Land Title Blog

P-24 Splitting Title Premiums in Texas

2007-10-20T09:25:00.000-05:00

P-24 Independent Agent Online Discussion 9-25-2007

Commissioner Geeslin Allows 30-day Extension to Consider P-24

Latest P-24 News:

9-25-2007
Title with Texans holds Online Meeting on P-24 issue
TitlewithTexans held an online meeting with over 35 independnent Title Agents yesterday.

The guests included:

Bob Philo, Western Region Counsel, Southern Title Insurance Corp.
Terry Grantham, Owner, West Texas Title Company, Lubbock
Gregg Lyssy, President, Mission Title Company, San Antonio

There were over 35 Independent Title Agents participating on the call and were able to ask questions of the guest during the call.

The goal of the meeting was to provide independent Title Agents information about the "compromise" proposal of the TLTA Board, Metro Agents, ITAT and Sierra Title. In addition, we discusssed the background of P-24 and the instructions from the Commissioner at the September 5, 2007 Rules Hearing.

We discussed the pros and cons of the compromise proposal and how this proposal if passed would effect a diversity of business models which exist in the market today.

9-12-2007
Title with Texans will host online meeting to discuss Solutions for P-24.
Join other Independent Title Agents to discuss recommendations to the Commissioner of Insurance for changes to P-24. TitlewithTexans.com is sponsoring a FREE Online Meeting to get your input on this important issue. You have a choice. You can allow others to make recommendations to the Commission which will ultimately determine how or if you split premiums or you can add your voice to the discussion.

Date & Time: Friday, September 25, 2007; 9:30 a.m. - 10:30 a.m. - CST

To Register Go to:

As you know, buying or selling Title Evidence and Examination with other Title Agents is regulated by the Texas Department of Insurance Rules. The Rule that regulates Premium splits between Title Agents is Procedural Rule 24 (P-24.)
P-24 is controversial because in Texas it is difficult to reach a balance between Agents in metropolitan areas (Metro Agents) and those in rural communities (Small County Agents.) On September 5, 2007, the TDI Commissioner Mike Geeslin heard testimony regarding proposed changes to Rule P-24 and at the end of the Hearing decided to grant a 30-day extension for additional comments.

P-24 is important Independent Title Agents. The following web pages may give you a better understanding of P-24 issues and you can listen to Testimony and the Commissioner’s comments at the Hearing:

q TitlewithTexans.com P-24 Page
q TLTA Breaking News 9-6-2007
q TDI Hearing Audio – Docket 2668 Part 5 discusses keeping Comments open 30 days

Please attend this “Online” Meeting and bring your SOLUTIONS and recommendation for changes to P-24. The Commissioner was gracious enough to extend the Comments portion of the Biennial Hearing and we should assist the Commission with concrete suggestions. Please attend this online meeting with an open mind. Independent Agents consist of both Metro Agents and Small County Agents so our input should be important to the Commissioner. Our panelists include a Metro Agent, a Small County Agent, and an Underwriter with no Direct Operations

Moderator: Paul Cones, Integrity Title Company

Panelists:

Steps to Register and Join Online Seminar

Register for Seminar at:

Register for Online Meeting at:

Log On to Online Meeting via your computer. Call in via telephone for audio portion of meeting.

As an Attendee, you will be able to submit your comments and questions during the discussion and have those read during the online meeting.

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9-7-2007
TLTA AD-Hoc Committe Recommendation

An AD-Hoc Committee of TLTA in response to the Commissioner’s directive to take Item 2006-65 and address his four items of concern is going to take to the Board (on Sept. 17th in Austin at 9:00 am) King’s Item- 65 with the following amendments:

1. Change the 100% and 0% numbers back to the original 90% and 10%
2. Amend to allow not only contiguous counties to deviate by PWA but also companies within the same county
3. Request that the $125,000 threshold be moved to $ 150,000 in five years, and
4. Parties engaging in such transactions must be paid within 30 days of the issuance of the policy, if not before.

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9-6-2007
TitlewithTexans email to Independent Agents following 9/5/2007 Hearing

Independent Title Agents:

On September 5, 2007, at the 2006 Texas Biennial Rules Hearing, Mike Geeslin, the Commissioner of Insurance heard testimony regarding the proposed changes to Procedural Rule 24 (P-24.) In response, Commissioner Geeslin agreed to leave the record open for 30 days for further comments. Commissioner Geeslin asked that Parties concerned about this issue work together to find common ground on P-24.

Background:

Last week and prior to the Hearing, an Ad-hoc Committee of TLTA met with representatives of Sierra Title to discuss an amendment to Sierra Title's proposed Agenda Item 2006-65 affecting P-24 and premium splits. A compromise was reached between TLTA and Sierra Title. Prior to this compromise, TLTA had agreed to accept the Staff recommendation (see below) so long as the PWA (Prior Written Agreement) language was NOT deleted.

2006-65 Sierra Title / TLTA Compromise [Click Here for Full Text]

Under $125,000

Agent providing Title Evidence and Examination would earn 100% of the Premium and NO PWAs allowed; UNLESS, the Closing Agent is in a "contiguous" County and a PWA is in place for not less than 90 days prior

$125,000 or greater

50/50 Split between Agent providing Title Evidence and Examination and Closing Agent unless a PWA is in place for not less than 90 days prior

2006-67 Staff Recommendation [Click Here for Full Text]

Over $100,000

30% Furnishing Title Evidence
30% Title Examination
40% Closing the Transaction

$100,000 or less

60% Furnishing Title Evidence
30% Title Examination
10% Closing the Transaction

Note: The staff recommendation 2006-67 would eliminate all PWAs.

