TITLE INSURANCE:

COST AND COMPETITION

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 26, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–88

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TITLE INSURANCE: COST AND COMPETITION

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30–539 PDF 2006

TITLE INSURANCE:

COST AND COMPETITION

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 26, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–88

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

ROBERT W. NEY, Ohio, Chairman

GARY G. MILLER, California, Vice Chairman 

RICHARD H. BAKER, Louisiana 

WALTER B. JONES, JR., North Carolina 

CHRISTOPHER SHAYS, Connecticut 

PATRICK J. TIBERI, Ohio 

GINNY BROWN-WAITE, Florida 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

STEVAN, PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

CAMPBELL, JOHN, California 

MICHAEL G. OXLEY, Ohio 

MAXINE WATERS, California 

NYDIA M. VELA ́ ZQUEZ, New York 

JULIA CARSON, Indiana 

BARBARA LEE, California 

MICHAEL E. CAPUANO, Massachusetts 

BERNARD SANDERS, Vermont 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

EMANUEL CLEAVER, Missouri 

AL GREEN, Texas 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

April 26, 2006 ................................................................................................... 1

Appendix: 

April 26, 2006 ................................................................................................... 39

WITNESSES 

WEDNESDAY, APRIL 26, 2006

Cunningham, Gary M., Deputy Assistant Secretary for Regulatory Affairs 

and Manufactured Housing, U.S. Department of Housing and Urban Development .................................................................................................................. 9

Hunter, J. Robert, Director of Insurance, Consumer Federation of America ..... 28

Miller, Douglas R., President and CEO, Title One, Inc., Minneapolis, MN ....... 30

Sterbcow, Arthur, President, Latter and Blum, Realtors, New Orleans, LA, 

on behalf of the Real Estate Services Providers Council, Inc. ......................... 32

Stevens, Thomas M., President, National Association of Realtors ...................... 34

Toll, Erin, Deputy Commissioner of Insurance Compliance, Colorado, and 

co-Chair of the National Association of Insurance Commissioners’ Title 

Insurance Issues Working Group ....................................................................... 4

Williams, Orice M., Director, Financial Markets and Community Investment, 

U.S. Government Accountability Office .............................................................. 7

Yeager, Rande, President and CEO, Old Republic National Title Insurance 

Co., Minneapolis, MN, on behalf of the American Land Title Association ..... 36

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 40

Ney, Hon. Robert .............................................................................................. 42

Waters, Hon. Maxine ........................................................................................ 43

Velazquez, Hon. Nydia M. ............................................................................... 45

Cunningham, Gary M. ..................................................................................... 46

Hunter, J. Robert, ............................................................................................. 55

Miller, Douglas R. ............................................................................................. 78

Sterbcow, Arthur .............................................................................................. 153

Stevens, Thomas M. ......................................................................................... 171

Toll, Erin ........................................................................................................... 180

Williams, Orice M. ............................................................................................ 199

Yeager, Rande ................................................................................................... 212

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Statement of the American Homeowners Grassroots Alliance ..................... 497

(1)

TITLE INSURANCE: 

COST AND COMPETITION 

Wednesday, April 26, 2006

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:55 p.m., in room 

2188, Rayburn House Office Building, Hon. Robert Ney [chairman 

of the subcommittee] presiding. 

Present: Representatives Ney, Miller of California, Tiberi, 

Neugebauer, Campbell, Waters, Lee, Scott, Cleaver, and Green. 

Ex officio: Chairman Oxley. 

Chairman NEY. This afternoon, the Subcommittee on Housing 

and Community Opportunity meets to discuss title insurance and 

its role in the real estate transaction. I do look forward to today’s 

panel, and I want to thank you for coming and sharing your views 

on title insurance, costs, and competition in the marketplace. 

Title insurance, of course, is designed to protect homeowners and 

lenders from future claims to their property. It helps protect 

against the risk that property may be encumbered at the time of 

sale by unknown rights and claims that would be asserted by others. 

Title problems can limit the homeowner’s future use of real estate and threaten the security interests the mortgage lender holds 

on that property. 

Unlike most other types of insurance which focus on potential future events and are renewed annually, such as homeowners or 

automobile insurance, title insurance, of course, protects against 

losses arising from past defects, and is only paid at the purchase 

or refinancing of a home. 

For the past several years, regulators, industry groups, and others have suggested several changes to regulations that would affect 

the way title insurance is sold. In 2002, HUD proposed revisions 

of the Real Estate Settlement Procedures Act—RESPA, as everybody knows—that were designed to increase competition in the real 

estate settlement industry. The proposed revisions included the development of guaranteed mortgage packages and a more binding 

good faith estimate, both of which would have affected the pricing 

and sale of title insurance. Such revisions appear to be controversial, and HUD was forced to withdraw the proposal in 2004. 

However, HUD announced in June of 2005, that it was again 

considering revisions to the regulations implementing RESPA, and 

2

was seeking input from the industry and others. Given the intense 

member interest in this issue during the previous Congress, and 

the attention this issue has received in the media, RESPA reform, 

I don’t think, is going to be a simple one. Rather, it’s pretty complex. It’s important that HUD take a cautious and thorough approach, weighing all the perspectives, of course, as it moves forward. 

While title insurance differs from many other insurance products 

in the marketplace, it’s a valuable tool in protecting homebuyers 

and lenders from problems that may arise in a real estate transaction. However, buying a home has become pretty complex. It has 

to be simplified, so there is more transparency in the pricing of settlement services. 

While we all may agree on that goal, there are differences in how 

to achieve it. It’s my hope that today’s hearing will focus on the importance of regulation that balances the need for vigorous consumer protections with vibrant business competition to provide a 

healthy insurance marketplace for consumers. And with that, I will 

yield to the Chairman of the Full Committee, Mr. Oxley. 

The CHAIRMAN. Thank you, Mr. Chairman, for holding this hearing, and for your continued leadership in making it easier for consumers to buy homes. This subcommittee, under your leadership, 

has led the way with the American Dream Downpayment Act, the 

Zero Downpayment Act, and other initiatives to make the dream 

of home ownership a reality for an impressive 69 percent of American families. 

Congress could still do more, however, to reduce barriers that 

limit competition in the real estate marketplace. Many home buying services with relatively fixed costs, such as realtor fees, title 

searches, and lending fees, have skyrocketed, along with the value 

of the homes, even though the amount of work involved has actually been reduced with improved automation and computerization. 

If a house has doubled in value, does it really cost the realtor 

twice as much to sell it, and the title agent twice as much to do 

the automated title search? Consumers are paying home purchase 

costs that are artificially high, because of the lack of competition 

in real estate services. 

I am particularly concerned about the ongoing investigations of 

title insurance fraud that have already resulted in tens of millions 

of dollars in settlements. In Colorado, Deputy Insurance Commissioner Toll, who is with us today, has unraveled a web of illegal 

kick-back schemes using captive re-insurance, and involving title 

insurance agents, builders, realtors, and other real estate service 

providers. 

These schemes have inflated the price for title insurance for 

thousands of people. Few consumers will hold up their new home 

purchase over a few thousand dollars in title insurance. But what 

the consumer doesn’t know is that, in many cases, a large percentage of the consumer’s title insurance payment is kicked back to the 

real estate professional who set up the closing in the first place. 

Illegal kickbacks are already a violation of RESPA. But the investigations by Colorado, Minnesota, California, and other States 

make it clear that this is an endemic problem. That is why I ask 

3

the GAO to investigate for Congress how title insurance gets sold 

in the real estate marketplace. 

GAO’s interim report raises some very troubling questions for 

members of this committee. According to GAO, in several cases, 

title insurers, or agents, have created fraudulent businesses and 

arrangements to provide potentially illegal kickbacks to realtors, 

mortgage brokers, lenders, and attorneys, in return for steering 

business their way. 

GAO is finding that instead of focusing on consumers, title 

agents normally market their business to these real estate providers, creating a potential conflict of interest that benefits the providers at the expense of the consumer. 

I believe that most business professionals are beyond reproach, 

and provide consumers with the best services that they have available. Some of these individuals are here with us today. Unfortunately, the majority of professionals find themselves undercut by 

unscrupulous actors who are circumventing RESPA’s rules on illegal kickbacks. Given the number of annual home purchases and refinancing, I don’t believe it’s a lack of price competition in real estate services, it’s something we can just enforce our way out of. 

HUD and State insurance departments simply do not have the 

resources to monitor every property transaction. This is a structural marketplace problem that, at some point, Congress will have 

to address. 

I want to thank our witnesses for joining us today to help shed 

some light on this critical consumer issue. Ms. Toll has been the 

leader in uncovering title insurance problems and opening the path 

for others to follow in protecting consumers. GAO and HUD have 

been very helpful in analyzing the marketplace and initiating a discussion of potential next steps. 

And the witnesses on our second panel will be enormously helpful in providing us with the industry and consumer group perspective to separate fact from fiction, and to underscore why a vibrant 

title insurance marketplace is so important for our consumers. 

Mr. Chairman, I look forward to working with you, Ranking 

Member Waters, and other members of the committee, as we begin 

this discussion of the problem, and a search for solutions. And I 

yield back. 

Chairman NEY. Well, I thank the chairman for his participation 

in this, and for his leadership on the committee. And the 

gentlelady from California, Ms. Lee? 

Ms. LEE. Thank you, Mr. Chairman. I do want to thank you and 

our ranking member, Maxine Waters, for convening this very important hearing on title insurance. And also, I want to thank our 

witnesses for being here today. 

The home ownership process, we all know, is filled with confusion. Countless documents, fees that consumers must weed 

through, trying to understand this whole process, is quite overwhelming. Many in the real estate industry want to see a consolidation of the paperwork, and make the process easier for potential 

homeowners. We all agree that the process must be consolidated. 

And one of the ways to make the home ownership process benefit 

consumers is to look at the fees and the competition, or lack thereof, in shopping for a lender or a broker, appraisers, and home inVerDate 0ct 09 2002 17:34 Dec 05, 2006 Jkt 003539 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\DOCS\HBA116.040 HFIN PsN: TERRIE
4

spectors, and title insurance. All of these issues demonstrate why 

we must, quite frankly, reopen the RESPA, and why it’s so important that we are here today. 

This hearing, I hope, will highlight some of the bad actors—and 

there are some—in the title insurance industry, and how we can 

correct the problems while maintaining a competitive market for 

consumers to choose from. 

Title companies really should have to compete, and consumers 

should have choices. That’s the bottom line. So I hope that our witnesses will discuss the RESPA violations by title companies, the 

kickbacks, the lenders, realtors, brokers—these kickbacks, and 

that’s what they are, they often receive these kickbacks from business referrals, as well as—I hope we talk about the price of insurance compared to the low percentage of payouts. 

So, I look forward to hearing from our witnesses, and working 

on—with our chairman and ranking member on drafting meaningful bipartisan RESPA legislation in the near future. Thank you, 

and I yield the balance— 

Chairman NEY. I thank the gentlelady. The gentleman from 

Texas, do you have an opening statement? And with that, when the 

ranking member comes, of course, we will have an opening statement. 

We will go to panel one. We have Erin Toll, who is the deputy 

insurance commissioner of compliance and market regulation for 

the State of Colorado. She also co-chairs the National Association 

of Insurance Commissioners’ Title Insurance Working Group. Ms. 

Toll’s investigations in the title insurance arrangements in early 

2005 led to multi-million dollar settlements with title insurers. 

Orice Williams is currently Director in GAO’s Financial Markets 

and Community Investment Team. Mr. Williams is responsible for 

overseeing and producing reports on topics affecting the insurance, 

banking, and securities industries. 

Gary Cunningham has been the Deputy Assistant Secretary for 

Regulatory Affairs and Manufactured Housing at HUD since April 

of 2004. The office has responsibility for enforcement of the Real 

Estate Settlement Procedures Act, RESPA, and the Interstate Land 

Sales Act, and for the administration of HUD’s manufactured housing program. 

With that, we will begin with Ms. Toll. Thank you. 

STATEMENT OF ERIN TOLL, DEPUTY COMMISSIONER OF INSURANCE COMPLIANCE, COLORADO, AND CO-CHAIR OF THE 

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS’ 

TITLE INSURANCE ISSUES WORKING GROUP 

Ms. TOLL. Thank you for the warm welcome. My name is Erin 

Toll and I am deputy commissioner at the Colorado Division of Insurance. I am also the co-chair of the title insurance working group 

for the National Association of Insurance Commissioners, and I am 

here today testifying on behalf of the NAIC. 

