Some borrowers take heavy hit from insurance fee increases

<br /><div class=”b-group” id=”b-group”><div class=”byline”>Joseph N. DiStefano </div><a href=””>Email</a> Joseph N. DiStefano <br /><div class=”minitext”></div><div class=”divclear”></div></div><div id=”article”><div class=”story-content”><div id=”article_sidebar”><div class=”article_related”><div class=”photo_area”><div class=”photorelated”><a href=”″><img alt=”A newer home in a Pleasant Hills, Pa., development. State-mandated title insurance now is more costly.” border=”0″ src=”*379/20120725_inq_phillydeal25-d.JPG” /></a> </div><div class=”photocredit”>AP </div><div class=”photocaption”>A newer home in a Pleasant Hills, Pa., development. State-mandated title insurance now is more costly. </div></div><div class=”linkssubhead”><span style=”background-color: white;”><br /></span></div><div class=”linkssubhead”><span style=”background-color: white;”><br /></span></div><div class=”linkssubhead”><span style=”background-color: white;”>Starting this month, it costs more to buy state-mandated title insurance, so you know the papers for the Pennsylvania house you’re buying from the bank are for real.</span></div></div></div><div class=”body-content” id=”body-content”>The Pennsylvania Insurance Department agreed to let title-insurance companies boost their government-mandated fee by what it says is an average 7 percent. It’s the first increase since 2002.<br />But the state has also “simplified” the title-insurance fee system at insurers’ request, eliminating past discounts for homes that were already sold and title- insured in the last decade, and newly constructed homes.<br /><br />For some recent purchasers, that’s meant much higher increases.<br /><br /><strong>Fred Glick</strong>, of Philadelphia-based <strong>U.S. Loans Mortgage L.L.C.</strong>, cites a Delancey Street client “who was supposed to have paid $3,458 but will now have to pay $5,350″ after losing the 10-year discount for a $1.5 million home purchase. Some borrowers hit by big insurance increases may no longer qualify for their loans, he added.<br /><br />”Appraisal costs have also skyrocketed,” Glick told me, but those are set “by the market,” while title-insurance fees are imposed in Harrisburg under the influence of insurance companies and agents.<br />”Real estate agents can’t set commissions at 6 percent” under federal antitrust limits, Glick said. “But the insurers can set title-insurance rates. It bothers me.”<br /><br />Tables posted by the department show charges now total $500 for the first $30,000 in property value, plus $6.50 for each additional $1,000. That’s for home purchases; refinancings cost less.<br />”This is not something that happened overnight,” counters lawyer <strong>Murray Levin</strong>, owner of title-insurer <strong>Grateful Abstract L.L.C.</strong> (he’s a Dead fan.)<br /><br />While some discounts have gone away, the new rate schedule gives new discounts to people who refinance repeatedly, Levin told me.<br /><br />In their joint application for higher rates, insurers claimed “the average production and underwriting costs” for Pennsylvania titles “almost doubled from 2000 to 2010, increasing from $1,133 to $2,254,” putting low-end loans below the industry’s target “5 percent profit margin.”<br />Overall, “claims are way up, mainly as a result of identity theft and property theft,” Levin added. He cited the 2008 bankruptcy of <strong>LandAmerica</strong> and the sale or disappearance of other title insurers as signs of the industry’s difficulties.<br /><br />Shouldn’t online public records make it tougher to phony up titles, driving title-insurance costs lower as digital systems improve?<br /><br />”It seems to be about a tie” in the race between technology and fraud, said Glick. “Making information more accessible also makes it easier for the bad guys.”</div></div></div><div style=”border: medium none; overflow: hidden; text-align: left;”><br />Read more: <a href=”” style=”color: #003399;”></a></div>

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