Contact person: Robert B. Holman, Esq.
OAITA
(440) 232-9911
SUBJECT: INDEPENDENT TITLE AGENTS FILE LAWSUIT AGAINST OHIO DEPARTMENT
OF INSURANCE DIRECTOR ALLEGING FAILURE TO ADEQUATELY PROTECT OHIO
HOMEOWNERS
FOR IMMEDIATE RELEASE
The Ohio Association of Independent Title Agents (OAITA) (www.oaita.org) has filed a lawsuit
with the Ohio Supreme Court against Mary Jo Hudson, Director of the Ohio Department of
Insurance. OAITA, an association of independent title insurance agents in Ohio, seeks to prevent
the spread of kickbacks and referral schemes in the real estate industry by asking the Ohio
Supreme Court to compel the Director of the Ohio Department of Insurance to enforce currently
existing rules prohibiting banks, realtors and mortgage brokers and their subsidiaries from
engaging in the business of title insurance.
OAITA is represented in the newly-filed lawsuit by Columbus attorney E. Bruce Hadden, Medina attorney Gregory W. Happ and Oakwood Village attorney Robert B. Holman. The lawsuit alleges that Director Hudson failed to enforce current administrative rules based on long-standing Ohio statutes that prohibit banks, realtors or mortgage brokers, or any of their subsidiaries, from unlawfully steering Ohio homeowners and their real estate transactions to title insurance agencies owned all or in part by those same banks, realtors or mortgage brokers. The suit alleges that ownership of title insurance agencies by banks, realtors or mortgage brokers, known as controlled business arrangements, creates dangerous conflicts of interest by allowing those banks, realtors and mortgage brokers to obtain kickbacks and referral fees for steering Ohio homeowners to their own controlled title agencies. The lawsuit alleges that such conflicts of
interest violate Ohio statutes and that Director Hudson has failed to construe newly enacted rules in accordance with the long-standing law. The suit is the first of its kind in the United States and is an important step towards reducing the overreaching power and influence a bank, realtor and mortgage broker has over a homeowner’s real estate transaction and, in particular, a
homeowner’s statutorily protected choice of title insurance provider. The lawsuit is important
since many homeowners do not even realize such a choice exists. By permitting banks,
mortgage brokers and realtors to move into the title insurance business, the lawsuit alleges that
the ODI’s inaction has helped to feed the pervasive greed that has overwhelmed the real estate
industry in recent years. Considering the well-known impacts of the mortgage industry meltdown and the rise in foreclosures across the country, homeowners across Ohio are well-served by the OAITA’s action.
Independent title insurance agents serve as important checks and balances on the power of
banks, realtors and mortgage brokers to unlawfully steer homeowners’ real estate transactions to controlled entities. Members of OAITA are independent title insurance agents who refuse to give kickbacks or referral fees to banks, realtors and mortgage brokers for the real estate transactions they close. Instead, independent title agents: (1) help to reduce the cost of title insurance by not engaging in elaborate schemes to reward referral parties at the homeowners’ expense; (2) help to lessen the likelihood of real estate related litigation involving homeowners by not allowing referral party pressure to dictate closing requirements; and, (3) help restore trust and integrity in the fiduciary relationship that exists between homeowners and their settlement providers by insuring that only disinterested title agents provide title insurance services, not their referral parties.
-END
If someone in the real estate industry is doing a controlled business arrangement with a title company, lender… they need to have their customer sign a ABA disclosure.
Yes, ABA’s have the borrower acknowledge a disclosure statement. However, if the action in question is a violation of federal law, all the disclosures in the world will not save you. I believe this is what the Ohio lawsuit is claiming, that the ABA’s between title companies and lenders and/or realtors are a fundemental violation of RESPA, no matter how many disclosures you sign. Fundamentally, there is always some kind of referal incentive in ABA’s, no matter how hard companies try to obscure it. Lenders and realtors would not affiliate with title companies unless there was ultimately some kind of financial incentive for them. Conversely, title companies would not handcuff themselves to a lender or a realtor unless they realize that they won’t get any business unless they play ball with the lender or realtor. I think this is an intriguing suit. Title companies will have the underwriting memos flying off the fax machine. Good times.
In Ohio, the state does not allow controlled business arrangements. Thus, a disclosure is as meaningless as the paper it is printed on. Further, under RESPA, a disclosure by a sham AfBA does not protect the AfBA from liability. Rather, it only discloses the sham.
To all banks, mortgage brokers and realtors: disclosing your kickback will not save you. Your time has come to go back to lending, real estate and mortgage brokering and leave the title insurance business to title agents.
AfBA’s have been a round Ohio for years now – legal or not they are operating all over the State. Which is why OAITA has decided to take on these bogus operations. While it is true that the Realtors are required to disclose to the buyer and seller the AfBA, one must wonder if the buyer or seller truely understands or sees the overall picture. I have had numberous closings where the buyer and seller turn to me and say, “Oh my Realtor told me to come here, s/he picked it really.”
I wonder how much the Realtors really explain the nature of their AfBA too. Around here it doesn’t seem to have a very good explanation. At least that is what I hear form people on the street that recently bought or sold. It sort of gets explained something like this…Realtor says “Here is this diclosure about the closing company. We work with them regularly and they are our favorite so just sign here and we take care of everything.” I actually heard that with my own ears so I know it happens. What they fail to tell people – who are guilty of not reading what they sign too – is that they get a cut of the profit from the AfBA and don’t bother to tell them about the choices they have, like shopping around to find the best price, which I know for a fact is available. I have contacted Realtors about our commitment to save money for buyers and sellers only to hear that they are in an ABA and can not use my services, even if I will save their client $500-$600 on their closing fees. I know for a fact they never even mentioned it to their client!!! What buyer/seller in their right mind would not jump at the chance to save money????
I have been in Real Estate since 1987. and a real estate Broker for 7 years. I am not for this shift that the industry has taken the greed by the chain brokers have nearly destroyed what was once a respectable Business. Today you cannot get the state to enforce the most damaging practice’s of the Real Estate Brokerage industry, their greed has spilled over to all who touches it.