The Commissioner's gave those present at the Hearing "Marching Orders" and other issues to consider:

o The Department of Insurance needs to make sure "Rural" and/or "Small County" Agents remain financially viable
o The industry should indentify the party (Agent) most at risk to make sure they receive a reasonable rate of return
o The fees MUST BE "commensurate" with the services provided

A couple of other important statements the Commissioner made were:

o The industry needs to find a long term, permenant solution so P-24 will not be revisted in two years
o A direct quote from Commissioner Geeslin was, "Think outside the box"

A few Comments from those tesifying yesterday inlcuded:

o We MUST have Prior Written Agreements in some cases or this is a "non-starter" for many agents

o 100% of the Premium (for under $125,000) seems to be one-sided - 0% is not a number; why not keep the 90/10?

o Requirements of 90 days prior for PWAs is too long; particularly for Commercial Transactions; 30 days might we workable

o Is the 90 days prior to "order being placed" or prior to Closing? This does not appear to have been addressed

o PWAs for contiguous counties will give an unfair advantage to Underwriter Directs who are licensed in many counties

These comments may serve as food for thought as you make your suggestions. As the Commissioner said, we need to THINK OUTSIDE THE BOX and work toward a P-24 agreement that satisfies the needs of Rural, Small County, Metro and Underwriter Direct Agents. The problems with P-24 are fairly well defined. What we need are SOLUTIONS!

The Commissioner seemed sincere in his desire to find a workable solution to the P-24 issue. Let 's do what we can as independent Title Agents to help the Commissioner.

Make comments directly to the Commissioner by sending them to Gene C. Jarmon, General Counsel and Chief Clerk, Texas Department of Insurance, William P. Hobby Jr. State Office Building, P. O. Box 149104, Austin 78714-9104 by 5 p.m. Oct. 5, 2007.

Please add your comments, suggestions and solutions below and we will post those on this site and make sure those are forwarded to TLTA and (ITAT) Independent Title Agents of Texas.

Thank you,

Paul

Note: We realize you may have recieved information from TLTA regarding this issue and we do not want to duplicate TLTA's efforts. We simply want the perspective of Independent Title Agents to be heard loud and clear.

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P-24 Comments & Suggestions Message Board

Suggestion 1: Forget the PWA because the big companies will just call the rural companies as soon as this passes and strong arm them to get PWA how they want it anyway. Pick a number and take the negotiation out of it so everyone is on the same page. Also make better definitions of the difference between "title evidence" and "title examination" because nobdy seems to understand the difference. Also make it clear that issuing the policy does not give you any more percentage because too many people think that entitles them to get more but the rule does not mention anything about that.

Suggestion 2: If an agent is receiving 100% for Title Evidence, what about the company that actually issues the policies? If they are receiving 100% are they also going to be required to issue?

Suggestion 3:
1. Remove P-24 entirely and require policies to be issued by an agent/direct operation licensed in the county where the property is located. NO premium split. Requestor may close and retain all closing fees. Home office issue remains for multi-county transactions.

2. 50-50 ok if before underwriter and issuer pays all underwriter (15%) premium. (Basically the current 60-40 division.)

My basic problem with P-24 is that we provide the full plant service (records, search, review,corrective action, customer contact/relations and risk) but give up a significant portion of the premium because we did not 'receive the initial order' while the closer retains all fees they wish to charge i.e., escrow, copies, email, etc.

We have had instances where we insisted on P-24 division and the underwriter/direct operation/out of county firm would state: "If you do not agree to this division, we will go to your competitor." We hear nothing else even though we are the only agent licensed for this county. We later see the transaction clear the courthouse. Who provided the title evidence and policy? No one knows!

Suggestion 4: When it comes to splits, I always get the short end of the stick. The big city agents want the commitment RUSH! RUSH! RUSH! and then they take 6 to 8 months to pay the split, if at all. When the TDI was called to ask how to handle the nonpayment, I was told that they don't like to get mixed up with financial areas. On a property that was on the list at $6M, through a split, I got a check for a whopping $500.00 as this was calculated by a New York firm because they had multiple properties in multiple states. I think splits should be done away with entirely. There is no reason for Houston or Dallas to want 60 to 80% for closing, when they don't have to keep up a plant. I think the policy should be issued in the county where the land lies and let the metro companies compete in their own areas and leave us alone.

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Comments below were made Prior to the
September 5, 2007 Rules Hearing

Independent Title Agent Poll

Attention Independent Title Agents
Vote Now!

A change to Procedural Rule 24 (P-24) has been proposed by the TDI staff regarding:

(i) furnishing title evidence
(ii) furnishing title evidence and examining title
(iii) closing a transaction, or
(iv) closing a transaction and examining title

How do you feel about the proposed staff recommendation for changes to P-24 and the TLTA's position regarding this proposed Rule change?

Please take a moment to read the staff recommendation, the TLTA position, answer the poll questions and then Vote. Feel free to add comments and suggestions. YOUR IDENTITY WILL REMAIN ANONYMOUS!

Your business may be effected by a change to Rule P-24. The opinions of Independent Title Agents are important as the Commissioner considers these proposed rule changes. Thank you for taking your time to add your voice to this discussion.

