Source of Title Blog Responds to Poizner

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Title Insurance with myClosingSPACE

Steve Poizner, the insurance commissioner for the California Department of Insurance, recently stated that "the title industry is broken." In many respects he is correct and I, for one, agree with many of his recommendations. Especially the idea that title insurance companies need to change themselves. He wants to offer title insurers a chance to clean themselves up before creating more regulations. IMO this is the way to go and let's hope that the title companies in California get the message.

Roberto Franco at the Source of Title Blog has a new post discussing some if his ideas. I agree with much of what he is saying but there is one point that I do disagree with. He believes is that marketing to consumers is not the right way to go and states "If the goal is to get the title companies to market directly to consumers, that may increase operating costs. It may be difficult to get the title companies to spend more money on marketing in the face of rate caps." OK, he may be right if title companies continue to market to real estate professionals AND add consumers to their marketing efforts. IMO what Mr. Poizner wants is to diminish the amount of marketing money (and sometimes kickbacks) spent on the professionals and move that effort to consumers.

I think this is the right way to go for two reasons.

  1. It can significantly decrease the corruption that is too accepted by many in the industry.
  2. By reaching consumers directly title companies will be able to educate them about title insurance and maybe help change the way the public views them.

It seems that the only time the general public hears about title companies is when another one is being sued for illegal practices. Those companies that are being sued may be in the minority but to the general public it is standard operating practice. This needs to change and marketing directly to consumers will help do that. Roberto Franco makes some very good points but I disagree with him on this one.

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Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA

"If the goal is to get the title companies to market directly to consumers, that may increase operating costs. It may be difficult to get the title companies to spend more money on marketing in the face of rate caps."

Whenever you cap rates and not let a business run in the market as a capitalist, there is a risk of putting people out of work.  Why cap the rates?  Why not let the businesses allow the market demand set the prices? 

I have no problem with marketing direct to the consumer. I agree it would be a positive to get rid of those RESPA approved ABA kickback alliances.

Of course Marketing costs would increase...thus operating costs.. the mere fact that the number of consumers is so much higher than the number of Realtors/Mortgage Brokers would change the marketing dynamics.

Heck - if anything needs to be capped in this world, it's CC rates. :^)

Jun 11, 2007 02:02 AM #1
Rainer
155,621
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

ABA kickbacks?  I'm not familiar with that term?  As far as caps go, they generally don't work.  Here in the St. Louis market for title work, it's very competitive and title rates are pretty low.  I did a loan out of state once and was surprised at how expensive the title work was.  When I asked the agent about it, she told me that title companies "HAD" to charge their card rate.  I thought that was odd.

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Jun 11, 2007 02:50 AM #2
Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA
AfBA Affiliated Business Arrangements

 

I simply mean the whole concept of an AfBA (Affiliated Business Arrangement), where in for example - clients are STEERED to a Title company by a Realtor or Mortgage Broker BECAUSE the Realtor or Mortgage Broker receives financial compensation. 

Kickback......A return of a percentage of a sum of money already received, typically as a result of pressure, coercion, or a secret agreement.

Jun 11, 2007 03:06 AM #3
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY

Rob: I agree with you that capping rates is not the way to go. I also believe that the inverse is true and there should not be a minimum that can be charged. And believe me, it is happening. Here in NJ there is a set rate for title insurance and you better not go below it or you are going to be scrutinized. IMO that is as bad, or worse, than capping rates at the top end. To an extent I agree that there may seem to be an increase in marketing costs but when you scale back B2B marketing they should even out and in some cases may even decrease.

Bob: Each state is different but the states in which we operate there are state regulated rates and oddly (or not so oddly when you realize how these rates are set) these states are among the highest in the nation. 

Jun 11, 2007 03:12 AM #4
Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA

The actual Title Insurance in PA is regulated.  Everyone must charge the same rate for the Insurance.

(The differences in actual companies are service, after hour closing fees, search fees, etc...)

Jun 11, 2007 03:16 AM #5
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY
Good distinction Rob. That is where the problems arise in many states. The cost of the insurance premium is regulated but actual cost for the service can be vastly different. Those extra charges are how many title companies make the money they use for kick backs and the like (and IMO Poizner includes these types of charges in his discussion of title insurance, if he does not I certainly do). I believe that a free market system can sort those issues out so title companies start working for the consumer.
Jun 11, 2007 03:21 AM #6
Anonymous
Robert A. Franco

I don't think we are as far apart on this as you may think.  I DO agree that marketing directly to consumers is a good thing.  I just don't think the way Poizner is approaching it is the right way to do it.  Think of all of the small independent agents that aren't paying kickbacks - they will have to continue marketing in an ethical way and the rate caps will make it more difficult for them to do it.  The large agents who pay the kickbacks could easily redirect their resources away from kickbacks to consumer-direct marketing, but the smaller agents will find it more difficult. 

