Why is it so important to you, the consumer, to have a local title insurance professional conduct your real estate closing?

The old adage that all real estate is local is absolutely correct, no doubt about it. And that adage is no truer than in Pennsylvania. Each county and township has its own criteria to transfer real estate and record transactions.

It’s your choice

When refinancing or purchasing be sure to shop for your title insurance provider and by all means choose a local, independent, licensed provider. Choose someone in or around the county in which you live. Don’t settle on the real estate agent’s “in-house” title agency and don’t let your television, internet, or national lender choose for you (let’s call them “out-of-state” lenders). If you do, most likely, you will have a “mobile” notary or notary signing agent conducting your closing.

By hiring an independent, licensed title insurance agent who is located in your community, you are:

• adding a level of security in the protection of your financial information
• hiring an independent eye who is not affiliated with your lender or real estate agent
• saving money
• supporting business owners who pay taxes and give back to your community
• protecting the sanctity of the public record
• adding a wealth of knowledge and expertise to your transaction

See why out-of-state title agents cost you money and why you pay more for less!

When you file a mortgage application with an out-of-state lender (including the big national banks), the lender typically orders title insurance through an out-of-state title insurance agency located in some place like Nebraska. And in some cases, the lender has an ownership interest in the title agency so it is making money off your loan and your title insurance. That’s why they push so hard for you to use the “in-house” company.

How the real estate closing works

The Nebraska title insurance agent doesn’t have a physical presence in Pennsylvania so how will it handle your real estate settlement? Quite simple – but it is going to cost you! It will find a nearby person who is a Notary Public. This Notary may have a printer in the trunk of his car or on top of his clothes dryer. When he receives the call to show up at your closing, he prints the mortgage documents containing all your personal financial information and shows up at your door. Why your door? Do you think it is because he is making it convenient for you? No, it is because he doesn’t have a local office. And guess what, the only way he is paid is by charging you a settlement fee anywhere from $150 -$350 to come to your home. This is how the Notary gets paid – you pay him – not the title agency that contracted with him. And unlike if you used someone local, the fee is not included in the title insurance premium you are paying. In most cases, he has very limited knowledge and expertise. He is not employed by the title agency.

Save yourself money

How can you save money? You simply select a local provider and attend settlement in their office during normal business hours and not pay a closing fee.

Avoid risk

And don’t forget, the Notary Signing Agents as they are sometimes referred to don’t own a community business, don’t have an office in the Commonwealth of Pennsylvania, and do not have a title insurance license. They are NOT employed by a local business owner or a large title insurance underwriter. They are simply independent contractors. But what they do have is your personal financial information including your Social Security Number, income, and birth date. And without a business office, who else in their home has access to your financial information? And what protocols do they have in place to keep the information safe?

A local title insurance agent

The local title insurance agent is part of your community, who pays local and state taxes, sponsors your child’s little league team, pays your neighbor’s salary, supports your local business, and he or she knows the local rules and regulations. He or she is the independent eye that you want for your real estate transaction. A licensed agent is required to attend continuing education courses. They interact daily with the court house, Recorder of Deeds, and the local real estate industry.

Help yourself and your community. No one can remove your right to choose a title insurance provider. Use a local independent (not affiliated with your lender or real estate agent), licensed title insurance provider who has the knowledge and expertise that will benefit you.

There are three major categories of fees associated with a mortgage refinance transaction:

• Lender Fees
• Title Insurance and Settlement Fee
• Government Charges
  

This article will help you understand Title Insurance and other related fees as they apply in the state of Pennsylvania.

The majority of title insurance charges in Pennsylvania are “filed” or approved by the Pennsylvania Insurance Department. These are broken down in four areas:

• Title Insurance Premium
  
• Endorsements to the Title Insurance Policy
  
• Settlement Related Fees
  
• Other Fees
  

Title Insurance Premium

Sometimes referred to as the “title insurance rate,” in Pennsylvania the premium in a mortgage refinance transaction can fall into one of four distinct filed rate structures. The rate is determined by the type of transaction, the amount of insurance required, and the number of years since the last evidence of title insurance (Typically a Deed for value or mortgage filed by an institutional lender).

Mortgage refinance loans are eligible for the Basic rate or one of three discounted rates. The policy amount is equal to the loan amount. See the table below for a quick summary of rate qualifications. Negatively amortizing and reverse mortgage loans may be subject to increased policy limits as required by the mortgage lender.

Title insurance rate calculators are available to help you determine the appropriate rate for your refinance transaction.

