Bill would create panel to evaluate title insurance costs and lack of oversight
State Rep. Antonio Cabral is pressing the Legislature to regulate title insurance — a type of coverage that costs homebuyers thousands of dollars and is sold without government oversight in Massachusetts.
The New Bedford Democrat’s bill would create a commission to examine the costs and practices in the multi-billion dollar title insurance industry. The panel also would study the way policies are sold, and the business arrangements between title insurers, real estate lawyers and realtors.
“This is not just a minor issue,” Cabral said. “There's no regulations at all in Massachusetts. The insurance commissioner doesn't even have the power to ask for data from those insurance companies that sell title insurance.”
A WBUR investigation in November found that lawyers in Massachusetts receive hidden commissions from title insurers. All homebuyers are required to buy a title insurance policy for the lender providing their mortgage, and at the closing, their real estate lawyer will urge them to buy a second title policy, for themselves. The lawyer earns up to 80% of the fees paid for the policies, but doesn’t have to disclose that to the client.
Title industry associations say lawyers are doing the work necessary to keep title insurance claims to a minimum. Real estate lawyers say title fees cover the work they do to make sure buyers get a clean title to their new property, and that they would have to charge more on closings without title commissions.
Jordana Roubicek Greenman is real estate chair at the Massachusetts Bar Association, one of the entities Cabral has proposed should serve on a 13-member panel. She said the association would welcome the invitation.
"This study should include seeing what we do on a day-to-day basis," Greenman said. She said she voluntarily discloses her title fees to clients and feels the sums are fair for the work involved: "I have no problem having it disclosed."
Most homebuyers are unaware that their real estate lawyer is being paid for the title policies, on top of other title and closing fees. This leaves consumers in the dark about a confusing financial product during one of their biggest life investments.
In many states, lawyers do not have a monopoly on the job of title agent; other professionals can provide the service.
Cabral’s past bills to reform title insurance have been overlooked by the Legislature’s Joint Committee on Financial Services. This session, he re-introduced a similar bill, to require the disclosure of attorney commissions and to have the State Division of Insurance oversee the industry. (The division routinely reviews rates and policies for other types of insurance, including health and auto.) But lawyers and insurance groups have lobbied against regulating title coverage.
Another group on Cabral's proposed commission list is the New England Land Title Association. Mark Bennett, executive director of the trade association, said he was aware of the bill, but did not commit to participating on the commission.
"The board has a meeting in a couple of weeks, and they'll be discussing it," Bennett said.
State lawmakers, as well as representatives from home lenders and the Massachusetts attorney general's office, also would be asked to participate.
State Rep. Christopher Hendricks, also a Democrat representing New Bedford, is the bill's co-sponsor.
The proposal is modeled on the state of Maryland’s approach, which established a commission and then passed legislation to authorize its insurance division to regulate the industry, according to a Cabral spokeswoman.