On January 3, 2018, the IDFPR held a Town Hall Meeting which was labeled by the IDFPR as the beginning of a dialogue regarding premium splits between title agents and their underwriters. They referred to it as the first step in a long journey. The IDFPR limited the discussions at the town hall meeting to the following three issues:
(1) Improper Inducements– IDFPR Position- The underlying agreement between the underwriter and the agent controls the compensation to be paid and if a higher amount is paid to the agent, there is a violation of the Illinois Title Insurance Act and RESPA
(2) Splitting of premium – IDFPR Position- The Department would like to see agency contracts between the title agency and the underwriter of 80/20 or 85/15. The title agent’s agency contract agreement with the underwriter controls the split. Splits of 100% to the agent or those that would otherwise violate the statutory premium reserve are improper.
(3) Splitting of fees – IDFPR Position – A non-escrow agent can receive a split of a fee that directly relates to policy issuance or is otherwise authorized by the Act, i.e., determining the insurability of title, collecting premiums, soliciting title insurance, and issuing commitments, policies, and endorsements. Thus, a fee for a later date examination relates to insurability and can be split with the agent if that agent performed the examination. Otherwise, the fee cannot be split.
Furthermore, fees relating to closing/settlement services cannot be split because they are not related to an agent’s statutorily authorized activities.
Lastly, the Department stressed the importance of issuing the DS1 Disclosure Statement to clients prior to issuance of the title commitment. In many instances, the DS1 Disclosure Statement is signed at the closing table, and this is an issue that the Department is going to pay particular attention to on a go forward basis.
The Department Representatives also discussed the importance of the title agent performing the ‘core title services” as set forth by the IDFPR and HUD. For a title agent to receive compensation as a title agent, the title agent must perform core title agent services for which liability arises separately from attorney services, including the evaluation of the title search to determine the insurability of the title, the clearance of underwriting objections, and, where customary, the issuance of the title commitment and title policy, and where customary, the conducting of the closing.
The Department stated that legislative changes in the future may be needed to address marketplace conduct.
Should you have any questions, please feel free to contact GIT President Greg Kosin at [email protected]