This is an important update on H.R. 3211.
At the end of September, a bipartisan group of representatives from the House Financial Services Committee introduced a RESPRO-sponsored piece of legislation known as H.R. 3211, the Mortgage Choice Act.
Instead of proceeding on H.R. 1077, known as the Consumer Mortgage Choice Act, the new bill strips out the provisions regarding lender-paid compensation to mortgage brokers and loan level price adjustments charged by Fannie Mae and Freddie Mac and focuses solely on the naked attempt by the affiliated business arrangement lobby to except affiliated service charges from the 3% qualified mortgage (QM) cap. H.R. 1077 is effectively dead and in its place is a bill that its sponsors, such as RESPRO, originally intended — one that is designed to compensate banks and referral sources for their referral of settlement business.
Who is RESPRO?
RESPRO is the Real Estate Service Provider’s Council. A non-profit trade organization that represents banks, real estate firms, mortgage companies, title insurers, title agents and homebuilders from across the United States for the sole purpose of expanding the use and prevalence of affiliated business arrangements.
If you are an independent title insurance agent doing business without buying your business, RESPRO is the organization that pushes the opposing view to yours. They are pro-controlled business (CBA) and they lobby Congress and state legislatures to increase CBA business opportunities and, in turn, minimize truly independent title insurance agents. Why? Because they want to be paid for referring settlement business.
While it would appear that RESPRO would be against the mainstream title insurance industry in its efforts to protect independent land title agents, RESPRO has the membership support and sponsorship of ten title insurance underwriters, including three of the “Big 4”. The list of RESPRO members also includes some of the largest affiliated title insurance agencies in the nation affiliated with the largest real estate firms in the country. Click here for the list of RESPRO members and supporters.
While membership in an organization is not necessarily an indictment of the individual member by their own professional philosophy, it does suggest the member’s support for the organizational mission. In this case, that mission is to reduce the role of independent land title agents and the mission is tied to an organization that calls upon the support of a major and influential block of the title insurance underwriting community to do it.
In other words, when it comes to controlled business, our own industry is as much to blame as any referral source and affiliation matters.
What is RESPRO’s Relationship to ALTA and Why Does it Matter?
The American Land Title Association (ALTA), which represents the title insurance industry and is widely supported by title underwriters, has not taken a position on H.R. 3211 or its predecessor bills. It recently released an Advocacy Update taking issue with several consumer groups who oppose H.R. 3211, but refused to take an official position on the bill. The great risk of not taking an official position on an important issue like H.R. 3211 is that your critics get to paint the narrative as they see fit. In this regard, that is ALTA’s prime failing. When it matters most to independent title agents, they have been effectively silent and other organizations such as the Center for Responsible Lending and other public interest groups that do not understand title insurance have fired away with abandon calling the industry “overpriced”. Yes, there will be a response from the industry, but it will, once again, be merely reactive in nature and the opportunity to “own” the issue lost. To win the battle of information and education, one must lead from the front, not from the back.
As was the case with H.R. 4323 and H.R. 1077 (the predecessor bills to H.R. 3211), ALTA has determined it cannot act out of fear it will offend those who support affiliated businesses. In other words, the organization is officially paralyzed by this issue.
Do not be fooled into believing that the title insurance industry has not taken a position on H.R. 3211, though.
Some of the largest and most influential members of ALTA are also members of RESPRO – the organization that is pushing this bill in Congress. Thus, even though ALTA has no official position on what can fairly be described as anti-independent title agent legislation or anti-consumer legislation, it is clear that significant ALTA members do, in fact, support H.R. 3211 and anti-independent title agent legislation through their involvement and support of RESPRO.
RESPRO is doing the heavy-lifting on H.R. 3211 for those in the title insurance industry who support affiliated business arrangements and no one in the title insurance industry, other than NAILTA, is effectively presenting the other side — the independent title agent position.
Why Does RESPRO Support H.R. 3211?
It should be obvious why referral sources support H.R. 3211. The bill permits affiliated service providers to act as conduits for ever-increasing title insurance costs and allows referral source providers such as lenders to avoid the 3% cap on points and fees which would otherwise keep mortgage loan costs at a minimum. In other words, it gives referral sources another place to obscure present and future price increases from consumers. Those price increases are critical to the continued rise and prevalence of affiliated business arrangements.
The idea of creating fee conduits on the under-regulated side of a real estate transaction is not what the Dodd-Frank Act was created for, but RESPRO and bill supporters will not be bothered with facts or the concerns of consumers. In fact, the bill sponsors stripped the word “consumer” from the title of the latest bill. That is likely no coincidence. The referral sources and RESPRO members only want their referral money. After all, that’s the sole mission of RESPRO and its supporters. RESPRO supports H.R. 3211 because their members want to get paid for delivering settlement business and the QM rule stands in the way of progress.
What is RESPRO’s Main Argument on H.R. 3211?
To support these efforts, RESPRO members argue that without H.R. 3211 there would be an imbalance in the settlement services industry because only affiliated providers would be capped by the bill, not independent ones.
Of course, this argument assumes a reality that does not exist — i.e. that the title marketplace is actually competitive. Government observers and industry statistics suggest otherwise. The U.S. Department of Justice compiles the measurement of “most consolidated” industries and lists the title insurance marketplace as one of the least competitive markets in commerce. The bipartisan U.S. Government Accountability Office (GAO) made similar comments in a widely cited study of the title insurance industry from 2006 and 2007. Four title insurers control nearly 90% of all title business conducted in the United States. The number of title insurers decreased from over 100 insurers in 2007 to only 44 in 2013, or over 50% contraction in the industry during that time period. These are all significant facts.
Affiliate providers do not play on the same competitive field with independent providers. They are in position to buy their business and have access to consumers who are steered to the closing table by their referral source. Independent providers have no such advantage and no such access. Arguments to the contrary are laughably naive.
RESPRO does not stop there. They also argue that affiliated business arrangements are better for consumers and less expensive. Both of these arguments are anecdotal, at best. First, consumers do not choose their settlement service provider. The referral source does that for them. Why? Because they get paid to do so. That eliminates any sincerity to the “better-for-consumer” argument. Second, costs in the title insurance industry continue to rise. Why? Because claims continue to rise and there are more referral sources wanting bigger and bigger pieces of the title insurance profit at the same time. The only way to feed affiliate growth is through higher title insurance premiums and settlement costs. The pot is only so large, though. To keep it filled, the industry must continue to provide opportunity for profit sharing to its referral sources. With income streams scarce, the only pocket to pick belongs to you, the independent title agent.
What Can You Do?
Don’t like the fact that your livelihood is the source of income for a growing brand of affiliated business arrangements? Do something about it.
Not everyone in the title insurance industry can protect the independent land title insurance agent from harmful legislation and only you can make the choice between taking a position to protect yourself or doing nothing.
In the race to protect independent land title agents, you can make a difference if you act. You have NAILTA in your corner. Support our organization.
Call your congressional representative and tell them you do not support H.R. 3211. Here is a list of phone numbers for the House Financial Services Committee. Get on the phone and have your voice heard today! Stop RESPRO and its supporters from valuing their kickback over your existence.
What is NAILTA Doing?
NAILTA volunteers are traveling to Washington DC for the third time this year to meet with members of the House and Senate to talk to them about the perils of affiliated business arrangements and the obvious motive of H.R. 3211. This is grass roots action by independent agents, for independent agents.
If this matters to you, get up and join us. As an all-volunteer organization, we need your help.
For more information on NAILTA or how to get involved, please visit our website at www.nailta.org.