Docstoc

Real Estate Attorneys Chicago

Document Sample
Real Estate Attorneys Chicago Powered By Docstoc
					           Title Guaranty
          the Iowa System

Florida Title Insurance Study Advisory Council
                 August, 2009

                Loyd Ogle, Esq.
                    Director
              loyd.ogle@iowa.gov
                             Overview

• Title Guaranty
  – Division of the Iowa Finance Authority
     • State Housing Finance Authority
     • Grubb v IFA 255 NW2d 90 (Iowa)
• Created in 1985 (Iowa Code §16.91)
  – Facilitate lender’s sales to secondary market
  – Add to integrity of Iowa’s land transfer system
  – Provide additional guaranties of Iowa’s titles
                                History

• Title Insurance Prohibited by Iowa Legislature –
  1947 (Iowa Code §515.48)
  – Prohibition found constitutional
     • Chicago Title Insurance v Huff 256 NW2d 16 (Iowa 1977)
                                 History


• Abstract/Title Opinion System
  – Abstract based on 40 year title plant owned by county
    abstractor
  – Attorney’s title opinion
     • Determine marketability
• Lending in Iowa
  – State chartered lenders
  – Portfolio loans
                                   History

• 1980’s – Trend toward national lending
• Emerging Secondary Market
  – Require standardized title assurance
     • Title Insurance in most states
     • Iowa Lenders reluctance to buy out of state
  – Initiative by Iowa State Bar Association supported by
    Iowa Land Title Association
     • Interest in preserving abstract/title opinion system
     • Legalize title insurance?
     • State run program?
                                History

• 1985 Iowa Legislature creates Title Guaranty
  (Senate File 577, 2985)
• Consultation with title industry
     • Attorney’s Title Guaranty Fund, Inc. (Illinois)
     • Attorneys’ Title Insurance Fund, Inc. (Florida)
     • General Counsel for Fannie Mae comes to Iowa to assure
       secondary market acceptance
                             History

• Program Details
  – Iowa Statute mandates issuance based on abstract
    continuation and attorney’s title opinion
  – Reinsurance with Attorneys’ Title Insurance Fund, Inc.
                                                           History

                                  Title Guaranty Timeline
                                                      10,000th
                                                                                  CPL's
                                                      Certificate
                                                                                  Offered
                                                       Issued
   Iowa
                             TG issues                                           Transfers
Legislature
                                 58                                                to IFA               Full Service
 Prohibits
                            Certificates,                                          $40m                 Commercial
   Title
                            3 employees                                                                 Dept.
Insurance
                                                                                 500,000th
                                                                                    Cert
                                                                                  Issued



   1947         1985           1987         1988        1990          2000         2006        2007         2008



                 Iowa                      $300k                                             Reinsure
              Legislature               transferred                                            with
               Creates                  to housing                                           Stewart
                 Title                   programs
               Guaranty                                              Transfers
                                                                    to IFA now
                                                                       $20m
                    Title Guaranty Product


•   ALTA 2006 Forms
•   ALTA Endorsements
•   Demotech A Prime Rating
•   Accepted by secondary market and Iowa real
    estate industry
                      Title Guaranty Product

• Flat Fee Pricing
  – Instituted in 2006
     • No correlation between premium and claims
        – More claims on lower priced properties
     • Now industry standard in Iowa
• Free Commitments
• Free Closing Protection Letters
                   Title Guaranty Pricing

• $110 for coverage up to $500k
  – $1/thousand for coverage over $500k
  – $90 Refinance
• Free Endorsements – (Comp, Environmental,
  Location, Variable)
• Free Owner’s Coverage
  – Issued concurrently with Lender’s
  – Owner occ, >$500k, Purchase
                          Pricing


  Flat Fee (purchase Transaction)         $110
  Reserves (10% of premium)               $ 11
  Administrative Fee (to issuer)          $ 40
Available for Administration/Operations $59
          (Historically 25%-70% profit)


   Transfer of Funds to IFA $42Million+
                              Market Share


• Difficult to measure
  –   Reporting not consistent
  –   Secondary market loans vs. portfolio
  –   Internet/Out of state lenders vs. local
  –   Refi vs. purchase


• Estimated 50% Market Share for residential
  purchase
• Refi/Commercial market share lower
                       Myth vs. Reality

• Myth #1- Government run monopoly
• Reality: Facts about the prohibition
  – Prohibition restricts domicile and issuance within the
    state
  – Discourages excessive spending of Marketing $$
  – Lenders may choose to buy title insurance or Title
    Guaranty
  – Title Guaranty competes in market place
                       Myth vs. Reality

• Myth #2- Less protection for consumers
• Reality: UsesALTA 2006 forms
• Abstract/title opinion system combined with Title
  Guaranty enhances consumer protection
  – Public records searched and shown in abstract
  – Attorneys apply Iowa law and title standards
  – Defects cleared before Title Guaranty Certificate
    issued
                       Myth vs. Reality

