We’ve caught a lot of flack lately over our REAL Credit™, with some of our competitors saying the progressive program is a violation of D.C. Code.
After consulting the District of Columbia’s Department of Insurance, Securities and Banking (DISB) for guidance, DISB released a bulletin clarifying their position. According to DISB, a title company may provide a settlement discount (e.g., REAL Credit™) to a homebuyer so long as the credit is tied to an “action that improves the efficiency of the settlement transaction, such as applying electronically.”
Real Credit™ is allowed
Federal Title’s REAL Credit™ is perfectly legal since it is awarded to a homebuyer only when a homebuyer or the homebuyer’s agent orders settlement services through the online order system.
DISB approved Federal Title’s REAL Credit™ on the basis that it:
- 1) improves the efficiency of the settlement transaction;
- (2) does not rebate any of the title insurance premium; and
- (3) is awarded to a homebuyer exclusive of whether the homebuyer elects to purchase owner’s title insurance coverage
Federal Title’s proprietary online order & workflow system allow for a more efficient, transparent and error-free closing. In regards to ordering settlement services, scheduling and notification, the online system:
- (1) Automatically confirms an order notifying all parties to the transaction together with a guaranteed quote for costs of title charges and transfer/recordation taxes.
- (2) Automatically disseminates e-mail correspondence, with embedded online forms, to all parties (e.g., title abstractor, land surveyor, real estate agents, lenders, homebuyers, and sellers)
- (3) Automatically delivers a preliminary HUD-1 to the lender to assist in the preparation of an accurate Good Faith Estimate
What’s not allowed
Essentially, a title company may not offer a discount or credit unless it provides a “reasonable basis” for doing so. In other words, a title company may not rebate, or provide a credit against, any cost of the title insurance premium or provide a credit to a homebuyer which is contingent on the purchase of owner’s title insurance.
According to our contact at the DISB, who is tasked with aggressively monitoring title insurance activities and enforcing D.C. Law, the following are examples of discounts or practices that would be prohibited:
- A title company may not offer to match or beat any competitor’s fees
- A title company may not offer to purchase a home warranty on behalf of a homebuyer
- A title company may not offer a settlement discount that requires a coupon
- A title company may not offer a settlement discount “at the closing table” as a result of negotiations by any party during settlement
- A title company may not offer a settlement discount only if a settlement client does not qualify for a reissue rate
DISB is charged with the enforcement of a recently enacted statute (D.C. Official Code § 31-5041.07), which prohibits a title insurer from inducing a homebuyer to purchase title insurance.