5 11 2010

The National Association of Independent Land Title Agents defines an Independent Title Agent as follows: “Any individual or entity authorized and licensed to issue title insurance policies that is not controlled by, whether directly or indirectly, a title insurance company/underwriter, bank, mortgage company, mortgage broker, real estate firm (including agents and brokers), builders, developers, appraisers, surveyors, any subsidiaries thereof, or by any other referral source.”

 They call them CBA’s or AfBA’s (Controlled Business Arrangements and Affiliated Business Arrangements) and they are legal as long as the nature of the business is disclosed to the buyer. The disclosure consists of a piece of paper stating basically XYZ Title Agent has a Controlled Business Arrangement with Mega Bank … Please sign here.

But what does that arrangement really mean? Well, Mega Bank owns XYZ Title Agent and XYZ Title Agent does what Mega Bank tells it to do.
So what does that mean to the buyer? Let’s say that Mr. Buyer is purchasing a foreclosed property and XYZ Title receives the title opinion from the closing attorney and that opinion discloses some problems with the foreclosure. As chances have it Mega Bank was the foreclosing lender. XYZ Title spots this and knowing that these foreclosure errors will bother Mega Bank, issues Mr. Buyer a clean title policy. Great for Mr. Buyer – right? Not really, you see the error that XYZ Title agent so graciously ignored was the fact the Out of State Foreclosed Owner was never provided notice of the foreclosure. Mr. Buyer found this out when the former owner knocked on the door and asked why someone was living in his house. Sure, the Title Insurance Underwriter will probably cover the claim, but that can take years. Does Mr. Buyer really need the stress of worrying that he might lose his home?
An Independent Title Agent would have refused to permit the transaction to close until the title was clear! CBA’s and AfBA’s have a benefit, but it’s not for the buyer, it’s for the owner of the CBA or AfBA.
For more information about the value of independent title agents visit http://www.nailta.org/