Title and escrow companies say they are getting a bad rap in the media about allegedly gouging consumers on title and escrow fees when consumers refinance their mortgages.

The refinance frenzy makes consumers too hurried to always ask for discounts and over worked title and escrow workers are busy speeding through the reams of refis and are often too harried to remind them, industry officials say.

Also, a study that spawned a state investigation of the title and escrow industry didn't take into account that some closing cost fees have been lowered directly as a result of the refinance boom.

The industry is, however, gearing up with new technology to help consumers find the lowest title and escrow costs.

"One thing (the media) never mentions is the total combined title and escrow fees have fallen at least 25 percent over the last two years," says Joette Joseph, Joette Joseph, president of the Escrow Association of Santa Clara County, CA.

Ever lower mortgage interest rates has generated wave after wave of refinancing booms and some consumers believe they are paying more for title and escrow services than necessary.

"None of us were prepared -- consumers, title companies, lenders -- to have people refinance every six months, so pricing never really became as important to people. You didn't think about it because it was five or six years between refinancing. Now it's done every one, two, three, five or six months," says Don Partington, general counsel for Fidelity National Financial, the parent company of Fidelity National Title and Chicago Title.

In the New York class action suits, homeowners sued the eight largest title insurers active in the state, charging them with intentionally overcharging thousands of borrowers on their refinancings.

Out West, California's Insurance Commissioner John Garamendi ordered an investigation of the title and escrow rates of five of the state's largest title insurance sellers after Consumers Union surveyed the rates of the six companies, that sell 84 percent of all title insurance in the state. The survey found that major title insurance companies were quoting title insurance rates that averaged twice what title industry representatives themselves said where available.

Title, escrow costs

For a refinanced mortgage, the lender typically requires the home owner to buy a title insurance policy to protect the lender against unrecorded encumbrances, such as liens or judgments held against the title; forgery or fraud and many other title anomalies that could have cropped up since the property last changed hands or its mortgage was refinanced.

Along with performing title search work (to make sure the title is clear of those encumbrances) that comes with the cost of title insurance, title companies in many areas also act as the escrow company -- a neutral third party that handles the paperwork, money, transaction instructions and other details during a home purchase or refinance.

Escrow fees are the second largest single fee title companies charge, ranging from about $200 to $500 per transaction for a $250,000 loan, according to the Consumers Union survey. Also levied are smaller fees for services -- recording fees, courier fees, notary fees, loan packaging fees, etc. The services provided and the fees charged vary from company to company.

As with most costs in a real estate transaction, title and escrow costs are negotiable.

Title and escrow companies also offer what's called a discounted "reissue" or "revamp" rates for title insurance when a loan is being refinanced and the same lender is used. The discount can be as high as 55 percent. There's also a smaller "short term" rate discount of 10 to 20 percent if a property has had title insurance in recent years, which varies from about five to 10 years, depending upon convention and rules in a given region.

"In a refinance transaction, sometimes the search that we need to do is somewhat abbreviated so there can be about a 30 percent reduction off the title insurance rate and it could go down to as low as a 55 percent reduction," said Partington.

The discounts reflect the fact that when ownership hasn't changed hands on a property whose title was recently searched and insured, the need for an extensive new search for new title problems is sharply reduced. Statistically, the probability of claims following the initial search also falls.

"We make no bones about that. If it's the same borrower with the same lender you are getting anywhere from 30 to 50 percent off the normal rate that you may have paid the first time. There is no time limit on that," said Jim Cortese, division president of the Santa Clara County, CA offices of Stewart Title.

Some companies are using technology to help make consumers more aware of the discounts.

Fidelity National Title and Chicago Title Web sites, for example, offer refinance calculators with questions that help consumers uncover available discounts.

"We just did a press release that indicates we have on our Web sites refinance rate calculators. It allows the consumer to print out the rate quote and take it to any office," said Partington.

"We have to provide more tools for people to recognize the rate reductions they can get," he added.

Also, say California industry officials, escrow fees have been slashed across the board by many companies and that has created a built-in discount on all title and escrow fees.

"Because escrow fees have fallen for the last two years, the combined total of title and escrow costs have fallen at least 25 percent over the last two years. It's lower on the escrow side rather than the title side. The fees are down because of supply and demand," said Ms. Joseph, also a branch manager and vice president of Alliance Title in San Jose.

"In some cases, the discounts on escrow fees is greater than you'd get by receiving the reissue rate," she added.

Published: June 19, 2003

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.