Notice of 2006 Texas Title Insurance Biennial Hearing

Agenda Item - 2006-67 - P-24 Staff Recommendation

Note: On Thursday, August 30, 2007 an Ad-hoc Committee of TLTA had a meeting with representatives of Sierra Title to discuss the amendment of Sierra Title's proposed Agenda Item 2006-65 affected P-24 and premium splits. In essense it keeps PWA's "Prior Written Agreements" so long as there are at least 90 days prior to closing; and mandates no fees splitting for transactions less than $125,000 (unless you are in a contiguous county and have a PWA at least 90 days prior to closing) and a 50/50 split on transactions greater than $125,000 unless a PWA is in place at least 90 days prior. The complete text is below. How do you feel about this? Please add your comments below.

P-24 Amendment agreed upon between TLTA and Sierra Title

Steps to Participate in P-24 Poll

1) Review TDI Staff Recommendation (P-24)

2) Review TLTA Position (Below)

3) Answer Polling Questions ====>>>

4) Vote ====>>>

5) Add Comments & Suggestions
Express your opinion!

Agenda Item 2006-67 - Re: P-24
Do you agree with the TDI Staff recommendation for changes to P-24?

Agree w/ TDI Staff Reccomendation
Agree w/ TLTA Position allowing Agent Agreements
Leave P-24 the way it is

SEE POLL RESULTS

Thank you for Voting!

TLTA Position
Agenda Item #2006-67
Filed by: Texas Department of Insurance
Date filed: Sept.7, 2004
Amends: Procedural Rule P-24 to set reasonable percentage rates for payment of services for furnishing title evidence and title examination and to remove language in the rule that often prevents urban and rural agents from receiving the same amount of premium for the same work.
TLTA Position: SUPPORT, but only if Prior Written Agreement provision is not deleted

Below are comments from Independent Title Agents related to proposed Rule change:

Comment 1: Need some protection for low value policies. We have several that are less than 50k. They are not economical to process now, even in house, and to give up 40% of premium after underwriter is cost prohibitive. Should require underwriters with no agents in the field to absorb the underwriter portion (15%) in their identified division.

Comment 2: Our company policy follows P-24 recommendations and do not have separate agreements.

Comment 3: ...are taking money from those of us that are having a hard time anyway and giving it to the XXXXX and the XXXXX and leaving those that work in the small counties with nothing that we can help our own businesses with...it needs to be left alone!!!

Comment 4: If the issue is with the rural agents then consider a minimum county population for the guidelines to pertain to.

Comment 5: I agree with setting a standard split across the board without the need to negotiate but differentiating between providing title evidence and examining is a waste of time. Providing title evidence without examining and putting in a commitment is sometimes more work and nobody does it anyway. Also there needs to be a clarification that issuing the policy does nothing to enhance your split.

Comment 6: I agree with the Staff Recommendation to fix the premium splits. In our market we complete with Agents who are purchasing Title Evidence from Underwriters for $50 to $75 per file so the Underwriters can write the Policies. By doing so, the title industry is diminishing the value of its product and making it more diffuclt for independent agents to compete. If the Insurance Commissioner thinks $50 is the true cost of Title Evidence, which we know it's NOT, then expect rates to continue to decline.

Comment 7: In order to "furnish title evidence" you have to "examine title" so that you can present the evidence in such a way that it can be "examined". Under the TDI proposal you do the same work for half the money, so some clerk can "examine" title. These items need to be kept together and the "opt out" written agreement provision deleted as proposed by TDI. With the loose standards for home office issue, urban agencies which control business will just want a run sheet, no commitment, will prepare their own commitment and close and issue.

Comment 8: This is likely one of the most frustrating things we deal with. You establish policy based on the rule to give your employees guidelines to follow but you might as well not even bother. Practically every call we get begins with an offer that never follows P-24 and is less than what we feel our services are worth and ends with a threat that if we do not take what is offered we will get nothing. If we crater, we often find the work required makes us regret we took less. The "prior written agreement" language makes P-24 useless. We work in a regulated environment. Regulate the premium splits. No negotiating.

Comment 9: I suggest changing the language, "Any payment in excess of sums calculated by use of the percentage specified in this Rule shall be deemed to be an unreasonable and excessive amount." to "Any payment less than the sums calculated by use of percentages specified in this Rule shall be deemed to be a violation of P-22 (D) as such payment would not be commensurate with the services actually perfomed."

Comment 10: Without striking the language concerning prior written agreements, there would be no point to this change. Rural agents would still be faced with the pressure to agree to take less to get the business. The split should be non-negotiable, so that all agents are treated the same.

Comment 11: Allowing prior written agreements negates the entire rule change.

Comment 12: What is the purpose of having a rule if no one follows it? We get calls from underwriter owned offices in Houston and Dallas daily. They never want to follow the P-24 and if we do not agree to their offer they go to another local office who will sell out their services. Often the underwriter chooses another underwriter's agent and sticks it to their own agents. TDI needs to enforce whats there and our legislature needs to protect the local independent TEXAS agents.

Comment 13: I wouldn't see a problem with making the split the same across the board, if "furnishing title evidence" and title examination" were not separate. You have to examine in order to issue a commitment. I don't think an examiner would want to examine someone's hand written report and my abstractors do not have the time to type the reports, which would also cut into any money made on the premium split to begin with. I personally haven't had a problem with prior written agreements, but I do spend ALOT of time getting that premium split paid to me in a timely manner. So my opinion is leave it as it is, but do something to regulate the time frame that split has to be paid to the agent providing the service.