I would like to begin by thanking Chairman Ney, Congresswoman Waters, and the members of the subcommittee for inviting 

me here to testify. I would also like to thank Chairman Oxley for 

his leadership and interest on these important issues. 

5

Today I would like to address three basic points. First, what is 

title insurance and how is it regulated? Second, what problems 

have we, as State regulators, found with title insurance, and what 

are we doing about it? And third, what are some possible solutions? 

So, what is it? How is it regulated? Title insurance is a necessary 

but unique product. It protects homeowners and lenders in the 

event that a lien, or what’s called a cloud, is found on a title. Unlike other lines of insurance, which protect against things that may 

happen in the future, title insurance protects against something 

that already happened in the past. 

In addition, the competition is different. Consumers rely on recommendations from their real estate professionals when choosing 

a title insurance agency and a title insurer, unlike in homeowners 

and auto insurance. Title insurance entities and all the participants are regulated by a variety of State laws and RESPA, the 

Real Estate Settlement Procedures Act. 

Because State and Federal regulators understood the unique way 

in which title insurers compete, they created laws that said it’s illegal to give or receive remuneration in any form for the referral of 

business. This exchange of something of value for the referral of 

business is defined in Federal law as a ‘‘kickback.’’ 

As insurance regulators, our jurisdiction only extends to those 

who are giving the kickbacks. So what are we seeing in our investigations? What are the kickbacks, and what are States doing 

about it? 

Our investigations show that a black market has been created in 

the residential real estate transaction world. The good actors absolutely cannot compete with the bad actors, because the playing 

field is not level. We have initiated exhaustive investigations to try 

and level the playing field, and ensure a free market. 

Settlement service providers are demanding, and title entities 

are giving, kickbacks. And the kickbacks usually take two forms: 

you’ve got your unsophisticated direct kickbacks; and there are sophisticated, indirect kickbacks. And the sophisticated kickbacks include things like free spa trips, or free just-listed, just-sold cards, 

or free farm packages. But the sophisticated indirect kickbacks, 

those are the ones that make my job interesting. Those are a lot 

harder to discover, and they include sham affiliated business arrangements and captive title reinsurance. 

Affiliated business arrangements are nothing more than ownership arrangements between and among settlement providers and 

title insurance entities. And they are legal, unless they are not 

real, and they are referred to as shams. Our investigations in Colorado have determined that many of these affiliated business arrangements are simply vehicles to provide kickbacks. Where we 

have found these kickbacks, we have shut them down, and we have 

imposed penalties. 

Now, captive title reinsurance is a lot more complicated, and so 

I have brought some flow charts, and I look forward to your questions and answers on that. And I will put up the flow charts. And 

it’s also in your packet of materials. 

But in Colorado, our investigations uncovered that these reinsurance mechanisms are nothing more than vehicles that were created 

6

to provide kickbacks to those who were referring business to the 

title insurers. 

To date, Colorado has negotiated multi-state settlements that 

provide restitution directly into the pockets of consumers. Settlements negotiated, I am proud to say, by all States today equal almost $50 million. And we are not done. 

Regardless of the form, these kick-back schemes distort the marketplace, they inflate prices, and they harm consumers. So what 

are some possible solutions? States are exploring various ways to 

help with these problems. In Colorado, we are looking at ways to 

regulate all the players in the transaction. We do not regulate 

mortgage brokers yet in Colorado, but we have three bills that are 

pending that look for some sort of regulation. 

Colorado’s general assembly has just passed a bill that actually 

goes beyond RESPA, and it tightens up enforcement for us, penalties, and it provides directly for restitution. But importantly, cooperation and information-sharing between and among all the regulatory bodies that are involved is necessary if we’re going to stop 

this problem. 

In conclusion, a black market exists regarding real estate transactions. We, as State and Federal regulators, need to aggressively 

enforce the laws that we have. Lawmakers need to enact laws to 

regulate all the players and strengthen fines and penalties. Thank 

you so much for inviting me to testify, and I look forward to your 

questions. 

[The prepared statement of Ms. Toll can be found on page 180 

of the appendix.] 

Chairman NEY. Thank you. And our ranking member has arrived, so we will have an opening statement. I also wanted to 

thank—our ranking member requested a hearing, and we had one, 

in Los Angeles on CDBG. I want to thank Chairman Oxley and his 

staff, and Mr. Frank’s staff, and ours out there. It was a very productive hearing, and we appreciated the comments that we received in Los Angeles. Ranking Member Waters? 

Ms. WATERS. Thank you very much. Good afternoon, ladies and 

gentlemen. I would like, too, to thank Mr. Oxley, Chairman of the 

Financial Services Committee, for his interest in the title insurance 

industry. And I would like to thank Chairman Ney, who is the 

chairman of this subcommittee, and he certainly must be commended for holding today’s hearing. I would like to also thank him 

for the hearing that was held in Los Angeles on CDBG. We have 

already begun to get a lot of response from the elected officials 

there. 

This hearing on the title insurance industry is important for a 

number of reasons. Primary among them is the varying degree of 

opinions about the title insurance industry. There are those who 

believe that the industry is in great shape, and that the imposition 

of additional regulations is not warranted. 

Of course, there are those who believe that the industry is not 

operating competitively, because of fraud and abuse. Indeed, there 

have been published reports of fraud and abuse in the title insurance industry in the State of California. 

However, whether you support one position or the other, I believe 

that industry practices need to be examined closely, to shed light 

7

on issues surrounding the industry. To that end, I believe today’s 

hearing represents an initial step in the right direction. 

Why are the abuses in the title insurance industry so prevalent 

that we should consider legislation to reform the industry? Can the 

industry police itself? Are there any measures, short of legislation, 

that this subcommittee might consider to ensure that the consumer 

is protected from any competitive forces that could be at play in the 

marketplace? 

We all know that the true cost of any alleged fraud and abuse 

weighs most heavily on the consumer. Consumers cannot avoid 

paying for title insurance, but they need not pay for overpriced 

products because the market is not competitive. Title insurance is 

a fact of life in most real estate transactions, in every State in the 

Nation, although three States do not require licensing of title insurance agents: New York, Tennessee, and Georgia. 

Why? The cost of title insurance varies from State to State. Indeed, it is the lack of uniformity between the different title insurance systems that makes this an important issue. 

In addition, approximately 90 percent of the title insurance business is concentrated in the hands of a few large title insurance 

companies. Higher mortgage loan amounts can also result in higher title insurance premiums for the buyer. Loans in the sub-prime 

market carry higher insurance premiums. Does this benefit consumers? 

While today’s testimony has generated broad interest, I could not 

find any agreement about why the industry is in its current state. 

Therefore, of particular interest to me is the GAO preliminary 

study, because it can provide a blueprint for this committee to examine the underlying factors, economic and non-economic, influencing the title insurance industry. Is it a competitive industry? 

How are title insurance rates determined? 

While it is too early to rely on the GAO report exclusively for 

guidance on the appropriate legislative response to these questions, 

the completed study will ultimately provide this committee with instructive suggestions on what remedies to entertain. 

Accordingly, I would strongly urge the chairman of the GAO to 

expedite the study of the title insurance industry before we reach 

any final conclusions about what is the appropriate response. I 

thank you, Mr. Chairman, and I yield back my time. 

Chairman NEY. I thank the gentlelady. 

Ms. Williams? Thank you. 

STATEMENT OF ORICE M. WILLIAMS, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. WILLIAMS. Chairman Ney, Chairman Oxley, Representative 

Waters, and members of the subcommittee, I am pleased to be here 

today to discuss our views and issues concerning the title insurance 

industry. 

As you are aware, title insurance is designed to ensure clear 

ownership when a property is sold or refinanced, and is a required 

part of most real estate purchases. 

While title insurance costs may be small compared to overall 

closing costs, title insurance costs can account for as much as oneVerDate 0ct 09 2002 17:34 Dec 05, 2006 Jkt 003539 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\DOCS\HBA116.040 HFIN PsN: TERRIE
8

third of closing costs for buyers in certain parts of the country. As 

Deputy Commissioner Toll has explained, recent Federal and State 

investigations have raised questions about certain practices and 

competition within the industry. 

My comments today will focus on our preliminary report, which 

identified issues that warrant further study, and raise a number of 

questions as part of our ongoing work for Chairman Oxley. Specifically, I would like to discuss issues involving agent practices and 

competition. 

Agents play a much more vital role in title insurance than other 

lines of insurance. In fact, most of the title insurance premium is 

paid to or retained by title agents, generally, to pay for title search 

and examination costs and agent commissions. 

As shown in our graphic, in 2004, about 71 percent of total title 

insurance premiums written were paid to or retained by title 

agents. The remainder is broken out as follows: about 21 percent 

went to expenses paid by insurers for salaries, rent, plant, and 

other costs; about 5 percent went to losses; and the remaining 5 

percent was the difference between total expenses, including the 71 

percent paid to agents, and total premiums. 

What we don’t know is how much of the 71 percent represented 

the actual costs incurred by title agents to do the title search and 

examination, and take corrective actions. In fact, in certain parts 

of the country, agents can retain as much as 90 percent of premiums paid. 

Despite the key role agents play in the underwriting process, the 

extent to which State insurers review their operations is unclear. 

In fact, we found few States regularly collect information on title 

agents’ operations, and three States do not license title agents. 

Moreover, most States do not take all of the various components of 

these agent costs into account during premium rate reviews, because they aren’t considered part of the premium. 

The last issue I would like to discuss is competition, which appears to occur at various levels. That is, the competition among insurers, as well as among agents for the business of other real estate professionals, such as builders, lenders, or real estate agents 

who refer clients. 

Title insurance is largely a relationship-based business driven by 

connections among real estate professionals. While consumers have 

the right to select their insurer, most consumers lack the knowledge necessary to shop around for title insurance. Instead, they 

usually rely on real estate professionals, knowingly or unknowingly, to make these decisions. Given this type of ignorance-is-bliss 

environment, it is unclear whether the competition that exists always works to the consumer’s benefit. 

These issues are further complicated by the recent trend of real 

estate brokers, lenders, and builders becoming full or partial owners of title agencies in what are called affiliated business arrangements. While these arrangements can be part of a legitimate business model that may benefit consumers, they also create potential 

conflicts of interests that may put consumers’ interests at odds 

with those of the real estate professionals. 

In closing, these are just a few of the issues we are addressing 

as part of our ongoing work. All of these issues are significant, beVerDate 0ct 09 2002 17:34 Dec 05, 2006 Jkt 003539 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 F:\DOCS\HBA116.040 HFIN PsN: TERRIE
9

cause they affect virtually everyone who has purchased, refinanced, 

or taken out a home equity loan, or plans to do so in the future. 

In other words, almost 70 percent of Americans. 

Mr. Chairman, this concludes my oral statement, and I would be 

happy to answer any questions that you may have. Thank you. 

[The prepared statement of Ms. Williams can be found on page 

199 of the appendix.] 

Chairman NEY. Thank you very much. 

Mr. Cunningham? 

STATEMENT OF GARY M. CUNNINGHAM, DEPUTY ASSISTANT 

SECRETARY FOR REGULATORY AFFAIRS AND MANUFACTURED HOUSING, U.S. DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Mr. CUNNINGHAM. Chairman Ney, Ranking Member Waters, 

Chairman Oxley, and distinguished members of the subcommittee, 

I appreciate the opportunity to be here today to discuss important 

issues related to title insurance under the Real Estate Settlement 

Procedures Act. 

Enforcement of RESPA is a high priority of Secretary Jackson 

and Brian Montgomery, the Assistant Secretary for Housing and 

Federal Housing Commissioner. We view RESPA enforcement as a 

very important part of HUD’s mission to increase home ownership. 

Let me say also that while the hearing today is on title insurance, RESPA enforcement is an industry-wide issue. We recognize 

that most settlement service providers desire a level playing field 

on which to compete, and take their obligations under RESPA seriously. 

RESPA was enacted in 1974, in response to Congressional findings that consumers needed more timely information on the cost of 

the settlement process, and that referral fees and kickbacks were 

driving up the costs of buying a home. A study of the title industry 

conducted for HUD as long ago as 1980 found that title insurers 

compete for referrals from settlement service providers, rather than 

for consumers. Current market case investigations indicates that 

this practice still exists in the title insurance market. 

HUD is actively investigating captive title reinsurance arrangements, in cooperation with several States, and the National Association of Insurance Commissioners. Our focus has been on companies receiving reinsurance premium payments. 

