Bulletin: FL000081

Dear Associates:

The Legislature has passed and the Governor has signed a new Bill known as HB403 modifying in various ways the Title Insurance ("Statute"). In this Bulletin we will direct your attention to the areas which we think are of most concern to title policy issuing agents.

Below you will find a copy of the new text of the Statute to the extent that it applies to any premium rate matters.

Effective date of changes:

The new law goes into effect July 1, 1999. This Statute does not address how pending matters are to be handled. We think the following would be a reasonable interpretation:

The new rate structure does not apply to any policy or endorsement with an effective date prior to July 1, 1999.

If a commitment is issued with an effective date prior July 1, 1999, the resulting policy and/or endorsements may be based upon the old structure or upon the new structure.

If a commitment is issued after July 1, 1999, the new rate structure must apply.

If no commitment is issued then the effective date of the policy or endorsement will control; with effective date prior to July 1, 1999 the old rate structure will apply; with any subsequent effective date, the new rate structure will apply.

Rates frozen for three years.

The authority of the Department of Insurance to set title insurance rates and minimum insurer retentions has been revoked for the next three years or until June 30, 2002. The new rates are set forth in the Statute. Other portions of the existing rate structure contained in the Title Insurance Rule that do not conflict with the new Statute will continue until that date.

Summary of the changes.

The new Statute changes the original owner, leasehold, and mortgage rates. It changes the original premium and premium splits for policies over $1,000,000.00 and creates a new home purchase discount. It also modifies the provisions concerning reissue rates and substitution loan rates.

Changes to original rates and premium splits. (The portions underlined reflect the changes)

The premium for original owner's or for leasehold insurance shall be:

PerMinimum
ThousandInsurer
________Retention

From $0 to $100,000 of liability written$5.7530%

From $100,000 to $1 million, add$5.0030%

Over $1 million and up to $5 million, add$2.5035%

Over $5 million and up to $10 million, add$2.2540%

Over $10 million, add$2.0040%

The minimum premium for all conveyances except multiple conveyances shall be $100. The minimum premium for multiple conveyances on the same property shall be $60.

In all cases, the owner's policy shall be issued for the full insurable value of the premises.

The premium for original mortgage title insurance shall be:

PerMinimum
ThousandInsurer
________Retention

From $0 to $100,000 of liability written$5.7530%

From $100,000 to $1 million, add$5.0030%

Over $1 million and up to $5 million, add$2.5035%

Over $5 million and up to $10 million, add$2.2540%

Over $10 million, add$2.0040%

The minimum premium for all conveyances except multiple conveyances shall be $100. The minimum premium for multiple conveyances on the same property shall be $60.

A mortgage title insurance policy shall not be issued for an amount less than the full principal debt. A policy may, however, be issued for an amount up to 25 percent in excess of the principal debt to cover interest and foreclosure costs.

As you can see there is no change to the existing rates or premium split for policies up to $1,000,000.00. For policies over $1,000,000.00 there is both a reduction in the premium rate to be charged and also a reduction of the agent's portion of the premium split.

The new premium splits apply only to the premium on policy amounts in excess of $1,000,000.00 when using original rates. When using any other rate structure, the split continues to be 70/30, such as for premiums for a reissue or for simultaneous rates or for endorsements.

Changes to reissue rates.

The reissue rates have not changed. There is a change in the provisions concerning when the reissue rate applies. Accordingly, the new Statute extends the time allowed between the effective date of the previous owner's policy and the new owner's policy from one year to three years.

Substitution loan rate.

The substitution loan rates have not changed, except that the rates now apply to refinances of $250,000.00 or more even when the new lender is not the same lender as on the original loan. The new substitution loan rate does not affect rates charged on a mortgage modification agreement.

The new premium split applies only to original rates. You should continue to remit 30% of the premium for any premium or portion of a premium computed using substitution and other rates and endorsements.

New home purchase discount.