Comment 14: If it is changed, our company will likely stop taking out of county orders. They are hardly worth our time under the current rule. The only other title company in our county already severely limits their out of county orders, so we are getting most of them right now, even from companies that share the "other guy's" underwriters. Then the out of county title companies can come do stand-ups in our county or even better set up their own company here so they can deal with rural acreage and our County Clerk, and then maybe they will realize why I think its funny when they ask for their title evidence order back in 3 days.

Comment 15: Regarding Comments 7 & 14, if you knew you would get a split of either [30% or 60%] or [60% or 90%] depending on the dollar amount of the transaction, as required by the staff recomendation for P-24, would this not solve the problem of getting too little per transaction? I suppose you could choose to sell only "Examined" title searches to get the larger premium split.

Comment: 16: 15, my concern is that under the new rule, most orders will be for title evidence only since "Examination" would be worth 30%, I'm assuming out of county companies would claim they will do the examining...but as was mentioned, "furnishing title evidence" requires examining the title.

Comment 17: What is our recourse? Work was done in May, closed in June, not yet paid (in August) because we will not sign a T-OO for a 60-40 split with us getting 40 on a $54k deal. Apparently, we sign or get nothing, including expenses.

Comment 18: The proposed P-24 amendment is not satisfactory for small agents. Sub par b is a step in the right direction in that small firms need protection on low value projects. However, the reduction in the 60-40 provision to 50-50 is a sell out to larger firms that do not have agents in an area. We, as a small firm, maintain a full record office and need some compensation from those that use that service. Giving the large firms that call demanding a short time frame that requires local projects to be delayed a larger percentage when they also close the transaction is not realistic.

I recommend that all premium go to the office supplying title information, regardless of the project value, with the closing office retaining all closing fees. The information supplier should also issue the policy. This will save time and effort for all as there will be no need for a T-OO (no split) and no the related bookkeeping/tracking/overhead for the Statistical Summary.

It appears that, again, TLTA is looking out for the large companies in the metropolitan areas and underwriter direct operations at the expense of the small agents in rural areas. One option to protect our investment and firms, will be to adopt a policy of non-support for firms requesting us to provide title evidence. They can get a landman ($500 per day) or send in one of their employees to do a standup examination at the courthouse.

New TitlewithTexans.com Referral Network

2007-06-30T08:10:00.000-05:00

Title Insurance is important to Consumers and Lenders.

Unfortunately, there is a disturbing trend among publicly traded Direct operations to send their title work overseas.

Offshoring certain functions are fine but the Abstracting/Examination work for the sale of Texas property should NOT be one of them.

Integrity Title Company, in cooperation with CourthouseDirect.com, are helping Texans keep more profits from Title Premiums right here in Texas.

Consumer, Lender, Real Estate Agent, Investor desiring a quality title insurance product should make sure the research is performed in Texas by Texans. Go to TitlewithTexans.com and place your order with experienced Agents commited to providing the highest quality title services available.

By using Title with Texans you can be sure your title work is being perfomed by Texas Abstracters & Examiners knowledgable of the nuances of our laws and traditions.

Many Underwriter "Direct" operations outsource their research overseas. The results have been less than superior Examinations and Title Commitments.

We believe in the free market but we also believe research should be done by those who understand the local laws and land titles in Texas. Shouldn't the profits from title premiums stay in Texas rather than go to Wall Street investors?

Texans should make the conscious decision to do business with Independenet Title Agents.

Underwriters are neccesary to the Title process and perform invaluable services including educating Title Agents and providing sound Underwiting decisions. Underwriters (along with the Title Agents) incur the risk of insuring the title to real property and paying claims when title defects occurs.

In Texas by law, Underwriter's earn 15% of Premiums and Agents earn 85%. If you are both Underwriter and Agent i. e. "Directs" then you earn 100%. This is the reason for the proliferation of Underwriter owned Directs operations in Texas.

Now is the time for Texans to take a stand and put the (85%) Title Premiums in Texas businesses by doing business with Independent Title Agents.

As consumers, how do we know if we are working with an Independent Agent? How do you know if the title research for your property is being done here in Texas or overseas in India, China, Indonesia or Belize?

Now it's easy. Go to: TitlewithTexans/ClosingLocations and select an Independent Agent in your area. By doing so, you know you will be working with Independent Agents who perform the title research right here in Texas.

Title Insurance is a regulated industry and the only products we sell are title searches and Title Policies. Why not make sure the title products you buy are done by those most familiar with records in the county where your property is being bought or sold. You have a choice. Choose an Independent Agent.

For more information about the Texas Title industry go to Texas Title Facts.

Forbes Article Regarding Title Insurance

2006-11-25T08:49:00.000-06:00

In the Forbes Magazine article dated November 13, 2006 titled, "Inside America's Richest Insurance Racket," the writer, Scott Woolley presents a scathing attack of the title insurance industry. The article contains some true statements, some untrue statements and some misunderstanding of the title industry as a whole.

Some of the responses to the Forbes article were from independent "mom and pop" title agents. Independent agents, throughout the country, work hard to provide quality title services to their customers. It is unfortunate these agents were lumped into what was referred to in the article as a "racket."

As an industry, we can not put our heads in the sand when we know abuses exist but most seem to be committed by the "big boys" and not local independent agents who strive to provide a valuable service.

Highly skilled Abstracters and Examiners spend a considerable amount of time and energy making sure land titles are "clear" by correcting legal descriptions, reviewing chains of title, searching real property, divorce, probate and bankruptcy records before providing a Title Commitment and ultimately a Title Policy. When these professionals perform their jobs effectively then the results are a low claims ratio.