• Myth #3- Higher Cost to Consumer
• Reality: Average title cost = $600-$800

  –   Title Guaranty Premium      $110
  –   Abstract Continuation       $300
  –   Title Opinion               $190
  –   Total                       $600
                        Myth vs. Reality


• Myth #4- Interest Rates are higher in Iowa
• Reality: Lenders in Iowa use both title insurance
  and Title Guaranty. Interest rates do not differ
  – Competitive markets drive rates and terms
  – Rate locks are met
  – Closing time frames are consistent with national
    industry
  – Industry rates as low or lower than surrounding area
    (BankRate.com)
                        Myth vs. Reality

• Myth #5- Additional burden on government
  budgets
• Reality: Title Guaranty receives no general fund
  appropriations
  – Self funded program
  – Generate revenue for Iowa housing programs
  – 16 total staff including 5 attorneys
     • Highest paid $102,000
     • Lowest paid $42,500
                       Myth vs. Reality

• Myth #6 – Title Guaranty doesn’t pay claims
• Reality: Title Guaranty administers claims as any
  underwriter (Demotech A')
  – Claims paid according to terms of coverage
  – Title Guaranty defends, litigates and pays claims
                                          Claims


• Iowa has clean title records
   – Funnel effect
      • Don’t cover every transaction but will touch most properties
        at some time
          – No insuring over defects – defects are corrected
          – Do not participate in indemnities with other insurers to ignore defects
   – Claims rate historically 1%
                                  Challenges

• Efficiency
   – 99 Counties in Iowa
      •   188 Abstractors
      •   Rural counties – most have one title plant
      •   1406 Participating Attorneys
      •   Changes in technology
• Politics
   – Tension between ISBA / ILTA
      • Abstracting without title plants
   – Acceptance of the Iowa System
                                                    2006 Residential Deed Transfers
126
126                     63
                        63                 293
                                           293            119                              131               91            103              122
                                                          119                              131               91            103              122                212
                                                                                                                                                              212                 157
                                                                                                                                                                                  157


375                     209                238            105            194               118              218            162              142
375                     209                238            105             194              118              218            162              142


                                                                                                                                                              202
                                                                                                                                                              202                  198
                                                                                                                                                                                  198
                        106                219             97             94               164              104            178             309
275
275                      106                219            97              94               164             104                               309
                                                                                                                           178




      168                     81            112                                                                             121             1776
                                                                                                                                            1775                  233             185
                                                                                                                                                                                   185               439
                                                                                                                                                                                                     439
                                                           109              530              212             245            121
      168                      81            112           109               530             212             245


                                                                                                                                                                                                            174
                                                                                                                                                                                              210           174
                                                    239            106                                                                                311                1047                  210
            70                     174                                              299               395           493             160                                 1047
            70                      174             239            106               299              395           493              160              311                                                     257
                                                                                                                                                                                                              257

                                                                                                                                                                                              191
                                                                                                                                                                                               191
                 136                 128           51            141            873               6719             468              244               184               735
                  136                128           51                            873               6719                                                                  735                               1015
                                                                                                                                                                                                           1015
                                                                 141                                               468              244               184

                                                                                                                                                                                              556
                                                                                                                                                                                              556

                        1216                       157            95               181             548            415             293               99              254
                          1216                     157             95              181              548           415              293               99              254
                                                                                                                                                                                         85
                                                                                                                                                                                         85                   LEGEND
                                                                                                                                                                                                             LEGEND


                        188
                         188               134            40
                                                           40            166
                                                                         166               95               97            63              520               184            221                        Total Deeds Transferred:
                                                                                           95               97            63               520              184             221           561
                                                                                                                                                                                           551
                                                                                                                                                                                                           0 - 150

                                                                                                                                                                                                           151 - 300
                         87                               67                               64               65            128              62               72
                                           188                           44                                                                                                                                301 - 500
                          87                188           87             44                 64              65            128              62                72
                                                                                                                                                                            346
                                                                                                                                                                            346                            >501




                                                                         Data from Summary of Real Estate Assessment 2006/Sales Ratio Study
                            Challenges

• Competition has lower standards
  – May use substandard search vs. abstract
  – Many eliminate attorney
  – May lower cost but increase claims
• Market channel product
  – Relationship business
• Homeowner still uneducated about choices
• Overcoming misperceptions
• Generally, same challenges as any small
  underwriter
                  Benefits of Title Guaranty

• Abstract/Title Opinion system supports
  marketable title
• Promotes price competition
   – Structure provide clarity in marketplace
• Stimulates real estate industry in Iowa
   – Profits support Iowa Finance Authority lending
     programs
   – Keeps local abstractors and attorneys in system
                              Summary

• Iowa System works in Iowa
• Predicated on pre-existing abstract/title opinion
  system
   – Established base of Abstractors with 40 year title
     plants
   – Established network of real estate attorneys
• Value to unbundling = cost clarity
• Iowa’s unique system began with 1947
  prohibition and dominance of abstract/title
  opinion system
Questions?

Thank you.

				
DOCUMENT INFO
Description: Real Estate Attorneys Chicago document sample