California looking to tighten AfBA regs
Posted in RESPA reform By Matt Carter, Monday, August 11, 2008.California regulators say they're going to start enforcing existing law on AfBAs, limiting title insurers to generating no more than 50 percent of their business through joint ventures. An analysis by the Department of Insurance estimates tightened regulations could cost the industry $732 million in after tax income (profits) and force "one or more domestic insurers" and "several underwritten title companies" out of business. See story.
You must login or register to post a comment.
Submitted by Diane Cipa on August 12, 2008 - 5:56am.
I really have mixed emotions over this whole thing. On the one hand, I have been blabbing on blogs and hoping in my heart that regulators and lawmakers would do something to curtail the proliferation of joint ventures and ABAs and knock out the corruption and conflicts of interest residing in most of the referral network.
That said, the personal loss of so many who work for these operations who aren't responsible for the creation of the dragon, is getting to me.
So, yeah, I am happy that CA will improve enforcement of their rules and create better enforcement. Thank you. I just want to say to those who will have to leave the business of title insurance until the system collapses and gets re-built that there is a tomorrow and it's not so bad taking a break and doing something else for awhile.
When mortgage originations virtually disappeared during the S & L crisis - early 80s, I left the biz and sold computers for Radio Shack for a year. It was a lot less money BUT I learned stuff about computers that I never would have encountered otherwise and so, I'm glad to have been kicked out of the biz for a bit.
Our business - real estate, mortgage lending, and title insurance is cyclical and it always comes back. If you love it, you'll find a place somewhere in the new system, whatever it is.
We'll find out together.
Submitted by Matt Carter on August 12, 2008 - 3:32pm.
Thanks for sharing your experience on weathering the S&L crisis, Diane. I guess the equivalent today to selling computers at Radio Shack would be hawking Apple's iPhone?
It's quite sobering when the quarterly reports come out and the big title insurers (and lenders) summarize the job cuts they've made since the downturn began.
They're trying to put a positive spin on their "headcount reductions," which are supposed to reassure their investors. They want to show they are "right sizing" and cutting costs to match declining orders. But that's not any consolation for people who are out of work.
I guess if any California title companies are forced to close down any "sham" AfBAs that don't actually have their own employees, you won't necessarily see layoffs associated with those actions.
If the total number of title orders written in the state stays the same regardless of the new regulations, I wonder if job losses will be concentrated among people tasked with marketing to real estate brokers and loan originators? And if orders that used to go to companies that relied heavily on AfBAs end up migrating to companies don't, will those companies have to hire to handle the additional workload?
We also know some jobs are going overseas, though, and that it may be a long time before the number of homes sales, title orders, and mortgage originations returns to the levels seen during the boom.
Submitted by Diane Cipa on August 12, 2008 - 4:46pm.
Well, the hope is that consumers end up the winner with a widespread move away from the referral network, one that creates competition and/or efficiencies that reduce pricing.
What will the title industry look like? My best guess is that we'll see a shift into huge web based consumer facing platforms like Cyberhomes with automated and outsourced products and services along with a population of boutique providers performing traditional title services. We'll lose the faux boutiques that fronted ABAs and JVs. In that kind of environment there might not be less jobs, just different jobs.
My previous comment really speaks to the displacement of the title job force more than anything. Money and jobs just move, they don't necessarily disappear but it's a scary ride.
So, while I applaud CA for enforcing their rules and making this kind of structural change while everything is in play and the collective industry is in a correction mode, I can't applaud with glee because it'll hurt while it happens. There will be a new kind of normalcy eventually and I sure do hope we can stay clean of corruption for at least a decade or two before it all starts again in one form or another. ;)