AB 957 moves closer to passage

Great news, folks! The California Assembly Judiciary Committee voted unanimously this week in favor of Assembly Bill 957, "The Buyer's Act!"

For those of you who aren't up on this legislation, it would allow buyers of bank-owned properties to use their own title and escrow companies, as opposed to banks dictating those choices for them. Consumers who aren't allowed to pick their own title and escrow companies often end up paying up to twice as much in escrow fees to out-of-the-area escrow offices that don't even provide decent service.

Let's all stay on top of this important new bill as it will soon go before the entire state Assembly prior to going to the Senate and governor's desk! If you want to stay on top of the news, please sign up to have my posts sent to you directly.

Urge support for AB 957!

Assembly Bill 957, the “Buyer’s Choice Act,” is one of the best — and most needed — pieces of legislation to come down the pike in a long time.

And it's coming up for a vote in Assembly Judiciary Committee on Tuesday (5-5-09). AB 957 allow buyers of bank-owned properties to use their own title and escrow companies, as opposed to banks dictating those choices for them. In many cases, banks have been requiring that buyers use the title and escrow companies the banks have contracts with.

It’s a chummy relationship that often causes local homebuyers to pay up to twice as much in escrow fees to out-of-the-area escrow offices that often provide substandard service to the buyer. The federal Real Estate Settlement Procedures Act (RESPA) prohibits a seller of residential property from requiring or influencing a buyer to purchase title insurance from a company chosen by the seller.

So this practice is not only expensive — it’s just wrong.

I encourage readers, brokers, real estate agents and other industry professionals to contact Assembly Judiciary Committee members right away and urge them to vote in support of AB 957. Let’s put some ethics back into the industry. For more industry news, log onto RESPAnews.com.

Here's a form letter that was posted on RE Insider that you can sign and fax to Assembly Judiciary Committee members:

Dear Assembly Member:

I support AB 957, The Buyer’s Choice Act. This is important legislation that affects my business and must be enacted!

I understand that this bill will prohibit banks (sellers who acquired title to residential real property at a foreclosure sale) from requiring the buyer to purchase title insurance or use escrow services chosen by the seller/bank. And it would prohibit a seller/bank from, without good cause, disapproving the use of a title or escrow company chosen by the buyer.

Of particular importance is the language in the bill that prevents a bank who is a seller from disapproving of a buyer’s choice of title, escrow and settlement companies without good cause. This will help prevent the current practice of large banks from putting inappropriate pressure on buyers to agree to use companies that provide an advantage to the banks in the transaction.

This bill will put the choice of affiliate services back where it belongs, with the consumer. Thank you for undertaking this important legislation in California.

Sincerely,
____________________________(Signature)
____________________________(Printed Name)
____________________________(Company Name)
____________________________(Street Address, City, State, Zip)
____________________________(Phone Number)


CC: Assembly Member Cathleen Galgiani, FAX 916-319-2117
Assembly Judiciary Committee

Assemblymember Mike Feuer (D) - ChairState Capitol, Room 3146, Sacramento, CA 95814. Fax: 916-319-2142. Counties: Portions of Los Angeles. Main Cities: Beverly Hills, Sherman Oaks, West Hollywood, West Los Angeles.

Assemblymember Van Tran (R) - Vice ChairState Capitol, Room 4130, Sacramento, CA 95814. Fax: 916-319-2168. Counties: Portions of Orange. Main Cities: Costa Mesa, Garden Grove, Westminster, Fountain Valley, Stanton, Anaheim, Newport Beach.

Assemblymember Julia Brownley (D) State Capitol, Room 2163, Sacramento, CA 95814. Fax: 916-319-2141. Counties: Portions of Los Angeles, Portions of Ventura. Main Cities: Agoura Hills, Calabasas, Los Angeles, Malibu, Oxnard, Port Hueneme, Santa Monica, Westlake Village.

Assemblymember Noreen Evans (D) State Capitol, Room 6026, Sacramento, CA 95814. Fax: 916-319-2107. Counties: Napa, Solano, SonomaMain Cities: American Canyon, Calistoga, Napa, St. Helena, Santa Rosa, Vallejo, Yountville.

Assemblymember Dave Jones (D) State Capitol, Room 6005, Sacramento, CA 95814. Fax: 916-319-2109. Counties: Portions of Sacramento. Main Cities: Sacramento.

Assemblymember Steve Knight (R) State Capitol, Room 2016, Sacramento, CA. 95814. Fax: 916-319-2136. Counties: Portions of Los Angeles, Portions of San Bernardino. Main Cities: Adelanto, Lancaster, Palmdale, Victorville.