Experienced Escrow Officers work closely with parties to real estate transactions including Real Estate Agents, Lenders, Surveyors, Buyers and Sellers curing title defects, preparing closing statements, closing the transactions and disbursing funds. It is not unusual for Escrow Officers to work late into the evening or on weekends to accommodate a buyer or seller or to prepare for a closing the next day.

To suggest that title companies do not earn their money is both insulting and inaccurate to those who work so hard in an industry they care so much about.

The fees paid for title insurance is relatively small compared to fees paid to real estate agents and mortgage lenders. Particularly when you consider the amount of work we put into researching title and closing transactions.

Even with the latest technology, it requires the expertise of seasoned Title Examiners and Escrow Officer to close a real estate transaction effectively. Other expenses such as rent, office equipment, E & O Insurance, and personnel costs have not gone down but premiums continue to decline.

Mr. Wooley, states, "Sifting through property records to ensure that a title is clear of old claims costs them all of $25 to $125 if the records are digitized." We beg to differ.

When was the last time it cost a title agent $25 to produce a Title Commitment? This barely covers the cost for the typist.

Title agents know $25 to $125 to issue quality Title Commitments are not realistic amounts. To issue a quality product requires a specific skill set and other resources which are not cheap. For example, the cost of leasing or maintaining a "Title Plant" or other databases required to perform a title search can be very expensive.

It doesn't make much sense that people are willing to pay $200 for an extended warranty on a dishwasher but are reluctant to pay $1,000 for a title policy to protect them from title defects on their most valuable asset.

As defenders of the industry we must also be realistic. For example, the reinsurance controversy in Colorado, California, Washington, and New York was an accident waiting for a place to happen. We always thought reinsurance was a tool to spread risk on multimillion dollar transactions and not something to be used for transactions for as little as $150,000.

Industry responses such as, "the laws were not clear", "we thought it was legal", "the other guys were doing it" does not pass the smell test. When homebuilders are selling reinsurance on small transactions and never paying claims then this looks like a kickback and was destined to raise suspicion on the part of regulators.

Unless you just fell off the turnip truck yesterday you know bribes and gifts to real estate agents for referrals exist and have added to the distrust of our industry. Kickbacks had gotten so bad in Texas and so disturbed the Texas Department of Insurance that they instituted Prodedural Rule 53 (P-53) to try to curtail these practices. The jury is still out on whether or not this has made much of a difference.

Mr. Woolley also spoke of the problem with sham title agencies. He said, "Elsewhere many title insurance fronts don't even bother to create a real office. When investigators in Colorado recently sent out letters to the state's 500 title agencies, more than a hundred came back stamped "no such address," and also stated, "Such fronts typically are run by the large title companies but are co-owned by real estate agents and mortgage brokers, who get a cut of the profits."

As proponents of Affiliated Businesses it hurts our industry when "large title companies" operate in this manner. These kind of activities hurt those of us who play by the rules and believe ABAs are good for consumers and the proper way for real estate professionals to participate in the settlement portion of the real estate transaction.

In regards to other abuses, those who have read my previous postings know we have serious problems in Texas with companies using their power to control the market at the expense of independent title agents.

We should look in the mirror and clean up our act first before we start climbing too high on our horses. The Forbes article was critical of our industry but it is up to us to educate the public and give them a better understanding of what we do and the value we add to real estate transactions. In turn, we will reverse the negative impressions either real or perceived.

Title Plants and Market Activity

2006-09-23T00:50:00.000-05:00

Texas Title Industry - 101
The Title Industry in Texas is regulated by the Texas Department of Insurance which also regulates Automobile, Homeowers, Life and Casualty Insurance. Title insurance is only a fraction of the products regulated by the Department. There were approximately $1.5 Billion in Title Pemiums written in the State of Texas in 2005.

Premium rates in Texas are regulated and the basic title premium on a $100,000 sale is $871. In Texas, premiums are earned three ways:

Title Evidence
Title Examination
Closing the Transaction

"Direct" operations are wholly owned Agencies of Underwriter and "Affiliates" are Agencies owned partially (at least 10%) by Underwriters. By law, Underwriters earn 15% and Agents earn 85% of the title premium. If you are both the Underwriter and the Agent then you capture 100% of the premium (plus escrow fees.)

Affiliates and Direct operations represents approximately 60% of all title premiums written in the state. There are 254 counties in Texas and most counties have at least one or two independent agents. This means, the 4 or 5 major Underwriters' Directs and Affiliates operations dwarf the number of premiums generated by independent agents for the entire state.

Title Plants and Market Control

A Title Plant is a 25-Year geographically indexed set of records and other related indexes. By law, to be a licensed Title Agent you must either own or lease access to a title plant, which are expensive to build and maintain.

Direct operations and large independent Agencies have managed over the years to control a large part of the title market (in the Dallas, Houston, Austin and other metro markets) through what are commonly called "Joint Plants." The original concept of a Joint Plant was to share the cost of posting a title plant so the expense to maintain the databases could be reduced in purportion to the number of owners.

Over time, Joint Plants became profit centers, which in itself is not a bad thing, but at the same time Joint Plants became a tool to control the title market in large metropolitan areas. Now they are moving into smaller markets too.