It is HUD’s position that any captive title reinsurance arrangement in which payments to the reinsurer are not bona fide compensation, and exceed the value of the reinsurance, violates section 

eight of RESPA. In HUD’s view, there is almost never any bona 

fide business purpose for reinsurance on a single family residence. 

When there is a history of few or no claims being paid, or the premium payments to the captive reinsurer far exceed the risk borne 

by the reinsurer, there is strong evidence that there is an arrangement constructed for the purpose of the payment of referral fees. 

I would like to mention briefly just a few recent enforcement actions that the Department has taken for violation of section eight 

that prohibits the payment of kickbacks and referral fees. There 

are other examples in my written testimony. 

10

HUD investigated a reinsurance arrangement between a title insurance underwriter and a home builder. The home builder created 

a title reinsurance company, and referred title insurance business 

to the insurer. The title insurer paid a premium to the builder’s affiliated reinsurance company that far exceeded the risk assumed. 

In Memphis, a title company established eight affiliated title 

companies with various builders, real estate agents, and mortgage 

brokers. The affiliated companies were paid for certain title and 

settlement work that they did not perform, and HUD determined 

were only created to make referral payments to the providers who 

owned the affiliated companies. 

In Detroit, a title company paid real estate brokers for the use 

of conference rooms at rates that were substantially higher than 

the fair market rent, in return for the referral of business. 

In Atlanta, a real estate broker ordered its sales agents—offered 

its sales agents—incentives, including trips, Atlanta Braves tickets, 

and higher commission splits, based on the number and volume of 

referrals to the broker’s affiliated title company. 

HUD has increasingly devoted more resources to RESPA enforcement. It contracts with a private firm to provide nationwide investigative services, and working with its Office of Inspector General, 

the Department continues to coordinate investigations and conduct 

joint enforcement actions with other Federal agencies, and is developing increasingly close relationships with State regulators and 

their associations. 

The success of HUD’s regulatory efforts to implement RESPA for 

the benefit of both industry and consumers depends greatly on 

RESPA enforcement. Certain statutory amendments may advance 

the goals of RESPA. For example, RESPA does not currently include authority for regulators to enforce violations of the requirements relating to the good faith estimate, or the HUD–1 settlement 

statement. 

The effectiveness of RESPA could be enhanced by ensuring that 

creative business structures do not defeat the purposes of RESPA, 

and by providing the Secretary and State regulators with necessary 

tools to enforce the statute. 

I appreciate the opportunity to discuss these important issues regarding title insurance and the settlement services industry, as 

they relate to RESPA. 

[The prepared statement of Mr. Cunningham can be found on 

page 46 of the appendix.] 

Chairman NEY. Thank you. Chairman Oxley? 

The CHAIRMAN. Thank you, Mr. Chairman, for yielding me your 

time for questions. And Ms. Toll, in your testimony and in the 

chart, it appears that 5 percent of total annual premiums represent 

the losses in title insurance, which is a stark contrast to property 

and casualty, which is 80, 90, sometimes 100 percent. 

I practiced law for 9 years and I did my share of title searches, 

which, by the way, were painful and boring. And I probably still 

got some exposure, somewhere along the line, with that. But I 

guess the bottom line is why on earth would somebody who has a 

5 percent loss ratio, something that the property and casualty insurers would die for, what would be any reasonable explanation for 

11

setting up a reinsurance program, particularly one that is closely 

held? 

Ms. TOLL. Thank you, Congressman Ney. Before I get to what 

title reinsurance is, captive reinsurance, I wanted to say that I, too, 

searched titles from the old, dusty books with mildew all over 

them, so I know your pain. I feel your pain. 

The CHAIRMAN. There is a fraternity of that, I think. 

Ms. TOLL. I am a very visual person, so I created a diagram to 

help you understand this. First, about loss ratios, I have to explain 

that title insurance is unique—and, indeed, if they were doing their 

job perfectly well, their loss ratio would be at or near zero, because 

the risk exists on the day of the closing, which gets to your second 

question about why you would ever reinsure. 

There is no financial necessity to reinsure in a residential single 

family dwelling. There is absolutely none. And that’s why we in 

Colorado and other States who joined on to the multi-settlement 

said that these are nothing more than vehicles to provide kickbacks. 

If you want to know more exact details about how it works, I 

could also get into agent splits, and why that indicates that this 

isn’t real. 

The CHAIRMAN. When you did your investigation, did you have 

cooperation from the title insurance companies? 

Ms. TOLL. Oh, I would like to say that I had a lot of cooperation. 

And I did, from two of the largest insurers. And in fact, one of the 

title insurers afterward told me that they really didn’t want to be 

in the practice, but they had to, because they were losing market 

share. 

Unfortunately, the third company has refused to settle with Colorado on a multi-state basis, and was saying some—I was informed 

by another regulator—was saying some very personal things to try 

and discredit me in front of other State regulators and I don’t know 

who else. And that was very disconcerting and alarming, and I felt 

very nervous and threatened by that. 

The CHAIRMAN. What is the status of that now? 

Ms. TOLL. The status of that now is that I haven’t had any communication with them. I don’t know. I honestly don’t know. We are 

trying hard, and we will keep pushing. We issued a bunch of subpoenas against this particular insurer’s customers late last week, 

in an effort to reach some sort of settlement. But the last words 

to me from the company were, ‘‘We’re not settling with you on a 

multi-state basis.’’ 

The CHAIRMAN. And do these companies have captive reinsurance entities? 

Ms. TOLL. This is the company that began the practice 9 years 

ago. Now it’s been 10 years. So they began the practice, and— 

The CHAIRMAN. They began the practice of reinsuring? 

Ms. TOLL. Of captive title reinsurance. And they were allowed to 

continue, I guess—well, they continued doing this practice for years 

and years, and then the two other big companies jumped on the 

bandwagon when they saw that they were losing market share, is 

how it was explained to me by the companies. 

The CHAIRMAN. And how would that fee, if at all, show up on the 

closing statement? 

12

Ms. TOLL. You know, on that I do not know. I’m sorry, I don’t 

know. I can do my best to find out and get back to you, but— 

The CHAIRMAN. It would be my guess that it was hidden somewhere in the closing statement, would be a— 

Ms. TOLL. I don’t know how you would ever see that fee. 

The CHAIRMAN. Let me ask—you testified that eliminating kickbacks is the only way to ensure a level playing field. And kickbacks 

are already illegal in Colorado and most States, and actually in 

Federal law, as well. What would be the most effective way to 

eliminate that kind of practice? 

And secondly, what kind of penalties exist, for example, in Colorado for illegal kickbacks, and are they regularly enforced? 

Ms. TOLL. Well, I am proud to say that in Colorado, our legislature just passed a bill that goes beyond RESPA, so it really 

strengthens the penalties and that gets to the first part of your 

question, which is—I mean, I agree with Mr. Cunningham, that 

RESPA needs to be strengthened. There needs to be more penalties 

and restitution available if we are ever going to stop this practice. 

On the State level, we are taking many, many steps to halt the 

practices, including posting interactive rating guides, so consumers 

can actually shop for title insurance in an effort to show rate transparency, and try and get the prices down, through operation of the 

free market. 

The CHAIRMAN. Okay. Mr. Cunningham, how long have you been 

at HUD? 

Mr. CUNNINGHAM. Two years. 

The CHAIRMAN. And so you were participating in the initial 

RESPA— 

Mr. CUNNINGHAM. Yes, I came in near the end of that process, 

when the rule was withdrawn by Secretary Jackson. I mean, what 

would have been the RESPA reform rule. 

The CHAIRMAN. Do you recall the initial RESPA package that 

was offered by Secretary Martinez? Refresh my memory. How did 

the RESPA reform effort deal with this particular issue of kickbacks and reinsurance? 

Mr. CUNNINGHAM. The RESPA reform proposal—which is still 

something that the Secretary is very much committed to—was designed to increase the transparency, if you will, and to make more 

certain the closing costs. The original proposal, which was withdrawn, had a portion in it where packages of settlement services 

could be developed and sold in the marketplace. 

And the idea was that there could be direct competition between 

packagers or others in the marketplace, with respect to the settlement service package. I mean, that was one aspect of it. The current process with the good faith estimate, and so forth, would have 

continued to be available, but— 

The CHAIRMAN. It would be price-based competition? 

Mr. CUNNINGHAM. Yes. And frankly, that is still part of HUD’s 

goal, is to try to bring competition to the marketplace for all settlement services. 

The CHAIRMAN. Yes, I—the Secretary was here a week or so ago, 

and I asked him that question, and I understand that is still very 

much alive at HUD, the RESPA reform effort. And I would urge 

you folks to keep moving in the right direction, because a lot of 

13

these issues that continue to bubble to the surface are directly related to the kind of RESPA reform that is absolutely critical to the 

market. Ms. Toll, did you have a comment? 

Ms. TOLL. No. 

The CHAIRMAN. All right. I yield back, Mr. Chairman. 

Chairman NEY. Thank you, Mr. Chairman, and our ranking 

member, the gentlelady from California? 

Ms. WATERS. Thank you very much, Mr. Chairman. I think 

somewhere along the line I was told that there were only about five 

title insurance companies in the country. Is that true? 

Ms. TOLL. May I? 

Ms. WATERS. Yes. 

Ms. TOLL. Congresswoman Waters, no, that is not correct. It is 

correct that 5 companies control a huge percentage of the market, 

but there are actually 86 insurers. I checked before I left the office. 

Ms. WATERS. All right. Thank you. That does help. And I would 

like to know—I would like to try and understand the pricing. What 

is reflected in the pricing that consumers are paying? How much 

of this reflects the agent’s costs, premiums, etc.? Is there any consistency in pricing? Is there any competition? How does it work? 

Ms. TOLL. Congresswoman Waters, it varies from State to State. 

And in Colorado, you file the rate and use it, and the companies 

are required to maintain justification for their rates. And we would 

ask for justification in the event that there was a problem. 

To get at what you’re really asking, we are trying to get the rates 

down, because it’s our position that there couldn’t be kickbacks if 

there wasn’t a whole bunch of fluff somewhere in these rates. So 

we are posting an interactive rating guide up on the Internet, to 

hope that consumers will start shopping, and then pushing the title 

insurers to get the price down. That is one of the things that we 

are doing. But it does vary from State to State. Some States don’t 

even regulate the agents or the agencies. 

Ms. WATERS. Do you find that more expensive properties pay 

higher rates, and less expensive properties pay lower rates? And 

what’s the relationship to the cost of the property and the title insurance rate? 

Ms. TOLL. That’s a good question. The cost is directly related to 

the price. The more expensive the property, the higher the title insurance premium. 

Ms. WATERS. Why? The agents have to do more research? I 

mean, what causes that? They have to justify them in your State. 

What do they say? I mean, how do they do that? 

Ms. TOLL. They submit actuarial justification, where actuaries—

please don’t ask me to explain actuarial justifications—where they 

break down the components. But we are just beginning this process. 

I mean, it was just a little over a year ago now that we found 

all these problems, and all the other States have banded together, 

and we share information through the NAIC, all the working 

groups there, and other States—because I also co-chair the NAIC 

title insurance issues working group. So we’re all working together 

to figure out ways to examine these rates. It’s highly unusual. Title 

insurance is just so different from all the other lines of insurance 

14

that we regulate. Indeed, it’s only 1.9 percent of all the premium 

volume that we regulate. 

So, sadly, I think regulators just—it just hasn’t been on the 

radar screen. But it is now. 

Ms. WATERS. Let me just ask you, this committee is very much 

involved in dealing with predatory lending, and trying to determine 

how we protect consumers from predatory practices in the financial 

services community. And I am wondering if we now have to expand 

our look, and take a look at title insurance, as we begin to try and 

reduce these costs to consumers. 

Do you think that there is an issue here, as it relates to predatory practices that is causing consumers to have to pay unnecessarily exorbitant fees for premiums, etc.? 

Ms. TOLL. In Colorado, we are very concerned about predatory 

lending. The problem is, we don’t regulate mortgage brokers. So, 

there is a lot of room for improvement there. And as I stated earlier, there are three bills that are currently pending in the State 

legislature that would address issues with respect to mortgage brokers. 

Ms. WATERS. Let me just ask—I guess that I would ask this of 

Ms. Williams. What specific steps should be taken, if any, to reform 

the industry? 

Ms. WILLIAMS. This is one of the issues that we are planning to 

address in our ongoing work. Right now, we aren’t in a position to 

make any conclusions about specific steps. But we hope, through 

the course of the work that we plan to do over the next several 

months, that we would be in a position to provide information that 

would be useful in laying out some of those next steps. 

Ms. WATERS. Will that include perhaps some advice about how 

to expand competition in the industry? 