Assemblymember Paul Krekorian (D) State Capitol, Room 4005, Sacramento, CA. 95814. Fax: 916-319-2143. Counties: Portions of Los Angeles. Main Cities: Burbank, Glendale, Los Angeles, North Hollywood.

Assemblymember Ted Lieu (D) State Capitol, Room 3173 Sacramento, CA. 95814. Fax: 916-319-2153. Counties: Portions of Los Angeles. Main Cities: Lomita, Torrance, Redondo Beach, Hermosa Beach, Manhattan Beach, El Segundo, Venice, Westchester, West Los Angeles, Marina Del Rey, Playa Del Ray, Mar Vista.

Assemblymember William Monning (D) State Capitol, Room 5150 Sacramento, CA. 95814. Fax: 916-319-2127. Counties: Portions of Monterey, Portions of Santa Clara, Portions of Santa Cruz. Main Cities: Carmel by the Sea, Monterey, Morgan Hill, Santa Cruz.

Assemblymember Jim Nielsen (R)State Capitol, Room 6031Sacramento, CA 95814Fax: 916-319-2102. Counties: Portions of Butte, Colusa, Glenn, Modoc, Shasta, Siskiyou, Sutter, Tehama, Portions of YoloMain Cities: Alturas, Anderson, Chico, Colusa, Orland, Red Bluff, Redding, Weed, Yuba City.

Assemblymember Cathleen Galgiani (D)State Capitol, Room 5155Sacramento, CA 95814Fax: 916-319-2117. Counties: Merced, Portions of San Joaquin, Portions of StanislausMain Cities: Atwater, Lathrop, Merced, Newman, Stockton, Tracy

Bundling - for home buyers it's baffling

In some industries, bundling is a good thing.

Take AT&T, for example. They offer discounts for bundled services that include your home phone, Internet and advanced TV. The company touts its residential bundled services as a plan that "allows you to integrate all of your home services for less." Having it all in one package --the upshot? It provides "savings over traditional telecom services and up to 20 percent savings over ala carte options.”

That and similar scenarios seem to make sense. But I'm hearing about others kinds of bundling going on in the housing industry where title companies and banks are getting a little too chummy for their own good. In other cases, its banks and the asset management companies they deal with. Those are the businesses that sell off foreclosed properties on behalf of banks.

I'm hearing about these kinds of services being bundled exclusively together - services that aren't necessarily supposed to come together in one package and in fact, when they do specifically violate RESPA.

Here's the scenario: A title company comes to a bank and says, "We'll give you a discount if you put all of your title insurance through us - it'll be MUCH cheaper."

Or maybe the REO asset management company guarantees a similar break in price if the bank funnels all of its foreclosed properties to them.
These kinds of deals may well be cheaper for the bank. But they're also illegal under the California insurance codes and other mandates which also include HUD and its RESPA law that regulate these companies. If the inducement is volume discounts, and the discount is passed inside between affiliate service sellers and NOT the buyer – well it’s downright illegal – plain and simple.

I put in a few calls about this to some banks, but never heard back. I also called REO World, which describes itself as "the premier asset management company representing foreclosed properties in the Western & Central United States."

I finally did get a return call from them while I was in line at the grocery store. When the female REO World representative identified herself, I figured I was finally going to get some kind of perspective on this thing. But I was in line and about ready to pay, so I asked her if I could call her back in two minutes. Her response caught me off guard.
"I can save you some time," she said. "We're not interested in making any kind of comment. Our comment is, ‘No Comment.’”

So that was the end of that. It seems that no one wants to talk about this, but I know it's going on. And you can probably draw your own conclusions too. If these transactions are transparent, then why the “no comment” line? Because they aren’t transparent, probably aren’t legal and appear to be insidious.

An April 2007, a report by the U.S. Government Accountability Office said actions are needed to improve oversight of the title industry and better protect consumers.
The report said that investigations by the Department of Housing and Urban Development (HUD) and state insurance regulators have identified instances of alleged illegal activities within the title industry that appeared to take advantage of consumers' vulnerability by compensating Realtors, builders and others for consumer referrals. Combined, the report said, "…these factors raise questions about whether consumers are overpaying for title insurance."

I can understand companies wanting to make money - that's the American Way, after all. But it has to be done legally - and ethically. If you're setting up an arrangement where services are bundled together in an illegal manner, it's just wrong.

And who gets the short end of the stick?

The home buyer and seller. Their real estate agent. The American Public.