For example, in 2002 if you wanted to be a Title Agent in Harris County, Texas there was only one title plant provider, a "Joint Plant" (owned by the major underwriters and a couple of large independents) and the access fee was approximately $18,000 per month plus other fees. At this cost, you could only be a very large agent to afford plant access. In 2003, a new Title Plant entered the Harris County market and within 30 days the Joint Plant lowered its monthly fee to under $8,000. See Houston Business Journal Article dated September 26, 2003 and follow up story dated October 4, 2003.

In Dallas County, there were two Joint Plants and the upfront cost to become an owner, if allowed, was over $2,000,000 and the monthly fee was over $25,000 per month. Therefore, in Dallas County (population 2.5 M) there were only 14 Title Agents. But, in Collin County, just north of Dallas, (population .5M) there were over 50 Agents. This was the result of reasonable plant fees in Collin County compared to the much higher entry and monthly access fees in Dallas County.

Underwriter owned plants in Dallas county have recently reduced their monthly fee to under $15,000 per month since a new title plant entered the market.

How have the Underwriter Directs and few large Independents Agents managed to control the Dallas County title market for an approximate 25-year period? In short, the owners of these plants kept the cost of access to the plants arbitrarily high. Additionally, the Vendor for the two Joint Plants in Dallas County was also the Vendor for the Dallas County Clerk and were instrumental in keeping others from obtaining the records.

To illustrate, the cost to purchase certain public records, the foundation for a title plant, in Harris County was about $5-10K. But, the cost to purchase the same records in Dallas County was approximately $2.4 Million. Our firm complained to the Attorneys General Office, Open Records Division about this desparity. A part of our complaint was that the Vendor for the County was paying nothing for the records while generating hundreds of thousands of dollars per month and at the same time keeping the records out of the hands of competitors. This is a great untold story.

Nothing was done about this until a new County Clerk took office. When this happended, our firm again requested the records as we had done before. This time, the new County Clerk was told by the County Vendor that they, the Vendor, had a copyright on the public records and how they were organized. This prompted the new Dallas County Clerk to file her own compaint with the Attorney General Open Records Division. As you might expect, the Attorney General let the county Vendor know in a 14 page opinion (framed in my office - our attorney had written a brief in support of the County) that in fact, these records were NOT copyrightable and they must be released to the County Clerk.

End of story, right? Wrong.

This same company turned around and sued the State of Texas Attorneys General's office in a Travis County District Court (which was their legal remedy.) In Texas, we have a saying, "that takes huevos."

Violations of the Texas Open Records Act are a criminal offense and the State had recently gotten it's first criminal indictment. A few weeks later, there was a meeting in Austin between this Vendor and the AG's office and not long after the County was able to release the records.

It took our firm over three years to acquire this information from the county. Since that time, the Vendor has been replaced by the County but remains the Vendor for the Dallas title plants.

If you control the Title Plants (where Title Evidence originates) the Title Examination, the Underwriting and the records from the County Clerk's office then you control the market.

Leveraging Second Best Asset - The Title Plant

2006-09-04T08:00:00.000-05:00

Independent Title Agents' greatest asset, after their people, are their Title Plants. It is important, in this information age, for owners of title plants to maximize the value of this asset by fully automating their databases thereby creating greater efficiencies and productivity; and, by strategically making title plant information available to others. (Note: Comments in this article are directed toward Texas Title Agents but may apply to Title Plant owners throughout the country.)

In Texas, Title Plants are regulated by the Texas Department of Insurance under Rule P-12. There are approximately 8 states with title plant laws and Texas is one of them. The definition of Title Plants and the State requirements can be found at: Title Plants.

Plant owners know the blood, sweat and tears that goes into building a title plant. For those who think the information is filed at the courthouse so what's the big deal about a Title Plant? Listen up...

Title Plants are tools Abstracters and Examiners use to research land records more effectively. The plant builder/maintainer indexes all of the documents filed in the courthouse against legal descriptions for the properties when legals are available. So, when the Examiner is running title in a given survey or subdivision all the records pertaining to the land are found in the same part of the plant.

Many plants and title agencies are family owned business passed down through generations. Historically, Title Plants were hand written, "Tract Books" or typed "Index cards." The indexing person for the title company would work at the courthouse for hours transcribing information from the daily recorded documents before the documents were sent off by the county for microfilming or before being bound in books. Since much of the indexing was done in the courthouse County Clerks would sometimes make space available to title companies to complete this task.

Historically, Title Plants were on paper so local Abstract and Title companies installed vaults, similar to bank vaults, to store their records. In fact, our firm leased an office across the street from the Fort Bend County courthouse and we kept our records in the old "Peirson Abstract Company" vault, which was a step back in time.

The obvious concern with tract books and index cards is the risk of loss due to a fire or flood. Tracts Books are usually very large books which take up large amounts of space and only one person can use them at a time. The problem with index cards is sometimes they can be misindexed or go completely missing. Inadvertently, cards may end up in an abstracter's file.

Some plants have already gone through the expense of microfilming or scanning their cards to preserve them which is a great start. Typical progression for older plants is from paper to microfiche (or microfilm) and then to computers or a combination of these.

A Title Plant can either be an ARBed plant or an unARBed plant. Acreage tracts in ARBed plants are assigned an "arbitrary" tract number. An unARBed plant post acreage tracts to the Survey or Abstract Numbers.

There are reasonable arguments to be made for both ARBing and not ARBing. The biggest problem with ARBing is it is very expensive and if a parcel is ARBed to the wrong tract then it will NEVER be found in the plant. In most cases, the persons ARBing are not as skilled as Examiners who can make determinations of the relavance of a instrument relatively quickly. The main drawback of an unARBed plant is it may take longer to search. But, with electronic images, wherein an image can be opened and closed in seconds, this is less of a concern. The time lag was an issue, when documents had to be viewed at the courthouse, or copies were made from microfilm.