To believe in rate caps, I think you have to also believe that title insurance is over-priced.  I don't, at least not in Ohio.  Rather, I believe that title insurance has become over-valued.  I would much prefer to see the value of title insurance increased by requiring a thorough title search and actually correcting defects instead of insuring over them, or adding blanket exceptions to the policies.  Title insurance should be more in line with the requirements for marketable title, since that is what the policy insures. 

Rate caps may address the problem that we seem to have with the companies paying illegal kickbacks, but it has a much larger effect than that.  It creates a hardship on the many ethical agents who don't pay them.  In my opinion, it would be much better to eliminate the exemption for AfBAs in Section 8 of RESPA and enforce the anit-kickback provisions as they were meant to be. 

Marketing directly to the consumers would be great, but very difficult to implement.  Again, I think the AfBAs complicate the issue.  Loan officers and Realtors have a lot of influence, if not absolute control, over the choice of the settlement agent.  When they have an AfBA, they are going to push their customers to it.  It will take a lot of marketing to educate the consumer to the point where they will be empowered to make those decisions independently.

Thanks for the mention, it is a great discussion.  And again, I think we agree in spirit when it comes to direct marketing.  We are just on different parts of the same page.

Best,
Robert A. Franco
SOURCE OF TITLE

Jun 11, 2007 04:25 AM #7
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY

Thanks for commenting Robert. I agree that we are not that far apart and I agree with the basic premise of your original post. The Internet is a great resource that can change the title industry because of the availability of information to the average person. Before the Internet was widely available consumers were not able to thoroughly research potential purchases like they can today. It has changed almost every consumer based industry in the world including real estate and mortgages. IMO title insurance will follow. As more consumers learn about title insurance they will take it upon themselves to become more educated. This presents and opportunity for the majority of title agents, who are in business to help consumers, to explain their service to the consumer. This is the first step in direct marketing.

I agree that rate caps are not going to help (I work in states that have rate caps and many companies simply pass on junk fees to consumers to increase their margins). Instead it is up to the individual title companies to explain their service to consumers and help them understand what they are paying for. It may not be marketing in the traditional sense but it is marketing nonetheless. There is an opportunity to market to consumers in a traditional and non-traditional manner that can be cost effective and if done right can help rid the industry of the illegal ABA's and kick backs that are currently too closely associated with the title industry.

Again thanks for responding and for your thought provoking blog post that started this discussion. 

Jun 11, 2007 05:47 AM #8
Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA

I love a thread where discussion can take place without the 'defenses' going up by everyone.

 

Mark & Robert - thanks for the insight.

Jun 11, 2007 06:11 AM #9
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA

Mark:  You know I agree with you 100%.  I just can't understand why most title agents can't see how easy it is to market to consumers.  Just take whatever money you might have spent on gifts, ads, Realtor meetings, etc. and direct it to advertising that a consumer can relate to.  It's not rocket science.

In our area the local Realtor boards ask for door prizes and meeting sponsorship ALL the time.  Despite the RESPA concerns, most title agents give and give and give, hoping to get back.  Lunch sponsorship can be hundreds of dollars for one meeting.  In the same market, that money buys a half page ad in the homes magazine for a year!  DUH!!!

Web sites cost, what $20 a month at most?  DUH!!!!!

Blogs cost NOTHING.  DUH!!!!!

 

All of these tools are available for title agents and what do most do?  Give away the lion's share of their earnings through ABAs or gifts or free title work and hope to get referral.  DUH!!! 

Control your destiny, folks.  It ain't tough. 

Jun 18, 2007 08:49 AM #10
Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA
Diane... you, as always, are like the glistening morning dew as the sun first hits it.  Fresh and full of sparkle. 
Jun 18, 2007 09:08 AM #11
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA
LOL  Well that's one way to put it.  LOL
Jun 18, 2007 09:26 AM #12
Rainer
119,269
Rob Robinson- Lehigh Valley PA
Bertrum Settlements (Title & Abstract) - Allentown, PA

Hey........   I love your thought process and professionalism.  Don't laugh at the 'new' Title Guy. :^)

Jun 18, 2007 02:27 PM #13
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY
Daine, as usual you are right on the mark. I think a lot of companies are leery of taking money from their traditional marketing efforts because they fear they will lose a lot of repeat business if they move to the consumer side. IMO you have a much larger audience with consumers AND if you do quality work the professionals in the industry will want to use you again. Not because you paid for their business but because you provided a valuable service to their clients.
Jun 18, 2007 11:48 PM #14
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA

;)  Thanks.

