Wednesday, March 30, 2016

Inside The Title Insurance Cartel: How The Industry Became The Bulletproof Behemoth It Is Today

In New York City, The Real Deal (NYC) reports:
  • [T]itle insurance, which in 2014 reaped an operating income of $12.2 billion and net income of over $800 million, has always been an opaque corner of real estate. Though technology has made title searches simpler and cheaper for firms, buyer premiums have continued to rise, given that the industry colludes to keep prices artificially high and uses political clout to block competition, effectively functioning as a cartel.

    Title insurance rates in New York are regulated by the state, and since 1993, underwriters have worked together to propose uniform rates through a membership organization, the Title Insurance Rate Service Association (TIRSA), which is led by the industry’s dominant players — Stewart’s John Frates is currently president. While underwriters may file their own rates — deviating from the industry standard — almost none do.

    Attempts to regulate the industry more closely have failed. An effort Gov. Andrew Cuomo launched last year to crack down on kickbacks and “inducements” is now dead in the water, according to several sources. And even the Treasury Department’s new requirement that title companies must disclose the identities of buyers who purchase luxury Manhattan real estate anonymously is said by many experts to lack teeth.

    “People speak about title insurance seldom with the understanding of the vital role that our industry plays in ensuring that the great and good people of the State of New York have clear ownership to their homes,” Old Republic’s chief underwriting counsel Marvin Bagwell said at the 2013 hearing. But part of that lack of clarity seems to be by design; firms are able to get away with so much precisely because it’s so difficult to answer this question: How does the title insurance industry work?

    The Real Deal attempted to find out. [...more...]
For more, see Special Report: Inside the title insurance cartel (How the industry became the bulletproof behemoth it is today).

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