Ms. WILLIAMS. We are definitely looking at the issue of competition, the dynamics of competition in the market, and trying to come 

to terms with competition in the title insurance industry. At this 

point, we don’t know if we will have recommendations. 

Ms. WATERS. All right. Thank you very much. Mr. Chairman, I 

will yield back the balance of my time. 

Chairman NEY. Thank you. One quick question, and I have to go, 

but I will be back, and I yield my time to Mr. Miller. 

The quick question I have is for GAO. The report indicates that 

a lot of the title insurance companies offer discounted refinance 

rate for title insurance. 

Ms. WILLIAMS. Yes. 

Chairman NEY. Do you get that automatically, or do you have to 

ask for that discounted rate? 

Ms. WILLIAMS. This is one of the fundamental questions that we 

are currently grappling with. At this point, it’s not clear whether 

refinance rates are automatic. We understand that in certain 

States it may be a requirement that these rates be provided automatically. In other places, it appears that you have to actually ask 

for the discounted or refinance rate. 

And in our review of consumer information posted on various 

websites, this is the guidance that they are giving to consumers. 

That is, you have to make sure that you ask for certain types of 

discounts. 

15

Chairman NEY. And I am going to recognize Mr. Scott, and then 

yield my remaining time to Mr. Miller. Mr. Scott? 

Mr. SCOTT. Thank you very much, Mr. Chairman. I want to 

thank you and Ranking Member Waters for holding this important 

hearing on the cost of title insurance. 

I guess my first question would be to Ms. Toll. Is there a problem, in your opinion, with assessing the cost of title insurance, due 

to the varying State regulations covering this product? 

Ms. TOLL. I think everything is different in every State. So, on 

a State level, there are varying factors to take into account, depending on what systems they use, and so forth. In Colorado, we 

can ask for anything of virtually anyone to get rate justification, 

have anyone come in and testify to explain things to us. Did that 

answer your question? 

Mr. SCOTT. Yes. Since the title search process is automated, why 

have insurance costs not decreased? I would think that, since they 

were automated, that would have an impact on bringing down the 

cost. Why has that not happened? 

Ms. TOLL. You would think that. The competition is very different in title insurance, and there is not a lot of competition 

around price. There is—it’s just not there. 

The competition is on the quality and the service. As long as a 

realtor, a lender, and a mortgage broker have an incentive to go 

with someone who will facilitate the deal, the consumer will be protected. It’s when they start—the real estate agent and the broker 

and the home builder—start getting influenced by these kickbacks, 

that the interests get out of line between the consumer and the 

person who is in the position that is doing all the referring of a 

business. I mean, that’s the problem. 

Mr. SCOTT. Can you give us a little more detail on the characterizations of the kickbacks? 

Ms. TOLL. Sure. The direct kickbacks, they’re the easiest. In Colorado, we have this agency that flew the four top real estate agent 

producers in the State to a spa—female real estate agents in the 

State—to a spa in Arizona, and they said it was marketing. It was 

for an all-expenses-paid, 3-day thing, and they said it was marketing. And we went after them for the value of the whole package. 

And they said, ‘‘Oh, no, you have to subtract a lot of the value, because we took the company jet.’’ Anyway, we fined them. 

Mr. SCOTT. Ms. Williams, you’re with GAO. In your opinion, 

what barriers prevent consumers from choosing their own title insurance products? 

Ms. WILLIAMS. Based on the information we have collected to 

date, a lot of it has to do with a lack of understanding. The entire 

home purchasing process is overwhelming. It’s a lot of information 

to absorb. It also moves quickly. And you’re dealing with uninformed consumers. 

Mr. SCOTT. So you would think that a large part of the answer 

to this is more financial literacy? 

Ms. WILLIAMS. That may be part of it. I am not sure it’s the total 

solution—but literacy is likely some part of the solution. The other 

issue to be considered is that this is something that most homeowners do on a fairly infrequent basis. They may purchase a home, 

16

refinance a home, or take out an equity line on their home. However, it happens infrequently. 

But title insurance tends to be a small piece of the process, and 

I think that’s part of the reason that it just gets rolled up into the 

entire closing process, and the buyers’ attention isn’t drawn to that 

particular piece of it. 

Mr. SCOTT. Now, in your opinion, do affiliated business arrangements provide cost savings to consumers, or to real estate companies? 

Ms. WILLIAMS. This is one of the issues that we are currently 

dealing with in the study. And based on the work that we have 

done preliminarily, we aren’t in a position to answer this definitively, one way or the other. But it does raise a set of questions 

about conflicts of interest, and if the consumers are benefitting. 

Mr. SCOTT. So your answer to that would be probably the real 

estate companies? Okay. I will take that as a yes, without you having to say that. 

To the gentleman from HUD, Mr. Cunningham, why was HUD 

so unclear on its guidance on captive reinsurance arrangements? 

Mr. CUNNINGHAM. I don’t know that HUD was so unclear. I 

think the issue with respect to captive reinsurance, the whole 

scheme, if you will, or the whole set-up, we viewed in the analysis 

as an arrangement which had no legitimate purpose, and it was a 

way to get fees to a referring entity—the builder, or the lender, or 

the real estate agent that had a captive insurance company. 

We did put some—a letter out referring to captive mortgage insurance as guidance, but we felt that there was, because of our affiliated business sham-control business entity policy guidance that 

was out there, that people were warned, and should have known 

that, essentially, in a transaction that had no real substance, that 

HUD and other regulators would be looking at it. 

Mr. SCOTT. In your opinion— 

Mr. MILLER OF CALIFORNIA. [presiding] The gentleman’s time has 

expired about 35, 56 seconds ago. 

Mr. SCOTT. Very fine, sir. 

Mr. MILLER OF CALIFORNIA. I think it’s very appropriate we talk 

about cost and competition and the title insurance company, and 

Ms. Toll and Mr. Cunningham, I thank you for your comments and 

your testimony you have given today. I think it’s very enlightening. 

But it’s—to me, I mean, I have been in the real estate business 

for about 35 years as a developer, a home builder, and a realtor. 

And the title company—and this is very complex, very complicated. 

And I will tell you that when we talked about why different fees 

are charged for different amounts of money, we also need to discuss 

the concept that it doesn’t matter how extensive the title search is, 

or how limited it is, the cost is the same, based on the amount of 

the title policy. 

And I have had properties that I have bought that the title 

searches had to go back to the 1800’s, water easements, and rights, 

and things you might have, and you get to a point where you want 

to clear your title to buy the property, and you ask these title companies to write around those easements and such which are old 

and antiquated. And in doing that, there is a cost associated with 

that, and a liability associated with that. 

17

And I noticed from the checking I’ve done over the years on the 

cost—because I always wondered why I paid as much as I paid for 

title policies—most of it is in the research, going back and checking 

the title. That’s the bulk of the cost with most title companies. I 

know in California, they are extremely regulated. I mean, California law is very extensive on title companies, and they go to extensive issues on disclosure, enforcement, liability issues, and those 

type of things. 

And it’s important that we deal with competition, because competition is good for everybody. It keeps the costs down, it creates 

a very robust marketplace. And just speaking for myself, it seems 

that in California I have no shortage of title company options. And 

of all the years that I have been in that business—and I know a 

lot of people in the business—I can tell you the truth, I don’t know 

one person—and I speak for myself—I have never been offered anything, a kick-back from a title company, I don’t know a realtor who 

has been, I don’t know a builder who has been. 

But Ms. Toll, you talked about some bad apples in the industry, 

and I applaud you for that, for going after those bad apples, because—and I know HUD does the same thing, through RESPA. 

The good players don’t want the bad guys in the marketplace. They 

just want to do their job. 

And I will tell you, when it comes to something going wrong—

and we talked about, in the last year, about allowing banks to do 

title policies, and the real problem I had with that, I felt it was just 

a built-in conflict of interest, because you had a lender making a 

loan on a piece of property, and they guaranteed the title. And I 

will give you an example. 

I had—I bought a piece of property one time that had an easement for ingress and egress that looked real good on paper, but it 

had expired, because the municipality had not enacted that easement, and by law that easement expired after ‘‘X’’ amount of time. 

Now, had my lender, whom I borrowed the money from, written 

that title, he would be trying to find all kinds of ways to get out 

of the liability. But I went back to the title company. I said, ‘‘You 

issued me a title policy that didn’t have an easement. There is no 

easement. Fix the problem.’’ And that was their liability and their 

problem. 

That’s why I think all the aspects we deal with in the industry 

are integral, whether it be a realtor, a mortgage broker, a banker, 

a title company, whatever it is. All of those entities make the industry work. 

And I mean, I go back—when I was in my twenties, I used to 

do HUD work. I bid about the first 10 or 11 jobs with HUD, and 

I got every one of them, because my partner and I were the lowest 

bidder. And all of a sudden, one day the director from LA called 

my partner into his office and he said that if I don’t give him a 

third of my profits in a kick-back before I ever get the HUD contract, I will never be issued another HUD contract. And I was 

young and naive, believing that they couldn’t keep me from being 

low bidder. I never got a contract after that. They always found 

something wrong in the way they prepared the bid, and it went 

out. 

18

So there can be bad apples in any industry. And HUD, you’re 

doing a great job. I’m not impugning HUD today. Alfonso Jackson, 

I just think highly of the man. But there are bad apples in everything. 

But my question for you, Ms. Toll, is are there adequate regulations on the books, if they are enforced properly, to deal with the 

bad apples? 

Ms. TOLL. My first comment is that you talked about how complex this whole process is, and you were in it, and you couldn’t 

even understand it hardly. Imagine the average consumer— 

Mr. MILLER OF CALIFORNIA. Oh, I do. 

Ms. TOLL. Which gets to the other Congressman’s comments. 

Mr. MILLER OF CALIFORNIA. I do. 

Ms. TOLL. You know, in a lifetime you buy six homes. I actually 

had my market analyst look at this. So you have only six contacts 

with a title insurance agency. You just don’t have any incentive to 

learn about title insurance. 

Mr. MILLER OF CALIFORNIA. Yes. 

Ms. TOLL. Really, realtors are in the best position to know what’s 

going on. And as long as they’re not taking kickbacks, everything 

is great. Are there existing laws— 

Mr. MILLER OF CALIFORNIA. Is it illegal to take a kick-back? 

Ms. TOLL. It is illegal to—yes. 

Mr. MILLER OF CALIFORNIA. I agree. 

Ms. TOLL. Oh, did you just want me to say, ‘‘Yes?’’ 

Mr. MILLER OF CALIFORNIA. No, no, no. I just want—I’m asking. 

When you said— 

Ms. TOLL. You know— 

Mr. MILLER OF CALIFORNIA. I applaud you for that. I am not arguing with you. I think it’s great. Go ahead. 

Ms. TOLL. I was going to say that RESPA actually gives the 

State insurance commissioners authority to enjoin violations of it, 

as well as our own State laws. 

Mr. MILLER OF CALIFORNIA. I am aware of that. 

Ms. TOLL. And so we—yes, I do think that there are laws on the 

books— 

Mr. MILLER OF CALIFORNIA. So I think my question would go 

more along the lines of what do we need to do to guarantee adequate enforcement of the laws that are currently on the books, or 

do you need additional laws? I mean, how many hammers do you 

need to beat the same guy up with? 

Ms. TOLL. You know, I think the—thanks to the NAIC, and being 

able to share all this information, I think we’re doing a great job 

at— 

Mr. MILLER OF CALIFORNIA. I think you are, too. 

Ms. TOLL. And actually, if I can say this, working with HUD has 

been a delight. I think we could institutionalize the fact that we 

need to cooperate. I mean, Ivy Jackson and I have a great relationship, and we call each other and send each other e-mails. So we 

are sharing. But what happens if, you know, God forbid, she gets 

bored with her job, or I do, you know. 

Mr. MILLER OF CALIFORNIA. Yes. 

Ms. TOLL. That could be institutionalized, that cooperation 

among all the different regulatory bodies. 

19

Mr. MILLER OF CALIFORNIA. I am a great supporter of sub-prime, 

and I detest predatory lending. I really do. But there is a huge 

market that the sub-prime lenders fill. And there is a huge need 

that legitimate title companies fill in the marketplace, and I applaud them for that. 

And if nothing else, if we are sending a message today that Congress and the States are looking at predators who are violating the 

law, and we are going to enforce the law, then we are going to accomplish a lot today. But I don’t know what else we can do. 

I mean, my wife owns a business, and I am approached all the 

time by people wanting to provide title policies. And there is no 

shortage of competitors. In California, we have everybody you can 

imagine. Well—and there are big companies and there are little 

companies. 