There are still Plant owners who think protecting their asset means keeping it to themselves and NOT making the information available to others. If you are the only title plant in a county then you have a "legal" monopoly in the county and until now, keeping data to oneself may have made sense.

But, advances in technology makes it possible to build a quality title plants to compete with a plant in operation for decades. The "new" plant may not be as detailed or go back as far as the one in business for generations but if it meets the state requirements and is sufficient for examining title then it will likely be acceptable to the Underwriters.

Some small county plant owners would like to change the law to increase the number of years a plant must be posted geographically. In my opinion, it doesn't matter if it's a 50 year plant law or 75 year plant law. If competitors wants to build a plant in a county they will do so and you will be loathed to stop them.

Plant owners desiring to protect their assets and generate more revenue may need to look at their Title Plants differently.

This means using the latest technology to convert all data into an electronic format, making information available via the Internet, using contacts from the sale of online data to generate more business for the agency and creating additional revenue by providing data through mulitple sources. The end results may be to make it less economically attractive for competitors to move into a market.

The benefit of historical plant converstions are Preservation, Productivity and Profits.

Preservation - preserve paper plants (cards or tract books) by bringing in an onsite scanning team to:

Place index cards in proper order
Create Folders representing current file drawers
Create Sub Folders representing Surveys and Subdivisions/Section/Block/Lots
Consult Plant Managers with organizational and scanning questions
Scan Cards, Tract Books, Maps, Abstracts, Base Files, Run Sheets and Starter Files
Backup scanned data daily and make available to Abstracters and Examiners immediately
Save complete sets of data and images on DVDs and store off-site in secure location

An additional benefit to scanning is that all index cards will remain in place and should never again be out of order.

Productivity - in most card plants the title staff is continually getting up to search file drawers to find the records they need. If researchers remain at their desk and navigate the plant from their computers this is a huge time saver. If researchers still want to touch the paper they can simply print hard copies of the pages they need. Time is money and increased productivity among the title staff can not be underestimated.

Profits - many Agents are unwilling to allow Landmen or outside researchers in their facilities because they are legitimately concerned about the lack of care some of these individuals take when handling the records. The solution is to scan the indexes and images and make them available via a computer "kiosk", with no connection to the Internet and without the ability to print. Then, depending upon the oil & gas or other real estate activity in your area, plant owners may be able to generate another revenue stream.

Landmen are usually less concerned about the costs for title plant access as they are in buying leases. So, if you can generate more revenue without risks of loss or damage to your plant then allowing access to landmen may make sense.

Another concern is if there is more than one plant in a county then the competing plant will do just as I've outlined above and you could be left behind.

The biggest complaint we hear from large title operations in metropolitan area when ordering Title Evidence from smaller counties has little to do with the quality of the product, but rather the turn around time. The biggest compaint we here from small county Agents is, once they deliver Title Evidence they do not get paid or they have to fight to get to get paid. By having more accessable electronic title plants these concerns may be reduced or eliminated.

It doesn't make sense for independent Agents who do not get paid by the Underwriter Direct operations for Title Evidence to continue to send the same Underwriters a large number of premiums.

This is an excerpt from an earlier writing:

The Underwriter trend is to build Title Plants in large metropolitan counties and adjacent growing counties. Once established, the underwriters can deny local title agents access to title evidence and underwriting.

Rural agents need to look no future than this map to see what the future holds. Looks like the attack of "The Blob" doesn't it?

Independent Agents are in a strange predicament. The same underwriters who sponsor their licenses at the Department of Insurance are competing against them in their own backyards. Some Agents are reluctant or afraid to voice their objections because they do not want to be dropped or bullied by their Underwriters.

Several companies sell software for title plant posting and conversion such as Hal Systems Corporation and Ultima Corporation, (a Stewart Title Company.) Also, there are several companies who perform the locating and keying function for Title plants such as D. Bellow Associates, Inc. , SLK IT Enabled Services, or Extract Systems. If you are considering using a particular software for posting or outsourcing your keying or land locates function, it is prudent to perform thorough reference checks before deciding on which service to use.

Many times, hard copies may not leave the premises because these are resources being used everyday or are too sensitive to be taken off-site to a production facility. In that case, you may want to consider using a company like Imersion Technologies who can send a crew into the plant to perform the scanning of the data.

The primary focus of our companies, CourthouseDirect.com and Integrity Title Records are to consult with companies considering a large conversion project. We may also serve as a hosting facility and reseller of data. Although, Integrity Title owns Title Plants in major metropolitan areas our goal is not to build plants in every county. We prefer to work with local agent and help them publish their plant online in a secure environment.

CourthouseDirect.com serves as the marketing arm for the information plant owners want to sell. Currently, we have over 350,000 page views, over 30,000 unique visitors and over 12,000 returning visitors per month. We bring customers to local agents through our web portal by the same name.

If as the owner of the title information, you should always remain the gatekeeper and decide who should accesses your data, what data should be made available and at what price.

It requires a monetary investment to mold a paper or microfilm title plant into a concise, online product offering but it can be done. The success of doing so depends mainly on the will of title plant owners and their capacity to look beyond the present.

For those hoping to cash out on their title plant investment, an additional benefit of digitizing your records may be to increase the value of the plant asset so it will be easier to sell.

