CEA has been involved in an uncommonly large number of issues already in 2005, including bills relating to unlawful title company rebates, elder abuse, notary reform, and others. Of these, perhaps the most contentious is the rebate issue, addressed in SB 728 (Escutia). This bill proposes certification by the Department of Insurance of individuals acting as “title solicitors”, as defined in the bill. Unfortunately, as the bill is drafted, “title solicitors” would include escrow officers.

The genesis of SB 728 is continuing concern within the Department of Insurance over unlawful rebates allegedly paid by title companies, in violation of Insurance Code Section 12404. The Department has in the past, and continues to levy fines against title companies which they believe have paid rebates to real estate brokers as inducements for the referral of title business. The Department also contends, however, that these fines have simply been folded into company budgets as a “cost of doing business”, and therefore some jurisdiction over individual employees is necessary as well.

Hence SB 728, which provides that no person may act as a “title solicitor” without certification by the Department, a certification which may be withdrawn if the person is guilty of violating the rebate law. As drafted, any person who “effects” policies of title insurance could be required to obtain certification. Even the Department has admitted that such a definition would almost certainly implicate escrow officers.

It is interesting to note the difference in perspective between the Department of Insurance and the California Land Title Association on SB 728. Representatives of the Department have stated that there is never any justification for giving anything of value to a real estate licensee: no lunches, game tickets, door prizes, cocktails, nothing. CLTA has pointed to subdivision (d) of Section 12404, which permits reasonable expenses for food and entertainment, and has asked the Department to adopt regulations clarifying what is reasonable.

The position of CEA is that any certification imposed by SB 728 should not be required merely because escrow officers order policies of title insurance to complete transactions. It is one thing to be out marketing a title company in the usual sense, and quite another to simply be practicing escrow. And an outright prohibition on giving anything of value seems positively silly—should an escrow officer not be able to give a Realtor a baby present? We have suggested to legislators that any certification scheme be tightly limited to marketers, and have clear rules, since the very livelihood of CEA members is at stake.

CEA has been involved in a variety of other issues as well. AB 1539 would have required notaries to ensure that the signor understand the contents of the document they are signing, and impose mandatory reporting to law enforcement if there is evidence of coercion. Here, CEA, CLTA, and CAR all argued that the notary cannot be responsible for making sure that people truly understand the import of every document they present for notarization, and that any reporting to law enforcement should be voluntary, not mandatory.

Another bill amends the real estate withholding law (yes, again!). AB 1628 would make escrow officers liable for failing to advise buyers of the withholding law, even if the seller ultimately pays his or her taxes when due. The bill would also treat the escrow as the buyer if the notification is not done. CEA and CLTA are opposing this bill as well.

As the coming weeks and months unfold, we will begin to see resolution of these and other bills. In many cases, CEA News Flashes will ask members to call or write to legislators to express our positions. Please do not hesitate to act when called upon—what the California Legislature does really can effect escrow jobs!

by Michael D. Belote
California Advocates, Inc., Sacramento

The Busy Season