Note: The following is reprinted in its entirety by permission from Lawyers Title Insurance Corporation. It is a memo sent by Lawyers Title to all its North Carolina agents. We at Statewide Title, Inc. pass this along to you, our real property practice attorneys, so that you will be reminded of the importance of ensuring that your clients are provided with the best title insurance premium rates and service. Please be assured that Statewide Title, Inc. supports your role as an advocate for the consumer.
BULLETIN NO. 04-01
TO: ALL NORTH CAROLINA AGENTS
From: Frank Coman
Date: June 11, 2004
Subject: Reissue rates and consumer protection
201 SOUTH COLLEGE STREET, SUITE 1590 CHARLOTTE, NC 28244
704-377-0093 / 800-868-6529
FAX: 704-377-1803 / 800-926-8692
North Carolina State Manager
Francis X. Coman
North Carolina State Counsel
NCGS 58-27-5, which prohibits the payment or receipt of title insurance kickbacks, rebates or commissions, was adopted in 1973. As a result of its adoption, residential closing attorneys here are no longer issuing agents for title insurers. A companion statute, NCGS 58-26-1, requires title insurance to be issued solely on the basis of an opinion of title from a North Carolina-licensed attorney that is not an employee or agent of the company. Since 1973 closing attorneys have assumed the role of advocate for the consumer, securing the best coverage available for them and their lenders, unaffected by any vested interest in the title insurance premium charged.
Although most title agents are well aware of the history of title insurance in this state and the role played by practicing attorneys in advocacy for the consumer, a reminder about reissue rates is necessary. A series of class action lawsuits have been brought in other states, claiming that homeowners were being overcharged for title insurance when refinancing their mortgages. The plaintiffs allege that title insurance companies and their agents overcharged them by failing to give them a refinance or reissue credit. Although we are confident that our agents in North Carolina have been properly passing on reissue discounts to borrowers and that independent approved attorneys have continued to be advocates for the consumer, we feel it is imperative to reemphasize the need to pass on those discounts. The class action bar, so aptly characterized by John Grisham in "The King of Torts, will be coming to a town near you soon!
In compliance with state law, Lawyers Title filed its full rate manual with the North Carolina Department of Insurance in 1991, and has filed various amendments thereto, the most recent of which was in October of 2002. As a member, Lawyers Title has also adopted the rates and form filings of the NC Title Insurance Rating Bureau as to insured closing protection insurance, charging an insured closing premium which runs to the benefit of both borrowers and lenders.
In our rate manual, "reissue rate" applies to discounts based on a prior owner, loan or leasehold policy issued by Lawyers Title or another approved company on the property to be insured within 20 years of the date of issuance of the new policy. The reissue rate is 50% of the basic rate up to the amount of the new policy. If more coverage is needed, the additional coverage is computed at basic rates in the applicable bracket or brackets.
A "substitution rate", sometimes called a "refinance rate", applies when a loan is made to the same borrower, secured by the same property, the title having been insured by Lawyers Title or another approved company at the time of the original loan. The time period of applicability of the "substitution rate" is 5 years from the date of the issuance of the original policy. The "substitution rate" is 30% of the basic rate up to the amount of the new policy. Likewise, if more coverage is needed the additional coverage is computed at basic rates in the applicable bracket or brackets.
As an agent you are expected to abide by our filed rates and corresponding company policy. Failure to do so could result in state disciplinary action by the Department of Insurance affecting you and us. In light of the class action litigation it could also result in significant liability to you as the agent and to us as the title insurer. As appropriate please remind the Approved Attorneys with whom you do business of their responsibility on behalf of the consumer, to seek all applicable reissue and refinance credits and make sure that all invoices issued in conjunction with the issuance of our commitments reflect the correct reissue/refinance premiums applicable to the specific transaction.
We appreciate our agents. If you have any questions about the applicability of any title insurance rates in this state, please contact me at 704-377-0093.