Note: An [Article] published in the January 3, 2005 Edition of the American Land Title Association online newsletter is informative and more technical in nature but it more or less makes the same arguments that title plants can serve as, "opportunities for revenue growth, higher productivity, enhanced employee satisfaction, and improved customer service."

Feel free to contact me directly with any questions or comments.

Opportunities for Independent Agents

2006-08-20T04:08:00.000-05:00

Tremendous Opportunities Exist
These are exciting times in the title business. New Agents can make an tremendous impact in the market. The barrier to for most new Agents has been the the high cost of title plant access but this is no longer true in the Houston, Dallas and San Antonio areas.

There is now affordable access to title plants in the major markets. Integrity Title built the first new title plant in Harris County since 1967 (39 years) and the first new title plant in Dallas County since 1964 (42 years). Note: The Houston Business Journal article states, "in the past 12 years" because they were taking into account the demise of the North American (NATCO) Plant in Harris County.

Opportunties exist for Escrow Officers, Fee Attorneys, Approved Attorneys, medium size Home Builders, Mortgage Companies, Banks, Credit Unions and Real Estate firms to participate in the title business.

If you are a "Producer" such as a Home Builder or Real Esate Agent and want to join the title business you must follow all RESPA rules and and by definition you are considered an "Affiliated Business". Many Affiliated Businesses form AfBA's a/k/a Affiliated Business Arrangements with the cooperation of other land title professionals.

The title business is a "service" and "relationship" business. People don't do business with a particular company because of the name on the door. They do business with Agents because they like the Closer or the service they provide.

Title Agencies fear losing exceptional Escrow Officers /Closers who might leave and take business with them. Escrow Officers and Closers or Fee Attorney who can retain business and can properly capitilize an Agency may want to consider such a move. The questions they need to ask themselves are:

Do I currently share in the profits of the company I am working for?
How much business can I generate if I formed my own own agency?
How much more money can I make if I owned my own title agency?
Do I have the resources or do I need partners with other to capitalize the Agency?

Escrow Officers with an entrepreneurial spirit should consider the possiblity of starting an agency. Integrity Title Records will, in a confidential setting, provide prospective Agents with all the information they need to weigh the pros and cons of forming a stand-alone agency. For many, they will work the same hours, increase their income, own their own business, and build equity in something they might be able to sell later. These may be the compelling reasons to investigate this kind of opportunity.

I would argue, a branch office or lead escrow officer in a Fee attorneys' office already performs 70%-80% of what they need to know about operating an agency. The issues they will need help with are accounting, regulatory issues and Policy issuance. There are consultants and and other services that may be able to help them in these areas.

If a person is content doing what they are doing then they should stay put. But, if on the other hand, they want to grow personally and in business by owning an Agency they should at least explore owning an Agency.

I can not tell you how many times we talk to people who say, "I thought you had to be an attorney to be in the title business." This is not true but seems to be a common misperception.

Escrow persons do not always have to go it alone. Forming a Joint Venture with a builder or real estate company may provide the number of trasactions they need to establish a strong foundation for the growth of the business. Producers would like to participate in the title premiums legally but they need an experienced Escrow Officer or Examiner to assist them. So again, the time may be right to consider changing the Client-Vendor relationship into a true long-term partnership.

Affiliated Businesses - AfBA's
We will dedicate entire posts to AfBA's but the writing is on the wall. When the largest real estate company in world, Cendant (Coldwell Banker, Century 21, Prudential, etc...) buys the largest independent title Agency in Texas, Texas American Title Company then it is just a matter of time before every major real estate companies at least investigates the possibility of participating in the title business. [Article] This is a sea change in the title business in Texas and bodes well for those willing to step up and take advantage of the new market conditions.

For more information about becoming a Title Agency contact:

Paul Cones
President
Integrity Title Records, Ltd., LLP
9800 Northwest Frwy., St. 400
Houston, Tx 77092
713.683.8030

Land Title Blog - Welcome!

2006-08-06T07:53:00.000-05:00

Welcome to the Land Title Blog.

The Land Title business is changing rapidly and communication is critical to success in our industry.

In major metropolitan areas, the large underwriter owned direct operations dominate the marketplace. We want to give a voice to independently owned and operated title agencies.

Our goals are to:

Help independent agents network with other agents to provide Title Evidence, Title Examination and Closing Services statewide and nationally
Increase the voice of independent agents with Title Insurance Underwriters
Help independent agents become the preferred providers to other independent Agents so we can compete effectively with Underwriter Direct operations
Use the Internet to reduce costs by sharing resouces such as Abstracters and Examiners to maximize productivity and profitability

Please comment on:

The future of the land title industry and particularly independent title agents
How we can work together as independents to secure a sound future
Your personal experience with major underwriter owned operations
Things/People to watch for i. e. Fraud alerts, unfair business practices, etc...
Regulatory and Legislative issues effecting independent agents and the industry
How you can take advantage of the changing market through ABAs or leveraging data
Title Anecdotes - "A funny thing happened on the way to the closing..."
Upcoming events and seminars
Other suggestions and critical commentary

We look forward to a constructive dialog which helps us to understand each other and our industry better.

Thank you.

"We must all hang together, or assuredly we shall all hang separately." -- Benjamin Franklin

Coming Soon:

Independent Agents & Direct Operations
Leveraging Your Greatest Asset - The Title Plant
Opportunities For Independent Title Agents
We have Exams, You have Examiners - Sharing Resources
Expanding The Circle of Influence - The Numbers Game
Livelihoods in Title - Hanging by a String