Proposed changes in title industry could affect service quality.

Recently proposed changes to the Real Estate Settlement Procedures Act (RESPA), if enacted, seem certain to have immediate, negative repercussions for the title industry and the quality of services and choice that consumers have come to expect in residential real estate transactions. These changes would dramatically limit the ability of title and abstract companies to compete directly for the consumer's business, not only in refinance transactions, but even in transactions involving real property conveyances for value. While the goal of the changes--to simplify and improve the process of obtaining home mortgages and reduce settlement costs to consumers--is admirable, the proposed revisions as they relate to the title insurance industry are a case of fixing something that isn't broken. Under the new regime created by these changes, lenders would reign almost supreme, as they would be in a position to realize greater profits by forcing title and abstract companies to compete for business solely by lowering their prices.

At present, title and abstract companies in the State of New York are regulated with regards to the premiums offered for specific types of policy coverage. Competition is based on customer service and overall customer satisfaction, while overall closing costs vary only slightly from company to company. Nevertheless, the proposed changes to RESPA would seem to overturn the current system, as title companies engage in a race to the bottom under economic pressure to offer cut-rate prices and/or cut-rate services. At Horizon Land Services, we see clients being more sophisticated in their expectations of the level of services we provide. There is an expectation that title insurance companies be, in effect, a partner in facilitating transactions. We believe the proposed RESPA changes undermine those legitimate expectations. Another trend affecting the title industry, the continuing acquisition of smaller shops by the big title insurance underwriters, does not appear to be having a

negative affect on the level and quality of services available to consumers. In fact, the consolidation trend is a big compliment to the abstract companies, who have been able to carve out for themselves large segments of the market. At one point these agents were viewed, somewhat condescendingly, as just small players who might find niches in small geographic segments of the residential real estate market, but certainly would have little impact on large, complex commercial transactions. Today, however, agents compete on almost equal footing with the big title insurers for the most lucrative deals, often relying on their greater flexibility in order to rapidly and intensely focus resources to get the job done.

The big title insurers hope to bring this same lean, aggressive style to their deals by acquiring successful smaller shops, and this trend is likely to continue. Despite recent concerns expressed in some sectors of the industry, it appears unlikely that any anti-trust issues will be triggered by this continuing consolidation trend. For one thing, new abstract companies are born everyday, often exploiting the contacts established by their owners in the broader business, banking, legal and real estate worlds. The entry of this "new blood" into the title industry from these other fields is a continuing phenomenon. There seems little chance that the industry will become so concentrated as to give rise to anti-trust concerns in the foreseeable future.

BY SUSAN MAY-McLEAN PRINCIPAL HORIZON LAND SERVICES