Yes, this is the part that is so beautiful.  Consumers really prefer to make their own provider selection once they understand they have the power to choose.   Those who have used a title agent geared towards servicing the consumer act as market mavens.  They tell all their friends and family to use you.  We've built a solid book of repeat business just paying attention to the consumer and serving their needs.

The extra great thing about that kind of marketing is that the excellent Realtors and mortgage lenders will hear from their consumers and follow them to you!  Excellence likes to deal with excellence.  Mediocrity likes company, too, so pick your crowd and who you want to hang with.

Focus on the consumer.  Ask for their business.  Give them great service at a fair price.  Spend your money and thinking on the consumer and eventually you will have changed your professional life.  You'll find true independence.  That doesn't mean you won't be working with other professionals, it means you won't be beholden to them or subservient to them.  That's the yoke you've got to break and it's entirely doable.

If you're a gardener, think of consumer marketing like a garden.  You're starting from scratch, work the soil, sow the seeds, and eventually reap the rewards.  I know it's hokey but I think of every marketing effort like gardening.  Some work, some won't, but you just keep working it.  Realize it takes time but if you want independence, it's the right path.  

Hmmmmm.....one more thing.  Don't be afraid to appear unbusiness-like if you know what I mean.  Take a look at Mark's web site and mine - www.tcsclosing.com.  Mark's is better but mine's not bad.  Neither looks stodgy or serious, right?  Think friendly, think fun and go from there.

Jun 19, 2007 01:04 AM #15
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY
Diane, you rock. I noticed you said you were done with Radical. Is that for good or are you going to maybe throw a few posts our way on occasion? I really enjoyed reading what you had to say there.
Jun 19, 2007 01:08 AM #16
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA

Thanks, Mark.  I love Radical.  I stopped because I felt it had served its purpose.  It was born out of the need to defend title insurance.  Last October, the product itself was in danger.  I think Radical along with the efforts of others, helped to shift the focus where it belonged, on the delivery system. 

There was no effective argument or defense being raised by ALTA or our underwriters so a few of us had to scream at the tops of our lungs to get attention and that we did.  We had to make the arguments that others couldn't.  We had to clearly point the finger at the ethically degraded delivery system as the culprit.

I felt like we were cutting a path in the woods for others to follow.  You helped cut that path and now here we are in the clearing and thousands have joined us.  Thousands now understand the real issues and truth is breaking out all over.

Title insurance has been defended and now correction and change is in play.

I've shifted my attention to the consumer.  If we empower consumers and defend their interests, the RIGHT choices will be made by regulators and lawmakers.  The conversation on Title Insurance Talk is towards that end.  Defend consumers.  Give them the ammo to go to battle with the bad guys in the biz and watch what happens.

 

Jun 19, 2007 01:38 AM #17
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY

I agree and hope that we can continue to move forward in the right direction. I will just have to make my way over to Title Insurance Talk more often now (that's actually how I found Radical). 

Jun 19, 2007 01:40 AM #18
Rainer
6,789
Diane Cipa
The Closing Specialists® - Ligonier, PA

Well, we probably beat this issue to death, but I just remembered an image to share.  If I were an artist, I'd draw it for you, but as it is you'll have to use your imagination.

Imagine a door freely standing, attached to no walls.

At the door we have a velvet rope and a long, long, never ending, long queue of title agents.  Waiting.

The rope is controlled by two small groups, Realtors and mortgage lenders.

On the other side of the door we can see vast crowds of people milling around, sitting at tables, walking about, doing their thing, going about their business, not really noticing the door.  These are consumers.

Each title agent in line negotiates passage through that door by dealing with the Realtors and mortgage lenders. It's expected.  It's how it's done. 

Now some of us standing in line look at the crowd of people and ask..."Why can't we just go over there?  Why do we have to go through the door?  There nothing to stop us.   Hey you guys, follow us!"  ..and we walk over and start talking with consumers and having a good ole time and the other title agents in a daze, turn back to the line and wait because that's how it's always been done.

Kinda creepy, huh?

Jun 19, 2007 03:41 AM #19
Rainer
28,228
Mark Pilatowski
myClosingSPACE - Manhattan, NY
Haha. That's an interesting image and a great way to look at it.
Jun 19, 2007 03:43 AM #20
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