But what we have always based our decision on is who gives us 

the best service, and do they act in a timely fashion? And if there 

is a problem, are they accountable? That’s all I care about. When 

I sold houses to people, that was my main concern: timing, are you 

competitive; and are you accountable; and responsive. And I used 

the people who were. And if I didn’t think they were, and somebody 

else came along who I thought gave me a better—did a better job, 

I used them. 

And I guess I’m going to open it up to the three of you. What 

do you need from us that you cannot do on your own? 

Ms. TOLL. First of all, if everybody operated the way you did, I 

don’t think we would have as big of a problem as we have right 

now. So I just wanted to offer that comment, and then let my—the 

rest of the panel— 

Mr. MILLER OF CALIFORNIA. You’re up. 

Mr. CARTER. Mr. Miller, I would say this. Nobody disagrees 

about the valuable role that title companies play, or the service 

they provide. I think some of these we are finding, particularly in 

the arena with respect to the fees and kickbacks area and section 

eight, that entities are being developed, more sophisticated entities, 

some of them tied to affiliated business arrangements which, again, 

are not, per se, bad. And if done properly, as many groups do, benefit the consumer, from the standpoint of service. 

But there has not been the directed competition on price issues, 

because the marketing of title business is not done directly to the 

consumer. So we have got to—the consumer has a right to pick a 

title company, but they don’t know that. They don’t know how to 

shop for it, etc. So that’s one—I guess that is one side of it. 

We also think, from a RESPA enforcement standpoint, we only 

have, in essence, injunctive authority. We can get an injunction to 

stop a violation of section eight. We don’t have a civil money penalties type statute which would enable HUD to go—or the State attorneys general, or the insurance commissioners, or anyone else—

to go against somebody who has violated— 

Mr. MILLER OF CALIFORNIA. Can you do that regulatorily, or is 

it—do you need legislation? 

Mr. CUNNINGHAM. No, we need legislation to do that. 

Mr. MILLER OF CALIFORNIA. Okay, then we will write that down. 

Mr. CUNNINGHAM. So, we can’t really directly enforce a number 

of the provisions of RESPA, from that standpoint. There— 

20

Mr. MILLER OF CALIFORNIA. I would encourage you, in your 

RESPA proposal, for us to include that, then. 

Mr. CUNNINGHAM. All right. 

Mr. MILLER OF CALIFORNIA. Because you are doing that. You are 

coming forth with one. That would be a great recommendation. 

Mr. CUNNINGHAM. And there are two or three other things. We 

might expand the injunction relief—and again, these are not proposals that I am making today on behalf of HUD, these are—you 

have asked the question, ‘‘What could we possibly do?’’ 

The statute of limitations under HUD—under RESPA, right now, 

for private enforcement actions is only 1 year for private actions, 

and it’s 3 years for governmental actions. 

Mr. MILLER OF CALIFORNIA. Then maybe— 

Mr. CUNNINGHAM. We might think about doing something like 

that. We might make it—right now, the HUD–1 only has to be 

given a day before closing to the home buyer, if the home buyer 

asks. But there is no direct enforcement for—of somebody’s failure 

to do that— 

Mr. MILLER OF CALIFORNIA. Do we need to enact guidelines? 

Mr. CUNNINGHAM. What? 

Mr. MILLER OF CALIFORNIA. We need to enact guidelines that are 

clearly understood, and we need to provide for enforcement. 

Mr. CUNNINGHAM. And we could— 

Mr. MILLER OF CALIFORNIA. And I think that’s good. And we 

need to work together to do that. 

The issue you brought up on pricing, though, Ms. Toll, don’t they 

have to propose their pricing structure to you for approval? 

Ms. TOLL. Actually, they file their rate with us, and they use 

their rate. And if we find a problem with it, we require justification. 

Mr. MILLER OF CALIFORNIA. And I think all States do that. So 

they just can’t go out and dream up some figure, they have to file 

those figures with you. You review them, and you make comments 

and ask for—your questions will be answered. 

Ms. TOLL. Yes. 

Mr. MILLER OF CALIFORNIA. Okay. Thank you very much. Mr. 

Green, you are recognized. 

Mr. GREEN. Thank you. I thank the chairman and the ranking 

member for hosting these hearings, and I thank you, members of 

the panel, for appearing. 

Permit me to introduce a new term into the dialogue. But first, 

let me make mention of the fact that in Texas, title insurance will 

cost, on average, $1,443 for a $180,000 home. The national average 

is $756. Quite a difference. Gouging, something that we have heard 

a little bit about lately, haven’t talked about it as it relates to title 

companies. But price gouging. Is that a term that we can apply to 

some of what we are seeing in these disparities, Ms. Toll? 

Ms. TOLL. I have never heard that term used, and I believe 

Texas sets their rates, so they’re a little different from the rest of 

the States. They actually fix the rate and say that, ‘‘You have to 

use this rate.’’ 

And I wanted to add also, because it hasn’t been said, that title 

insurance agencies have to charge consumers the rates that they 

21

have on file with us. They can’t deviate. You can’t go in and bargain, if that makes a difference to you. 

Mr. GREEN. They have to charge a rate that they have on file 

with you. But before it’s filed with you, they use some process in 

making a final determination as to what they will file with you. 

Ms. TOLL. That’s correct. That’s called rate justification. 

Mr. GREEN. Right, and that’s the part that we have some difficulty comprehending, totally. 

Ms. TOLL. And that’s the part where the actuaries get into the 

picture. And that’s also the part that we are working on together, 

as State regulators. It varies across States, but all of us are looking 

for more rate transparency. We believe that if you can just shine 

some light on the components, the questions you’re asking for—if 

you could see the components of the rate, by then, automatically, 

justification would be provided and the rates, we would hope, 

would start to go down, by operation of the free market. 

Mr. GREEN. Well, have we not concluded at some point in life 

that people can justify almost anything that they really set out to 

justify? I mean, doesn’t that seem to happen quite a bit in the 

world that we live in? 

And given that we can justify these things, it just seems to me 

that there is something that we need to look into when we have 

the kinds of disparities that we are talking about. There really 

ought to be some desire to protect the consumer from—I will say 

it—price gouging. And it doesn’t matter to me who is involved in 

it, whether it’s just the entity, the title insurance entity, or whether the State is involved in it. 

When you charge the consumer more than you can justify 

—much, much more; sometimes it’s arbitrary and capricious, but 

you can justify it—seems to me that you are taking advantage of 

a person who is involved in this process, maybe for the first time. 

And it moves very fast. Very fast. You have paper thrown at you, 

one after another, one piece after another, ‘‘Sign here, sign there.’’ 

And most people don’t read what they are signing. Most people 

don’t know that they can shop. Most people just want to fulfill the 

American dream and own a home. 

And on that day, if someone said, ‘‘You are paying $1,000 too 

much for your title insurance,’’ my suspicion is a good many people 

would say, ‘‘Can I get the house? Will I still be able to have my 

house? And if the answer is yes, I will pay $1,000 too much.’’ 

So, it seems to me, that we ought to want to find some way to 

look out for the consumer who has, in a sense, said, ‘‘Look, I am 

sending you up there to Congress, Al, and I want you to be my eyes 

and my ears, and I want you to look out for me, because I don’t 

know all of these things about this process.’’ And it seems to me 

that you ought to be concerned when the prices vary so greatly. 

So, how would you have us try to pull these prices in line, such 

that we don’t have these great disparities in pricing? 

Ms. WILLIAMS. Pricing is another issue that GAO is planning to 

look at in its study. One of the things that we have discovered so 

far is that in States that have a file and use policy, that means 

that the insurers simply file a rate. And it’s not that they have to 

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22

fore they can use it. They file it, they wait the required period of 

time, and then they can start using that rate. 

So, one of the things we are trying to get our arms around is this 

issue of how the rates actually are set from State to State, and 

what that variation is, and explanations for the variation. So this 

is one of the things that we are planning to look into further. 

Mr. MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. Neugebauer, you are recognized for 5 minutes. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. I guess my question to the panel is—and just for a little bit of background, I have 

been a land developer, home builder, and in the real estate business pretty much all of my life, and so I have, you know, purchased 

and done business with title companies for a number of years. And 

I understand the benefit of title insurance to the system. 

So, when you start talking about kickbacks, and things that are 

going on in the industry, I guess the first question I have is, is this 

a big problem, or a systemic problem throughout the whole industry, or is this isolated companies and States—and you mentioned 

two States, California and Colorado. 

Because sometimes what we do, we chase the 1 percent, and then 

punish the 99 percent while we’re trying to chase the 1 percent of 

the people that aren’t playing by the rules. So I would like to hear 

your reflection on that. 

Ms. TOLL. Sadly, it’s a problem that we are seeing all across the 

country. It’s not just Colorado and California. We do see it concentrated, the kick-back schemes are concentrated in areas where 

there is a lot of real estate development, such as Colorado, California, Nevada, Florida, and Arizona—places where we see a lot of 

new development. But it’s a problem all across the country, and 

that is why it is so critical that all the States and all the different 

regulatory bodies work together to combat the problem, and we 

share information, including at the Federal level. 

Mr. NEUGEBAUER. Ms. Williams? 

Ms. WILLIAMS. On this particular question, I think it would be 

wisest for me to defer to Ms. Toll or Mr. Cunningham, because we 

are still in the process of doing our work, and we are relying on 

the work that they are doing. 

Mr. CUNNINGHAM. Congressman, I am not sure that we have statistical information in terms of how big a problem it is. We see it 

on a pretty regular basis, and we believe that it’s not the direct 

payment kind of thing, where I pay you for this referral. 

What it is, is some sophisticated kind of relationship like captive 

reinsurance was, like paying above-market rent for conference 

rooms to close a loan in Detroit, like title companies that set up 

affiliated—and this is not just a title problem, this is across the industry. 

You won’t see it, I think, because my experience in private practice is a lot from the commercial development side, where you’re 

used to bigger projects, and you’re used to reinsurance, and so 

forth. You don’t see it in that setting, I think. But in a single family real estate transaction—and what HUD thinks is—we need to 

find a better way to let title companies and other settlement service providers compete on the basis of price. 

23

And do an education process, maybe. Use the Internet. We have 

a consumer settlement booklet that is already part of RESPA that 

is supposed to be given out. We just collectively need to let people 

know, ‘‘Hey, before you buy title insurance or hire a real estate appraiser, or anybody else in this process, realize that you have some 

choices. Shop it some. Talk to people, and you know, do those kinds 

of things.’’ 

And then, do some things on the enforcement side, so that when 

the rules are out there, and the rules are clear, and you know, 

you’re trying to set up an entity that really does no work or performs no valuable service, and somehow is going to get a premium 

or referral fee, that folks are going to suffer the consequences for 

that. And they do. And when there are settlements, they get posted 

on the Internet, it gets picked up in your local paper, that this and 

that real estate agent or whatever, paid a kick-back, or received a 

kick-back, and so forth, and let people know. 

So, competition, we think, is part of the heart of the thing. But 

competition that’s directed at the consumer. And then sell the services and, ‘‘My services are better than her services,’’ and so forth, 

too, as part of that process, but don’t market primarily to the referrers of the title service. 

Mr. NEUGEBAUER. Do you think that States ought to set title insurance rates, or do you think they ought to just be open to the 

market, and— 

Mr. CUNNINGHAM. Well, I mean, this is me talking. I don’t think 

that—I think the States who regulate the title insurance business, 

their job is to make sure that there is somebody of substance 

standing behind the title policy that’s issued, and so the regulatory 

function that Erin is talking about, in terms of we look at numbers 

and financial soundness, and those kinds of things, are legitimate 

and should be done. 

But beyond that, I think that the companies are going to have 

to say, ‘‘Our price is cheaper, and we can still make money at a 

lower price, rather than a higher price, and so forth.’’ And if the 

playing field is level, and there is enforcement, etc., most people 

will like that situation, and it can benefit businesses and the consumer. 

Mr. NEUGEBAUER. So I’m clear about your answer, did I hear you 

say that you think the State’s focus ought to be on safety and 

soundness, and that the marketplace ought to set the price? 

Mr. CUNNINGHAM. That’s my opinion, based on what I know. 

Chairman NEY. Time has expired. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

Chairman NEY. The gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. I am going to digress 

just a moment, and I will come back about the subject at hand. 

