happens the title company I refer to is an affiliate.  If they sucked they'd be history.

I know this is a sore spot.  And I also know that I'm in a unique postion that our affiliates are very strong in a very strong office.  I've never once felt pressured to use them in any way and I have no idea what the financial arrangements are.   Don't care.  On the contrary, they feel the need to prove their worth daily.  And on the lending side I rarely use our affiliate, though they are very good.   They end up not really being good enough when so many others raise the bar. 

Hope you don't mind my commentary...  As I said earlier it is enlightening to me to hear the other side of this argument and to learn.  It sounds like if I had started somewhere else with my same attitude I'd have been driven crazy by the non client focus of getting paid more to use the affiliate.  Not consistent with my philosophy or my rather headstrong nature :)

7:59pm • #20
NOV
24
2007
422,978 Points 36 Featured Posts Outside Blog

Rob,

In response to Josette's comment above, I'd just like to conclude my point by agreeing with everything Josette has said above...and focusing on her phrase, "among the companies I've used".

For this very reason, unless you've used every possible service provider available in a given area, an agent is NOT in a position to refer or steer a prospect or purchaser to either an affiliate or any other settlement service provider. If put before the purchaser, 'You have the right to choose the service provider of your choice...the company I recommend does good work, although they have a monetary relationship with my brokerage'. How do you think they would respond!

How would an agent respond to the age old question posed, "Do I need an attorney"? Be careful when and how you respond to that question!!! Thanks,   Fran

10:47pm • #21
NOV
26
2007
Hey, Rob... just noticed that you (Bertrum Group) are our (MG Title) PA abstractor in some counties.  Keep up the good work!  (Wish we had more)  --Tom
10:54pm • #22
NOV
27
2007
115,358 Points 1 Featured Post Outside Blog

lol - we wish you had more also.

Welcome to ActiveRain (Relatively new?).  You will find a LOT of worthwhile information on this site (along with of course my 'humor').

7:09am • #23
yes, joined last month.  kind of figuring out how this works.  actually seems like a great place to find qualified folks to refer things to (and hope for a return favor here and there).  take care.  hopefully biz will pick up in '08 and those left standing will be in a great position.  --tom
8:54pm • #24

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Rob Robinson- Lehigh Valley PA

Allentown, PA

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Bertrum Settlements (Title & Abstract)

Address: 1101 W. Hamilton St., Allentown, PA, 18101

Office Phone: (484) 664-7150

Cell Phone: (610) 417-7497

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Wisdom from Bertrum Settlements, a division of The Bertrum Group,LLC


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