This applies to the first sale of residential property (not previously leased or occupied), one-to-four family, which shall be discounted by the full amount of any premium paid for any prior loan policies insuring a mortgage executed by the seller on the premises. If the prior loan insured more than one unit the discount shall be prorated against the total number of units. The minimum to be charged is $200.00.

The agent is responsible for obtaining and approving the documentation that justifies this discounted rate. This includes copies of prior loan policies and closing statements or other or other proof of the amount paid for the prior policy or policies and endorsements. This documentation is to be kept in the agents' files and will be subject to routine audit.

Additional changes not related to premium.

As to Rebates:

There is a change in the section dealing with rebates on title insurance. What follows is the section dealing with rebates in its new format with words shown as deleted and with words underlined indicating that they are new to the Statute:

a.No title insurer, or any member, employee, attorney, agent, agency, or solicitor thereof, shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as inducement to title insurance, or after such insurance has been effected, any unlawful rebate or abatement of the agent's, agency's, or title insurer's share of the premium or any charge for related title services below the cost for providing such services, or provide charge made incident to the issuance of such insurance, any special favor or advantage, or any monetary consideration or inducement whatever. The words "charge made incident to the issuance of such insurance" shall be construed to encompass underwriting premium, agent's commission, abstracting charges, title examination fee, and closing charges, however, Nothing herein contained shall preclude an abatement in an attorney' fee charged for legal services rendered incident to the issuance of such insurance.

b.Nothing in this subparagraph shall be construed as prohibiting the payment of fees to attorneys at law duly licensed to practice law in the courts of this state, for professional services in the actual examination of title to real property as a condition to the issuance of title insurance, or as prohibiting the payment of earned portions of the premium commissions to duly appointed agents or agencies who actually perform services for the title insurer issue the policy of title insurance for the underwriting company.

c.No insured named in a policy, or any other person directly or indirectly connected with the transaction involving the issuance of such policy, including, but not limited to, any mortgage broker, real estate broker, builder, or attorney, any employee, agent, agency, representative, or solicitor thereof, or any other person whatsoever, shall knowingly receive or accept, directly or indirectly, any unlawful rebate or inducement, other than as set forth in sub-subparagraph b.

As to Related Title Services:

There are also changes in the section dealing with related title services and what follows is the revised language with words shown as deleted and with words underlined indicating that they are new to the Statute.

(1) (a)"Related title services" means services performed by a title insurer or title insurance agent or agency, in the agent's or agency's capacity as such, including, but not limited to, preparing or obtaining a title search, examining title information, preparing documents necessary to close the transaction, conducting the closing, or handling the disbursing of funds related to the closing in a real estate closing transaction in which a title insurance binder, commitment, or policy is to be issued. The risk premium, together with the charge for related title services, constitutes the regular title insurance premium.

Some things did not change. None of these changes affect the charges you make for search, examination and closing. You must charge at least your cost for each of these.

(b)"Primary title services" means determining insurability in accordance with sound underwriting practices based upon evaluation of a reasonable search and examination of the title, determination and clearance of underwriting objections and requirements to eliminate risk, preparation and issuance of a title insurance commitment setting forth the requirements to insure, and preparation and issuance of the policy.

(2)"Risk Premium" means the charge, as specified by rule of the department, that is made by a title insurer for a title insurance policy, including the charge for performance of primary title services by a title insurer or title insurance agent or agency, and incurring the risks incident to such policy the assumption of the risk, under the several classifications of title insurance contracts and forms, and upon which charge a premium tax is paid under s. 624.509. As used in this part or in any other law, with respect to title insurance, the word words "premium" does or "risk premium" mean only the risk premium as defined in this section and do not include a commission any other charge incidental to title insurance.

A new section has been added which attempts to correlate the Statute with RESPA as to the issue of persons being paid only for work actually performed and for which liability is assessed.

If you have any questions, please feel free to contact any of our Florida underwriting counsel.