I am interested in knowing whether or not you are familiar with 

an issue that has been at least surfacing around the country in 

various places with regard to title companies. California, 2 years 

ago, and Kansas, the State of Kansas, our next door neighbor, the 

Kansas legislature met last week, and they passed legislation that 

removed all references to race, in terms of covenants, from titles. 

My—I have introduced a bill here. Unfortunately, it’s not going 

anywhere. It’s already, of course, unconstitutional, but the lanVerDate 0ct 09 2002 17:34 Dec 05, 2006 Jkt 003539 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\DOCS\HBA116.040 HFIN PsN: TERRIE
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guage is still on probably tens of thousands of titles all over the 

country. 

One of the issues that has surfaced, as title companies have 

watched what’s going on, has been the cost, they say, of going back 

and trying to take care of removing all of that. And so it’s going 

to be State-by-State that it’s going to end up, unfortunately, having 

to be removed. But is that an issue that has any—that resonates 

with any of you, with the title industry? 

Ms. TOLL. Congressman, that issue does not resonate with us in 

Colorado. Our general laws prohibit discriminating on pricing, and 

I believe that’s part of model acts that virtually every State has. 

But I can check on the specifics. But no, we haven’t seen a specific— 

Mr. CLEAVER. No, no, no— 

Ms. TOLL. Am I not understanding your question? 

Mr. CLEAVER. I am sorry. It’s unconstitutional. It’s unconstitutional. The language is still there. Probably in Colorado, too. But 

the language—I’m not saying that because it’s in the—it’s on deeds 

or on titles that it’s a legal problem. It is not. But just still having 

that archaic language, which is still offensive, is an issue that some 

are concerned about. 

California passed legislation for it to be removed. And so whatever the cost was, it had to be removed. The State of Kansas 

passed legislation 2 weeks ago to have it removed, no matter the 

cost. And I—are we still on the same— 

Ms. TOLL. I’m not familiar with the issue at all. I’m sorry. 

Mr. CLEAVER. Sir? 

Mr. CUNNINGHAM. I share your Missouri background. I’m from 

St. Louis, so I know you as mayor of Kansas City, and so forth. 

I think that, whatever the records were 100 years ago—and 

that’s—Missouri has obviously got the same kind of problem—will 

stay. But I sure haven’t seen any recent title policies that come up 

where that sort of racial restriction is listed as something that is 

still part of the policy, or the real estate. So it’s going to be there 

and in the books, but I am not—and I don’t know how you ever 

get rid of that. But I’m not sure that people are still seeing those 

kinds of racial restrictions, even if they still exist in a particular 

title on current day documents. 

Mr. CLEAVER. The Kansas City Star did a—one woman went to 

buy a home, found it, and went to the Kansas City Star. They did 

research, and found out that it was rampant. I mean, all over. And 

after a conversation with the woman, I started checking in it, found 

out that California had already done something about it. 

And it doesn’t mean that we have a legal problem, it means that 

we have an ugly problem. And—okay. I will leave that. Let me go 

to another. 

There is a lot of paranoia on the Gulf Coast, as you can imagine, 

most of which is justifiable. And I’m wondering if you had any 

issues down in the Gulf Coast with regard to titles. Some of the 

folk—we have held hearings here, and many of the people say that, 

you know, they are living on property that was owned by their 

mother, and before that their grandmother. And after the flood 

came, they found out miraculously that they didn’t own the property. 

25

Many people are saying—I don’t know if this is anecdotal or 

not—but that, you know, property is actually being snatched from 

individuals who owned it, you know, for a century. 

And I don’t know what all of the issues are in the Gulf Coast region. I am wondering if you have had any—if you have seen any 

issues like that surface since Katrina and Rita hit. 

Ms. TOLL. I’m sorry, no. In Colorado, we haven’t seen those 

issues. I could check with the NAIC, who could check with the Gulf 

States, Louisiana and any States affected. But I haven’t heard of 

that. So, I’m sorry, I have to say, ‘‘I don’t know’’ twice, but I don’t. 

Mr. CLEAVER. I have to tell my children that, too. But no, I appreciate it. Thank you. 

Chairman NEY. Mr. Campbell? 

Mr. CAMPBELL. Thank you, Mr. Chairman. A couple of questions 

for Ms. Toll, please, if I may. In your testimony, you talked about 

large title companies setting up this sort of reinsurance arrangement. Did they all, all the big players, did they all do it? 

Ms. TOLL. You know, I’m really glad you asked that question. No. 

About five large groups of insurers control about 90, or 95 percent 

of the market; it’s a huge portion of the market. And in Colorado, 

we found that three of the four top companies were engaged in the 

process. But the fourth was not engaged in captive title reinsurance. And when I asked them why not—because I was just, frankly, curious so I asked their principals why they did not engage in 

these practices. And they said that they believed that they were illegal, so they never entered into them. 

Mr. CAMPBELL. Did they lose market share? 

Ms. TOLL. They claim they lost—their exact words were, ‘‘Erin, 

we’re taking a beating in the market, but it’s not right.’’ 

Mr. CAMPBELL. Can title insurers in Colorado pay a sales commission? 

Ms. TOLL. A sales—I don’t know what you mean, I’m sorry. 

Mr. CAMPBELL. Okay. If this—this arrangement, or a kick-back, 

if it were not illegal, wouldn’t we say that that was a sales commission? You are paying someone to market your product for you? 

Ms. TOLL. Yes, that’s a really interesting way to look at it, and 

it gets back to the competition and the unique way that insurers 

compete for business. If it were like other lines of insurance, we 

wouldn’t have anti-kick-back laws, and we don’t have them for 

other lines. You can split your commissions in other lines of insurance. 

But it’s because this product is not marketed to the consumer, 

they’re not controlling it, they don’t have knowledge about it. It’s 

those reasons that we have these kick-back laws. Whoever came up 

with—oh, you all came up with RESPA—and the various State legislatures passed mirror laws, or similar laws. It’s because they understood that the competition was different. And so, it would not 

be illegal in other lines, at least not in Colorado. 

Mr. CAMPBELL. Okay. I am trying to think if there—aren’t there 

other forms of insurance where—I’m just trying to think—where 

someone else—I mean, you might have mortgage insurance on the 

same transaction, which is really often recommended, or put together, by the title company or the lender, or whomever. 

26

Ms. TOLL. Okay, you’re getting into this anecdotal information I 

am starting to hear about. 

Mr. CAMPBELL. Okay. 

Ms. TOLL. I keep getting sort of anonymous calls and whispers 

in the hallways, which is how I learned about captive title reinsurance, that there is a problem with the issue you’re talking about. 

But I am not prepared to discuss it now; I don’t know anything 

about it. 

Mr. CAMPBELL. Okay. All right. Well, thank you. That’s all. I 

yield back my time, Mr. Chairman. 

Chairman NEY. Thank you. Mr. Tiberi? 

Mr. TIBERI. Thank you, Mr. Chairman. To the three of you, obviously we all have experiences in the marketplace, whatever market 

we’re in. I will give you my bias and my experience, and maybe we 

can have some sort of exchange. 

Clearly, what you all are talking about is these affiliated agreements in the marketplace. I was a realtor. Not a broker. I didn’t 

get anything out of referring somebody to a particular title agency, 

whether they were in the office that I worked or not. Nothing. Zero. 

I did it for one reason, and that’s to benefit my client. And I had 

an interest in benefitting my client as a realtor, because if I serviced my client well, hopefully they would be a client again. 

And in the marketplace, I have to tell you, as a realtor, I didn’t 

have any clients say, ‘‘I will pay an extra $1,000 to get in this 

house.’’ It was usually them beating on me to reduce my commission, and beating on me to reduce wherever I could reduce. So it 

was in my interest, quite frankly, to refer them to different services. 

And I usually did three, whether it was three mortgage bankers, 

or three title insurers, or three termite inspectors, or whatever, so 

they could be part of the process. But it was in my interest, quite 

frankly, to try to do everything I could, as a real estate professional, to get the best deal at the best cost for my client. 

Now, I’m not saying that every single realtor is going to do that. 

But the ones that are most successful, and are going to be in this 

for the long term, are doing that in the marketplace for the benefit 

of their client. And I think that’s probably with most industries in 

the marketplace. 

My question, I guess to you, going from your right to left, my left 

to right, is isn’t there an acknowledgment that in today’s world the 

real estate industry is so competitive that the majority—certainly 

not all—the majority of folks that are, number one, realtors at 

least, who aren’t legally allowed to get a—I think the word used 

earlier was kick-back—are in a position in a competitive environment, and refer based upon their reputation in the marketplace, 

and on behalf of their client? 

Ms. TOLL. Congressman, am I on your left, because you wanted— 

Mr. TIBERI. Yes, that’s right. 

Ms. TOLL. All right, then I will go first. As long as your interests—pretending you’re a realtor—are aligned with those of the 

consumer, that is you are choosing appraisers and termite control 

people based on quality of service, then I don’t think there is a big 

problem in the market. 

Mr. TIBERI. But isn’t it in my best interest to do that? 

27

Ms. TOLL. Yes, it—well, yes. But if I were standing there, handing you money, maybe—not everybody is swayed by this—but you 

might say—I hate to use you personally, but— 

Mr. TIBERI. No, you can use me, because no one ever handed me 

money. 

Ms. TOLL. But someone, a less scrupulous broker, might say, ‘‘I will take that $1,000, and direct my business to the company that 

you own.’’ And then it’s not based on the reputation and the quality 

of the service that the title insurance agency is providing, and it’s 

not—you know, it might not be a seamless closing. And so that’s 

not in your interest. 

But because title insurance is what’s called a long claim tail 

business, the consumer might not know about it for about 8 years, 

because it’s only when you go to sell your house that you went, 

‘‘Oh, my goodness, there was a problem.’’ So you might not find the 

problem right away, which is why we, as State regulators— 

Mr. TIBERI. And how are you defining the problem? 

Ms. TOLL. The kick-back or the lien. 

Mr. TIBERI. The illegal kick-back. 

Ms. TOLL. Right. If you don’t use a reputable title insurance 

agency, there are a number of things that can go wrong. They 

might not file the release of the liens on time. There might be problems with disbursement of fees. It might not be a seamless transaction. But you might not find that that release was not filed until 

you go to sell your house. You know, we don’t all go around going, 

‘‘Oh, I think I’m going to go over to the records and see if my note 

was released.’’ 

So that’s why it’s critical that you use a reputable title insurance 

agency, and that’s why, if a realtor is referring someone to somebody just based on the service, to a title agency just based on the 

service, I don’t think there is a big problem. And unfortunately, it 

is a few bad actors that are tainting the industry. It’s a—and we’re 

trying to get rid of the bad actors so everybody else that does it 

right can compete, and— 

Mr. TIBERI. So you would acknowledge that it’s a few bad apples? 

Ms. TOLL. It’s a pervasive problem in the sense that it exists in 

every State. I think, as a percentage of premium, that would be an 

interesting thing to explore. All I know is we are just going crazy 

at the Colorado Division of Insurance, finding the bad actors. And 

a lot of our complaints actually come from competitors. So we know 

there are good guys out there that want the playing field to be 

level, and we are trying to respond. 

Mr. TIBERI. Could you imagine that there might even be, in a 

competitive marketplace, actually a benefit to consumers, meaning 

if the three of you are title insurers, and I know all three of you, 

and I said to my client, Mr. Campbell here, ‘‘Go talk to these three, 

and get the best deal possible,’’ don’t you think that actually encourages competition and lowering the cost? 

Ms. TOLL. If I, as a consumer? 

Mr. TIBERI. No, he is the consumer. You are the title agency. 

Ms. TOLL. Oh. 

Mr. TIBERI. You three are the title agency, and he talks to all 

three of you, and asks for a bottom line. 

Ms. TOLL. Sure. 

28

Mr. TIBERI. Thank you. 

Ms. TOLL. We would start competing. 

Mr. TIBERI. Okay, next—oh, I ran out of time. 

Chairman NEY. Quickly, for the next— 

Mr. TIBERI. Thank you, Mr. Chairman. 

Chairman NEY. You want to answer? 

Ms. WILLIAMS. This is one of the issues that we are also looking 

at in our study. 

Chairman NEY. Okay. Mr. Cunningham? 

Mr. CUNNINGHAM. I think if you do it that way, and price is one 

of the considerations that you use to base the referral, absolutely. 

Anybody who refers business and takes price into account as well 

as the other factors, that is part of the solution to this whole problem. 

Chairman NEY. Thank you. I yielded my time to Mr. Miller, so 

I’m not going to take the time now. But I am going to put in writing the question to you about competition. I want to thank you for 

your time today. 