Endorsements to the Title Insurance Policy and Closing Service Letter

Since your lender is requiring title insurance, it also may require additional title insurance coverage provided through endorsements to the policy. The rate for most Endorsements in Pennsylvania is $50 per Endorsement.

Most lenders also require a Closing Service Letter that provides additional protections to the lender. The filed rate for a Closing Service Letter is $75.

Settlement Related Fees

These items are “lightly” regulated or not regulated at all. You should pay careful attention to this category and insist on full disclosure of all charges when requesting a quote.

Settlement related charges include notary, overnight mail, tax and utility certifications, and possibly a fee for conducting settlement.

Notary fees should be charged on a per act basis. They are set by the Commonwealth of Pennsylvania.

Pennsylvania Title Agents are to be reimbursed only for their expenses – courier costs, certifications, and other out of pocket expenses. They are not permitted to mark up these items.

A settlement fee is allowable only in specific circumstances. There is no upper limit set by the state. In many cases this charge is not necessary to conduct your closing and only serves to add to the profit of the title agent. You should request it be waived, or negotiate a substantial discount. One way to avoid this charge is to schedule your settlement at the title agent’s office during business hours. Under those circumstances, the settlement fee is absolutely not allowed.

Other Fees

Occasionally other legitimate charges are required for your closing and allowable by the Insurance Department. You should pay attention to any additional items not described above. Often these are unnecessary or “junk fees” like release tracking.  You should shop for title insurance agents who promise no junk fees.

Your best bet is to compare the rates by requesting written title insurance quotes from at least two different title agents recommended by different sources. This should allow you to verify that you are receiving the best possible rates for your refinance transaction.

You may find it convenient to have someone come to your home with notary stamp in hand and a pile of papers for you to sign.  What you might not realize is:

1. You may be charged a significant settlement fee – sometimes costing you several hundred dollars.  While the fee is allowable in Pennsylvania under certain circumstances, the borrower must be informed of the cost in advance.
2. The “closer” may only be authorized to witness your signatures and not be able to describe or explain any of the documents.
3. The notary might not have sufficient liability insurance coverage – leaving you out in the cold if they make a mistake.
4. This person might not have any knowledge or experience in real estate closings – possibly causing errors or not noticing errors that may cause your appointment to be rescheduled.

While a number of individuals may identify themselves as “notary signing agents” or “certified signing agents” don’t be fooled – these are self-awarded titles and are not certified or recognized by any regulatory body.

Avoid the additional cost and increased risks of an at home closing by choosing a settlement service provider with local offices who offers closings using licensed title insurance agents.

In Why Shop for Title Insurance, we explained how consumers can protect themselves from inappropriate charges simply by comparing charges from various providers.  Now we’d like to provide you information on how to shop for title insurance.

First, check the rates and fees

We’ve developed a Title Insurance Shopping Guide for use in Pennsylvania. This will allow you to compare quotes side-by-side. A detailed comparison will quickly highlight any glaring discrepancies such as incorrect application of the rates or inappropriate or “junk” fees.

Once you have compared the quotes from several title insurance providers, your next step is to identify the best title insurance agent for your transaction.

Interviewing a Title Agent

What’s important when selecting a title insurance provider? After performing literally thousands of settlements, we think we know what works. Here’s a quick list of important areas to consider to ensure a smooth settlement without surprises or post-closing issues.

Independence - An independent agent doesn’t risk being mired in conflicts of interest. We agree with The Office of the Attorney General of the Commonwealth of Pennsylvania on Affiliated Business Arrangements (where a lender, real estate agent or builder owns part of a title agency):

“ABAs…also create an inherent conflict of interest…”

Experience – Real estate transactions, even “simple” refinances, require the attention of an experienced title agent. Experience can make the difference between a smooth transaction or one mired in problems and omissions.

Local Knowledge – “All real estate is local” is a tried and true maxim. Real estate laws, rules, regulations and customs, are exceptionally local. Just because someone can pass a test sponsored by the state, doesn’t mean they have the knowledge of your local area. Many post-settlement headaches and mischarged fees are caused by out of area settlement agents trying to work outside their “boundaries” Make sure your title insurance provider has a local presence.

Focus on Quality – The true test of a title agent is satisfied clients. Do they have testimonials available? Do they use employees or contractors, like signing agents to conduct key parts of the transaction? If possible, try to talk to the person who will be handling your transaction. Be concerned if the title insurance provider can’t or won’t identify who’s handling your personal information.

Ask more questions – We’ve created a helpful guide Questions for Your Title Insurance Agent so that you can better equip yourself to shop for title insurance.