Inside the Capitol

Tuesday, March 10, 2009

3-13 Should Title Companies Get Special Treatment?

FRI, 3-13-09

SANTA FE - Are New Mexico homeowners getting the shaft on their title insurance? The 2009 Legislature is again being asked to consider the possibility. Last year, legislation to reform the industry got sidetracked and delayed. This year's possibilities look better.
New Mexico Public Regulation Commission Chairman Ben Ray Lujan was the leading advocate of the legislation last year. Now that Lujan is a member of Congress, his father, New Mexico House Speaker Ben Lujan, is championing the legislation.
The PRC no longer is on board with the reform. Lujan, Jr. was replaced by Jerome Block, Jr., who worked for a title insurance company before winning the $90,000 a year PRC post.
But having the House speaker as chief sponsor doesn't hurt at all. The bill has sailed through the House and has time to get through the Senate. This year's bill also is a compromise fashioned by Lujan, the title industry and Think New Mexico, the reform's major consumer advocate.
Attorney General Gary King also is participating in the title insurance battle. His focus is on the practice in which title agents market their insurance to realtors and loan agents rather than to consumers.
How many times have you ever shopped for title insurance? Like me, you may just go along with the insurer chosen by your bank or finance company. King says this makes title premiums much higher.
National statistics indicate that 80 percent of the insurance premium goes to the agent who sells the title policy. The legislation making its way through the New Mexico Senate caps that at 81 percent. An average 4.3 percent of premium is used to pay actual title insurance claims.
Most nations don't have such title insurance problems. The government researches land titles, guarantees them and compensates injured parties if it makes a mistake. In the United States, private industry performs the function. That is commendable but in New Mexico, title companies say it is too big a burden for them to shoulder.
So several years ago, New Mexico title companies managed to convince the Legislature to make us the only state in which title companies aren't liable for their mistakes.
Some national figures may shed light on the situation. Nationally five families of insurance companies handle 93 percent of the title insurance business. Only 7 percent are small regional companies, or mom-and-pop operations as New Mexico title insurers like to call themselves.
Through a state-mandated title insurance rate, New Mexico title companies have been able to survive and thrive. If rates were allowed to become competitive, the big boys would come in with discount rates and drive the little guys out of the market.
That would be unfortunate for the New Mexico title insurance industry and it would take another little chink out of our state's economy.
But do title insurance companies have any reason to be treated differently than corner grocery stores, clothing stores, hardware stores, mortuaries, banks, credit bureaus and dozens of other small businesses in every community that have been forced to sell out or go under in the wake of the big guys coming in?
Title insurance companies enjoy a government-protected status accorded to only a select few companies such as ambulances and tow trucks, for which consumers don't have time to shop.
But where is the rationale for home title insurance to have rates set by the state? There is time for people to make a few calls, or check a website, as Lujan's bill would create.
And why do home title insurance rates have to be just as high for refinancing? A title search already has been done. A quick check for new liens is about all that is necessary.
At a time when the housing industry is in so much trouble, making a home purchase a little easier on the consumer would seem to be very intelligent.

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