Thank you. I want to thank panel two for being here. Bob 

Hunter is the director of insurance for the Consumer Federation of 

America, and a consultant on public policy and actuarial issues. 

Mr. Hunter is the former commissioner of insurance for the State 

of Texas. He also found the National Insurance Consumer Organization. 

Doug Miller is the president and CEO, and co-owner of Title 

One, Incorporated, in Bloomington, Minnesota. Title One, founded 

in 1992, currently has 8 offices with 55 employees. Mr. Miller is 

certified by the Minnesota State Bar Association as a real property 

law specialist. 

Mr. Arthur Sterbcow has been president of New Orleans-based 

Latter and Blum, Incorporated since 1995. He is also a member of 

the board of directors for the Real Estate Services Providers Council, Incorporated. Mr. Sterbcow was appointed by former Louisiana 

Governor, Mike Foster, to the State’s property insurance task force. 

Tom Stevens is a 2006 president of the National Association of 

Realtors. The association represents more than one million members, and is involved in all aspects of the residential and commercial real estate industries. Mr. Stevens is a past president of the 

Virginia Association of Realtors, and was named Realtor of the 

Year by the State association in 1991. 

And Rande Yeager is president and CEO of Old Republic Title 

Insurance Company Group of Minneapolis, Minnesota. He joined 

the company in 1987, and is responsible for all operations of Old 

Republic Title and its subsidiaries. Mr. Yeager is also the 2006 

president of the American Land Title Association. Welcome, and we 

will start with Mr. Hunter. 

STATEMENT OF ROBERT HUNTER, DIRECTOR OF INSURANCE, 

CONSUMER FEDERATION OF AMERICA 

Mr. HUNTER. Good afternoon, Mr. Chairman, members of the 

subcommittee. Excessive title insurance premiums are not a new 

problem. In 1977, I assisted as Federal Insurance Administrator 

when the Justice Department first criticized the practice of reverse 

29

competition in title insurance. We haven’t used the word reverse 

competition, but this is the crux of the problem. 

Reverse competition is a feature of certain insurance transactions 

in which the buyer of the insurance is not the shopper, but is really 

looking for something larger, like a car or a home, and insurance 

is either required or suggested as part of that process. 

At that point, a third party—a real estate broker, car dealer, or 

someone—is in a position to steer the consumer to a particular insurer. The third party is often influenced in making the selection 

of an insurer by kickbacks that take many forms: commissions, 

underpriced services, captive reinsurance, and so on. The focus of 

competition is on rewarding the third party for the steering. Since 

this increases the price of the insurance, the competition is the reverse of normal. 

I heard Prudential say in a reverse competition situation, that 

they could not sell insurance, because they were—their price was 

too low. This was credit insurance. Their price was too low, therefore they were non-competitive. 

In the case of title insurance, title insurers market their products 

to real estate professionals who, because of their position of market 

power in the real estate transaction, can steer consumers to a particular title agent or insurer. The consumer has little or no market 

power in this transaction, because title insurance is required, because the consumer infrequently purchases reinsurance, and has 

little knowledge. 

It is very powerful uninformed consumers buying required insurance subject to market power exercised by trusted professionals, 

and only breaking the power of this incentive can end reverse competition and bring title insurance premiums down. In 2005, consumers paid $17 billion in title insurance premiums: 

4 times what they paid in 1995. This increase was driven by increased home sales, mortgage refinancings, and growth in home 

values. Yet the—given automation, there should have been savings, 

and prices should not have gone up at the same rate as these other 

factors. 

BankRate estimates that national average premiums for title insurance on a $180,000 loan is $925. I am an actuary, and I am 

using the title report and other estimates, that it should only cost 

somewhere between $200 and $300 for the 5 percent that was paid 

out in claims, and for the costs. So we’re talking about triple the 

fair price. 

The majority of title insurance costs are not for losses or operating costs, but payments to title agents. The top four title insurance paid an average of 80 percent of the title insurance premiums 

to their agents, and it’s not disclosed to borrowers. 

The widening number of investigations, State and Federal, into 

allegations of illegal kickbacks are helpful, but too little and too 

late. Congress must act to remove the financial incentive for reverse competition. 

There are two possibilities for doing this. One, replace title insurance with a Torrens-type system. Torrens title is another method 

for protecting buyers. It started in Australia in 1858, and is used 

throughout the world in most countries. In Torrens, title to the 

properties is created by the act of registration in the central regVerDate 0ct 09 2002 17:34 Dec 05, 2006 Jkt 003539 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 F:\DOCS\HBA116.040 HFIN PsN: TERRIE
30

ister. Once your name is on the register, you are the owner, by the 

fact of registration. Title by registration is the pivotal concept of 

Torrens. 

The State of Iowa uses this system, and it saves a lot of money. 

The current premium in Iowa is $110 for mortgages up to 

$500,000. Here, in D.C., a $500,000 mortgage costs, for title insurance, $1,775, 16 times what it was charged in Iowa. Given that 

most of the world—and even Iowa—has moved to an efficient method of protecting home buyers from defects in titles, Congress should 

encourage more States to experiment with less expensive alternatives. 

Second, make lenders pay for their title insurance. Another alternative is to have lenders pay for the title insurance policies, and 

include the cost in the APR, which is clearly subject to positive 

competitive forces. The general approach would be to make those 

requiring title insurance pay for it: the lender for lender’s policies, 

and the buyers for the buyer or owner’s policies. This would hold 

down the cost of insurance premiums, because there would no 

longer be an ability to indirectly pass the costs through to the 

home buyer. The direct pass-through approach, part of the APR, 

will pressure lenders to squeeze out excessive kickbacks from title 

insurance products. 

We have known about these kickbacks for decades. Study after 

study has shown that they exist, and that they are very powerful, 

and have doubled or tripled the real price. As has been true since 

1977, these incentives for kickbacks are great. 

And you just can’t outlaw them by saying they are illegal— 

Chairman NEY. I’m sorry— 

Mr. HUNTER. You have to stop them by taking away that incentive. 

[The prepared statement of Mr. Hunter can be found on page 55 

of the appendix.] 

Chairman NEY. I’m sorry, Mr. Hunter, your time has expired. 

The reason I am—I just got notice that we are going to have votes, 

so I want to get everybody’s testimony in, so I am just staying 

strict to the time because of that reason. 

Mr. HUNTER. Fine. 

Chairman NEY. Mr. Miller? Thank you. 

STATEMENT OF DOUGLAS R. MILLER, PRESIDENT AND CEO, 

TITLE ONE, INC., MINNEAPOLIS, MN 

Mr. MILLER. Thank you. I am here today because I am being 

shut out of the Minnesota title industry by controlled business relationships. My company can no longer compete because we won’t 

pay referral incentives to realtors and loan officers. There are a lot 

of realtors and loan officers who would like to send me business, 

but because of management pressures, they can’t do it. 

When you mix controlled business and fiduciary relationships, 

competition becomes, ‘‘Who can pay the most in referral fees?’’ 

I have been in business for 14 years. I have a great company. We 

strive to have the best service, product, and pricing. We are one of 

the most technologically advanced companies in the Nation. We 

have 60 great employees and 8 convenient locations. But none of 

31

that matters any more. Consumers typically rely upon realtors to 

select their title company. 

For title service providers, there is almost irresistible incentive 

to financially influence these realtors to refer them business. And 

nowhere are there more referral incentives tainting the market 

than in Minnesota. 

Minnesota is the most corrupt place in the Nation to close a 

home. Service excellence and price are now meaningless in my 

market. Instead, we have a system that rewards real estate professionals for manipulating their clients into selecting the highest 

priced title companies. That system is called controlled business. 

My title company is stopped at the door at most real estate brokerage houses in town. They have their own affiliated title company, and don’t want to hear about us. Loan officers who are loyal 

to our cause are powerless to risk making a title company recommendation that is contrary to the realtor’s recommendation, for 

fear of losing a referral source. Consumers are carefully guarded 

from key information about competing title companies, and agents 

are chastised if they recommend a title company other than their 

in-house company. I could give away my services for free, and still 

be shut out. 

RESPA was designed to prevent exactly what happened in Minnesota. Unfortunately, RESPA created some loopholes for certain 

affiliated businesses. Minnesota is now one big anti-competitive 

loophole. 

Real estate agents are trustees of their clients’ real estate affairs. 

They are fiduciaries. Controlled business and fiduciary relationships don’t mix. When you start talking about capture rates in fiduciary relationships, it is the equivalent of talking about manipulating fiduciary relationships for financial gain. 

It may be a great business plan, may make tons of profit and 

they may be hugely successful, but for the same reason that they 

are so successful is also why they are very illegal. It is self-dealing 

and anti-competitive. 

NAEBA, the National Association of Exclusive Buyer Agents, is 

one organization of realtors that takes the position that it would 

be self-dealing, and an obvious breach of fiduciary duties, to accept 

pressures or incentives in the selection of a title company. Take a 

look at Exhibit A. 

CBA’s don’t have to compete, so they are expensive. In fact, 

CBA’s are the most expensive title companies in the Twin Cities 

marketplace, sometimes by as much as 40 percent. And you can 

take a look at my price comparison over there. The entire basis for 

a CBA’s existence is to control fiduciaries, so that their clients are 

prevented from making an informed decision. A vulnerable and 

trusting consumer will pay more, so controlled business charges 

them more. 

If you have a CBA, then you have a license to charge whatever 

you want. CBA’s are bad for consumers, and they destroy competition. Joint ventures are the worst form of CBA. They are created 

by title companies for the purpose of paying referral incentives. Instead of competing on service and price, the title company captures 

the realtor’s business by setting up a joint venture with them. 

32

The joint venture provides identical services that the title company already provides, but the realtors get to share in the profits. 

There is no legitimate reason for their existence, they add nothing 

to the transaction, except an extra step and kickbacks or referral 

incentives to realtors. This adds a huge, unnecessary step and cost 

to a transaction that is already very complex and expensive. 

The realtor just tells the client where to go for their closing, the 

HUD will show an extra line item to the JV for services that 

should have been done by the original title company, the companies 

that compete on service and price never even have a chance. The 

realtor’s advice has been bought and tainted, just as clearly as if 

they had been paid a cash kick-back. 

Where there used to be a handful of title companies in the Twin 

Cities market, there are now over 500, and most of them are JV’s. 

Although the elderly, first-time home buyers, and some protected 

classes may be victimized the most, these schemes cross over all racial and demographic borders. 

The impact of CBA’s is nowhere more apparent than in Minnesota. The Federal Housing Finance Board conducted a survey of 

mortgage closing costs in U.S. cities, and concluded that our closing 

costs were more than twice the national average. A recent investigation by Money Magazine concluded that widespread existence 

of controlled business relationships was the main reason Minnesota 

now has the highest closing costs in the Nation. 

Conclusion. Minnesota’s free market system has been horribly 

perverted, and it is harming consumers and legitimate business to 

the tune of billions of dollars per year. Whether legal or not, controlled business in a fiduciary relationship will always have an 

anti-competitive effect. Why would any fiduciary, truly acting in a 

client’s best interests, repeatedly send those clients to an affiliate 

that it knows will cost them hundreds of dollars more, on average? 

The system has been breached, and the culprit is controlled business. Thank you. 

[The prepared statement of Mr. Miller can be found on page 78 

of the appendix.] 

Chairman NEY. Thank you. 

Mr. Sterbcow? 

STATEMENT OF ARTHUR STERBCOW, PRESIDENT, LATTER 

AND BLUM, REALTORS, NEW ORLEANS, LA, ON BEHALF OF 

THE REAL ESTATE SERVICES PROVIDERS COUNCIL, INC. 

Mr. STERBCOW. Good afternoon, Mr. Chairman, and members of 

the subcommittee. My name is Arthur Sterbcow, and I am president of Latter and Blum Realtors, a full service real estate brokerage company, headquartered in New Orleans, Louisiana, since 

1916. Despite Hurricane Katrina, we are still around. 

Latter and Blum Realtors has 28 real estate brokerage offices 

that engage in real estate sales and leasing in Louisiana and 

southern Mississippi through over 1,000 sales associates and 250 

employees. Latter and Blum offers mortgage services through our 

wholly owned subsidiary, Essential Mortgage Company, and we 

offer title and closing services through Essential Title, another 

wholly owned subsidiary. 

33

We also offer insurance through Latter and Blum Insurance 

Services, which is a joint venture, jointly owned by Latter and 

Blum and Hartwig Moss Insurance Agency. 

