Congressman proposes new title insurance rules [VIDEO]
One congressman believes that the practice of real estate agents and sellers referring clients to title insurance firms has to stop, because many of the consumers receiving these recommendations aren’t fully aware of why they are.
Rep. Keith Ellison (D-MN) introduced legislation regulating title insurance referrals to ensure that clients are being guided toward the best deals, rather than being given information that stands to benefit sellers and real estate agents over consumers. The Ensure Fair Prices in Title Insurance Act of 2015 would amend portions of the Real Estate Settlement Procedures Act of 1974 to strengthen protections for clients.
Referrals in an ‘opaque’ market
“Working Americans shouldn’t get cheated out of hard-earned dollars when they invest in a home for their family,” The representative explained in a press release. “When sellers or real estate agents refer buyers to a title insurance company, homebuyers assume they’re getting the best deal. But agents or sellers may have a financial stake in the title insurance company they recommend to buyers.”
Ellison’s proposed legislation would take a stab at ending the practice of agents or sellers referring clients to title insurance firms because of their financial stake in the decision, rather than because the recommendations are in the consumers’ best interests. He characterized the market as being “opaque” with “hidden commissions and reverse competition.” With his recent proposal, the congressman hopes to reduce the opacity in the housing market when it comes to title insurance referrals. The amendments to the Real Estate Settlement Procedures Act of 1974 will do several things specifically.
The changes Rep. Ellison hopes to make
For one, the proposed amendments would prevent realtors, builders, mortgage brokers or any other referral sources from receiving any sort of financial reward for steering a client toward a certain title insurance firm. The financial benefits covered by this amendment include nearly anything with some sort of face value, from tickets to a sporting event to some sort of ownership interest. If there’s the reward has monetary worth, it’ll be illegal under Ellison’s proposal.
Additionally, any sellers or agents that break the law would have to offer financial restitution to the affected clients and competitors. The amendments would also extend the statute of limitations on breaches of the Real Estate Settlement Procedures Act of 1974. Currently, it is one year, but if Ellison’s proposed amendments pass, the statute will be extended to three years to provide ample time to review cases.
However helpful it could prove to consumers, GovTrack doesn’t give the bill a very good chance of making it the distance. The organization gave Ensure Fair Prices in Title Insurance Act of 2015 an 8 percent chance of making it past its assigned committee, and only a 2 percent shot at going all the way.
By: Equity National April 27, 2015 Title