News & Press Releases

Title Insurance Issues in Missouri

FOR IMMEDIATE RELEASE
December 27, 2006

Title Insurance Issues in Missouri

Jefferson City - The Missouri Department of Financial Institutions and Professional Registration (DIFP) recently filed Statement of Charges against sixteen (16) title insurance producers that provide comprehensive real estate services.  The DIFP contends that the title insurance producers were charging title insurance premiums at rates that had not been approved by the DIFP, were misrepresenting, concealing and suppressing information from the consumers relative to the fees, and charged premiums that are discriminatory.  The DIFP has the ability to discipline title insurance producer licensees if the producer is untrustworthy and the DIFP believes that these activities demonstrate untrustworthiness.

Historically, when a buyer of real estate contracted to purchase that real estate, an abstract of title was provided and an attorney would review the abstract of title and render an opinion as to whether or not the seller had good, clear, unencumbered title to the real estate.  The purchaser would rely on that opinion before closing on the sale of the real estate. 

Several years ago, insurance companies formed to provide the same service and insure the purchaser against any defects.  Title insurance is created by statute and regulated by the Missouri DIFP.  Title insurance is a contract insuring or indemnifying owners of, or other persons lawfully interested in real estate, against loss or damage arising from the title or use of real estate.  Title insurance is secured by title insurance producers (agents) for purchasers of real estate.  Title insurance producers are also regulated in that capacity by the DIFP.

In addition to securing title insurance, title insurance producers have over time expanded the services that they provide.  Many title insurance producers now serve as closing agents whereby they facilitate the transfer of real estate.  Also, they serve as escrow agents wherein they hold the real estate sale’s proceeds and then distribute those proceeds at the time of closing in payment for any outstanding debt against the real estate, any real estate taxes, any real estate commissions, any other fee associated with the sale of the real estate and then ultimately, the balance of the proceeds to the seller.  Many title insurance producers hire additional personnel to provide these closing and escrow services but do not license them as title insurance producers with the DIFP. 

Frequently at the real estate closing, the purchaser is presented with a lump sum bill for the title insurance producer’s services which include premium for the title insurance, title research fees, escrow fees and closing fees.  The fee bill, however, does not differentiate the various fees being charged.  The producer remits to the title insurer the premium for the title insurance and retains the balance for their services.  The title insurers then pay premium tax on the actual title insurance premiums in the state of Missouri.

The DIFP has struggled for many years with its ability to oversee the title insurance producer’s operations.  The DIFP clearly has the ability to regulate the producers in their capacity as title insurance producers, but currently have no authority to regulate the other services that they provide.  In addition, the billing practices of title insurance producers have resulted in problems concerning producers’ manipulation of the amount of premium actually being collected and upon which premium taxes are being paid. 

In the last three years there have been some very significant problems, primarily in St. Louis, Missouri, concerning the misappropriation of escrowed funds by title insurance producers and their employees.  As a result, in 2006, the DIFP submitted to the Missouri Legislature a comprehensive revision to the title insurance laws which would include the regulation of escrow and closing services and require licensure of individuals performing those services.  The law would also clearly identify what services may be performed and the amount of fees that could be collected for those services.  The law would have also required full disclosure of the amount of the title insurance premium and the fees charged for related services. The Legislature, however, failed to pass this legislation.

The DIFP is working very closely with the Missouri Legislature to reintroduce legislation in 2007 for a comprehensive reform to the title insurance laws of the state of Missouri to address all of these concerns. 

Copyright ©2008 All Rights Reserved | Privacy Policy | Disclaimers | Site Map |