Referrals - title insurance inducements rules
1. A company that is owned by a title company provides Web-based software to help real estate agents or brokers with title transactions. Each transaction provides a credit to the real estate agent or broker, and gets subtracted from the amount payable by the real estate agent or broker each month. Is this allowed?
No. Title companies cannot directly or indirectly give anything of value to someone who's in a position to refer or influence the referral of title business to title companies. This applies to any third-party software vendor, whether part of the title company's system or outside of that system. See WAC 284-29-200(6) and 284-29-260(14) (www.app.leg.wa.gov) for details.
2. May a title company discount escrow fees for loans such as Department of Veterans Affairs (VA) loans?
No. Title companies cannot discount fees to provide a more favorable fee to the lender or broker than the published rates. See RCW 48.29.210(2) , WAC 284-29-200(6), and 284-29-260(15) (www.app.leg.wa.gov) for details.
3. May a title insurer or agent pay a portion of the premium to another title insurer or agent in exchange for the referral of title insurance business?
No. But a split of the premium is allowed according to the agency agreement between the agent and the title insurer by which the agent is appointed.
Under Washington state law RCW 48.29.210(1) (www.app.leg.wa.gov), title companies may not pay fees for business referrals. Washington state law prohibits payment of these fees, even though the federal Real Estate Settlement Procedures Act (RESPA) may allow paying fees if the referring title company actually performs a service.
4. As a real estate advertising company, may we set up a non-licensed entity that helps unrepresented property sellers get title and escrow services from licensed title companies for a fee or commission?
No. Title companies may not give anything of value as a reward for referring title business. See RCW 48.29.210(1) (www.app.leg.wa.gov) for details.
5. May a title company pay a referral fee to someone for referring business to the title company?
No. Title companies are prohibited from paying a referral fee to anyone, whether it is called a referral fee, tracking fee, or anything else. See WAC 284-29-260(14) (www.app.leg.wa.gov) for details.
6. If a title company gives a discount to a developer/builder for his or her half of the escrow fee, must the title company also discount the other party's (buyer's) escrow fee?
Title companies must charge escrow fees according to the escrow fee schedule filed with the Insurance Commissioner and comply with WAC 284-29-260(15) (www.app.leg.wa.gov). The escrow fee split must comply with the terms of the earnest-money agreement. Also, depending upon the circumstances, if the title company does not give the same discount to the buyer, the title company may be violating RCW 48.29.155(1) and (2) (www.app.leg.wa.gov).
7. Often the portion of the escrow fees a title company charges a builder who is selling a new home are extremely low, while the amount it charges the consumer who is buying the home is half of the standard closing fee - significantly more than what it charged the builder. Is this fee reduction for builders prohibited?
Title companies must charge escrow fees according to the escrow fee schedule filed with the Insurance Commissioner and comply with the rules. See WAC 284-29-260(15) (www.app.leg.wa.gov) for details.
8. May a title company give a small thank-you gift to a borrower, buyer or seller?
No, a title company must not give anything of value to anyone as a reward for referring business or creating title insurance business for a title company. See RCW 48.29.210(2) (www.app.leg.wa.gov) for details.
9. A lender is using a third-party vendor that service providers, including title companies, must use in order for the title company to obtain title insurance business from the lender. To use this service, the title company must pay an activation fee and a per-order fee to the vendor. Is this allowed?
No. Payment of a per-transaction fee to a producer is not allowed. See WAC 284-29-260(14) (www.app.leg.wa.gov) for details.
10. A producer developed a special “clock hour” class. He proposes to have a title company get the class approved by the Department of Licensing for continuing education. He then plans to teach the class under the title company’s name. All fees collected from the class would be paid to the producer. Is this permitted?
No. The time and expense to put on the class is a thing of value to the producer. For that reason, the title company is prohibited from sponsoring his class. See RCW 48.29.210(2) (www.app.leg.wa.gov) for details