Today I am representing the Real Estate Services Providers 

Council, known as RESPRO, as a member of its board of directors, 

and as its 2006 vice chair. RESPRO is a national, non-profit trade 

association of approximately 275 residential real estate firms, 

mortgage lenders, home builders, title companies, and other settlement service companies. The bond that unites this diverse membership is that we all offer one-stop shopping for home buyers and 

home owners through what are known under RESPRO as affiliated 

business arrangements. 

My testimony today will primarily focus on one topic of this hearing, affiliated title businesses, and particularly the difference between legitimate affiliated businesses and sham affiliated businesses. 

In RESPRO’s opinion, affiliated title businesses that comply with 

RESPA and similar State laws, which I will refer to today as legitimate affiliated businesses, increase competition by facilitating 

entry into the title industry by non-traditional providers such as 

real estate brokers, home builders, and mortgage lenders. They 

have also been documented over the years as providing consumers 

the benefits of convenience, accountability, and potentially lower 

costs. 

One of the reasons that companies like Latter and Blum have entered the title business over the last several years is because it allows us to improve the quality of the title and closing process for 

our customers. Another reason is consumer surveys—that are more 

fully explained in my written testimony—have shown that the majority of home buyers prefer to be able to get everything they need 

in one place. 

The reason these home buyers said they prefer one-stop shopping, or that they have just one person to contact, it speeds up the 

home buying process. It prevents potential problems and falling 

through the cracks. It ensures one standard level of service from 

all providers in the entire real estate transaction. 

Over the last 15 years, there have been a number of economic 

studies by both independent economists and HUD that have documented the increased competition and potentially lower costs that 

legitimate affiliated business arrangements have brought to the 

marketplace. In the interest of time, I won’t repeat their findings 

here. But the details are provided in my written statement, and I 

will be glad to provide the complete studies to the subcommittee for 

the record. 

It is important, however, for affiliated businesses to comply with 

the Federal regulatory framework governing them that Congress 

and HUD have provided under RESPA. This regulatory framework 

requires a person referring business to an affiliate to disclose the 

nature of the financial interest. It prohibits that person from requiring the use of the affiliated service, and it prohibits that person 

from accepting illegal referral fees from the affiliated company. 

RESPRO has served as a regulatory compliance resource for our 

members’ affiliated businesses throughout the years through our 

publications, a comprehensive desktop reference kit on regulatory 

34

compliance issues for managers of affiliated businesses, our workshops, and through our website at www.respro.org. 

Our organization, however, is very frustrated, frustrated that 

some providers in today’s marketplace are violating RESPA and 

similar State laws by creating sham affiliated businesses that are 

established primarily through a vague RESPA’s anti-kickback prohibitions. 

In addition, we see illegal kickbacks in the marketplace, such as 

certain title agents or mortgage originators blatantly paying certain real estate agents for referrals of business. 

RESPRO has long been concerned about these violations, because 

they make it more difficult for legitimate affiliated businesses to 

compete, and because they tarnish the reputation of our companies. 

It is, frankly, frustrating for companies like mine to devote substantial resources to assuring that our affiliated business are in 

compliance with RESPA and similar State laws, and then observe 

competitors bypassing those protections with clear-cut violations. 

For that reason, we totally support efforts by HUD and the 

States to more effectively enforce RESPA and State laws, and we 

support State efforts to put more teeth in their State laws, to enable them to more effectively curb sham affiliated businesses and 

illegal cut-backs by both affiliated and unaffiliated title companies. 

In fact, RESPRO’s Colorado chapter recently worked closely with 

Colorado regulators on a new State law governing affiliated businesses that is modeled after RESPA. We believe this law could provide a workable framework that can be a model for other States in 

the future. 

Mr. Chairman, we offer our assistance to Congress, HUD, and 

State regulatory agencies, as you effectively deal with shams and 

illegal kickbacks in the future. I thank the committee for the opportunity to testify, and I will be happy to answer any questions. 

[The prepared statement of Mr. Sterbcow can be found on page 

153 of the appendix.] 

Chairman NEY. Thank you. 

Mr. Stevens? 

STATEMENT OF THOMAS M. STEVENS, PRESIDENT, NATIONAL 

ASSOCIATION OF REALTORS 

Mr. STEVENS. Thank you, Chairman Ney, and members of the 

subcommittee. Thank you for inviting me here today. My name is 

Tom Stevens, and I am the former president of Coldwell Banker 

Stevens Realtors, which is now Coldwell Banker Residential MidAtlantic, right here in the Washington/Baltimore area. 

As the 2006 president of the National Association of Realtors, I 

am here to testify on behalf of our nearly 1.3 million realtor members, representing all aspects of the residential and commercial 

real estate industry. I appreciate the opportunity to share our 

views on title insurance costs and competition in the marketplace. 

Realtors take concerns about competitiveness and any sector of 

the real estate services industry very seriously. In fact, just a few 

months ago, the Government Accountability Office was asked to 

analyze competition among real estate brokerages. The GAO concluded that the industry has a number of attributes associated with 

active price competition. These include a large number of relatively 

35

small firms that are active throughout the country, and the ease 

of entry into the profession. 

Realtors have a particular interest in ensuring competitiveness 

in the title industry, as title companies play an important role in 

the real estate transaction. As you may know, real estate professionals interact with title companies in a number of ways. Let me 

highlight one, in particular, that explains why we believe the industry is competitive. 

Through affiliate business arrangements, a real estate broker or 

agent may refer business to a settlement service provider, such as 

a title company that is owned in whole or in part by the referring 

party. Under this arrangement, the referring party receives no direct payment for the referral, but he or she can benefit indirectly, 

based on the financial growth of the affiliated provider. 

While NAR does not have comprehensive data on nationwide real 

estate affiliated title companies, based on my experience I estimate 

that about 20 percent of real estate professionals have established 

title company affiliations. Industry experts acknowledge that the 

average capture rate, or the number of transactions completed by 

the affiliate, is around 30 percent. 

Why is this number so low? First, a broker-owner has little influence over how real estate agents manage their clientele. Second, 

agents are highly motivated individuals, whose future business depends on giving their clients a high level of customer satisfaction. 

Consequently, an agent will recommend the provider that they believe will provide the best experience for their client. More often 

than not, it is not the broker’s affiliated company. 

Title insurance providers must be highly competitive to win business from their partners in the transaction. I have detailed in my 

written testimony additional reasons why we believe title insurance 

also is competitive. These facts are not in serious dispute among 

real estate service providers. 

The question we have often heard debated is, if the business is 

so competitive, why haven’t the costs of title insurance decreased, 

especially with the proliferation of the Internet? Simply put, there 

is no do-it-yourself easy way to issue title insurance. Each home 

has its unique title and history. Each sales transaction requires its 

own title search, its own title examination and commitment, title 

policy, and settlement closing. 

Purchasing a home requires weeks, if not 1 or 2 months of work, 

and there is tremendous liability at stake for all parties. So while 

a person can go on the Internet and in just a few minutes have an 

airline ticket to virtually anywhere in the world, the time, complexity, and liability part of the real estate transaction precludes 

a point and click approach. 

However, there is one area of the title insurance market that 

greatly concerns realtors: illegal kickbacks. Not only are illegal 

kickbacks wrong, but they drive up closing costs for consumers. 

Real estate professionals want to see sham companies who engage 

in such practices removed from the marketplace quickly. NAR applauds HUD and State insurance commissioners for shining a 

bright light on sham companies and illegal kickbacks. 

36

We are optimistic that HUD’s increased enforcement and coordination with Federal agencies and State regulators will send a clear 

signal to the bad actors, that they are not welcome in our industry. 

We also wish to issue a challenge to our industry partners to allocate resources to RESPA education efforts, as NAR has done with 

its RESPA awareness campaign. NAR is committed to ensuring 

that realtors understand RESPA, and fully comply with its provisions. We welcome every opportunity to work with HUD on our 

compliance efforts, to ensure that the real estate industry remains 

strong and competitive, well into the future. 

And I want to thank you for your time, and I would be happy 

to answer questions. 

[The prepared statement of Mr. Stevens can be found on page 

171 of the appendix.] 

Chairman NEY. Thank you. 

Mr. Yeager? 

STATEMENT OF RANDE YEAGER, PRESIDENT AND CEO, OLD 

REPUBLIC NATIONAL TITLE INSURANCE CO., MINNEAPOLIS, 

MN, ON BEHALF OF THE AMERICAN LAND TITLE ASSOCIATION 

Mr. YEAGER. Thank you Chairman Ney, members of the subcommittee. Again, I am Rande Yeager. I am president and CEO of 

Old Republic National Title Insurance Group. But today I am appearing as the 2006 president of the American Land Title Association. 

ALTA represents those poor souls sentenced to life in painful 

title insurance. We have over 3,000 members, including title insurers, title insurance agents, abstractors, and attorneys. 

Mr. Chairman, all of us who work in the land title business are 

justifiably proud of the essential role our industry plays in making 

our real estate market the envy of the world. Nowhere else is the 

creation and transfer of interest in real property accomplished 

more efficiently and securely than in the United States. It is because we are so proud of the many good and unnoticed things that 

our industry does, that we are so concerned about any questionable 

practices involving our members. 

Let me make this clear at the outset. We support strong, consistent enforcement of State and Federal regulations that address 

referral fee arrangements. Businesses that do not play by the rules 

gain an unfair competitive edge, and often provide inferior services 

at higher prices to the consumer. 

Because my time is so limited today, I will urge you to read our 

comprehensive written statement. 

And while consumers today are more knowledgeable about real 

estate transactions than they ever were in the past, the fact remains that most consumers still look for advice to their real estate 

agent or mortgage lender in selecting a title company. That is not 

likely to change in the foreseeable future. 

When title companies compete for recommendations on the basis 

of service, quality, and price, consumers benefit. However, captive 

reinsurance and sham affiliated business arrangements may involve indirect kickbacks or referral fees to the builder, lender, or 

broker, as a way of securing their recommendations. 

37

It’s important for the subcommittee to appreciate that ALTA has 

always been a strong supporter of RESPA, and its objective to insure that competition is not skewed by illegal referral fees and 

other kickbacks. The reason for this support is clear. Such payments and practices cause great harm to the vast number of ALTA 

members who are complying with RESPA. 

Our association, therefore, has a strong interest in working with 

HUD and State authorities, and we do applaud the efforts of Erin 

Toll to insure that the rules are enforced fully, consistently, and 

fairly. Indeed, most enforcement actions are brought due to industry complaints to regulators. 

Accordingly, some of the changes we recommend to build on this 

private relationship are: section eight should be amended to provide competitors to bring a section eight case for injunctive relief. 

At present they do not have that right. Companies in the industry 

know when their competitors are engaged in unlawful payments to 

get business, and they have a strong incentive to stop such practice. 

Second, we would ask HUD to respond with a reasonable time 

to request for guidance on RESPA issues that are submitted by 

ALTA or other national settlement service associations. This 

screening process will ensure that only important questions with 

broad significance will be brought to HUD’s attention. 

Third, we believe that States should be encouraged to adopt and 

enforce referral fee prohibitions against the recipients of such payments. Frequently, it is the title companies that are under pressure 

from persons in a position to refer business to make questionable 

payments in order to get referrals. 

Fourth, greater emphasis should be placed on consumer education, both directly and through the Internet. ALTA allocates substantial resources to educating its members, and for many years 

has been actively engaged in consumer education. ALTA’s website 

contains clear and helpful information for consumers, as well as 

regulators. 

ALTA appreciates this opportunity to provide its views to the 

subcommittee, and I am prepared to respond to questions that any 

of the members have about the title insurance or its industry. 

[The prepared statement of Mr. Yeager can be found on page 212 

of the appendix.] 

Chairman NEY. Thank you. Without objection, the statement of 

the American Homeowners Grassroots Alliance will be entered into 

the record. 

Chairman NEY. Mr. Green, do you have a question? 

Mr. GREEN. Mr. Chairman, I do realize that we have the vote, 

and I will just compliment the persons who have appeared for 

doing so, and thank you for your testimony. And I thank you, Mr. 

Chairman, for providing the opportunity. 

Chairman NEY. Thank you for your participation in the hearing. 

I appreciate the second panel and I think it’s important for your 

views to have been here today, to be part of the record. 

And I would note that some members, including myself, may 

have additional questions that they wish to submit in writing so, 

without objection, the hearing record will remain open for 30 days 

38

for members to submit written questions to the witnesses, and for 

the responses to be placed in the record. Thank you. 

With that, the hearing is adjourned. 

[Whereupon, at 4:55 p.m., the subcommittee hearing is adjourned.] 

(39)

A P P E N D I X

April 26, 2006

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