Bulletin: MD000012

Dear Associates:

In connection with a recent ruling by the Maryland Insurance Administration in its adjudication of a complaint filed against Barrister Title Services (see Maryland Insurance Administration Case 377-12/95), an issue arose regarding the charge shown on Line 1104 of the HUD-1 (i.e., binder fee) where the subject agent incorporated a preparation fee which exceeded the amount approved by the Maryland Insurance Administration for Barrister Title's title insurer. The Maryland Insurance Administration narrowly defined a commitment fee (binder fee) under Line 1104 as an insurance product and not a work charge. It stipulated that no fee other than that which the title insurer had filed and approved could be charged on Line 1104 of the HUD-1. The Maryland Insurance Administration proceeded to assess a fine of $10,000 against the agent for charging a binder or commitment fee in excess of the amount filed with and approved by it. In addition, the agent was ordered to refund the excess fees collected on Line 1104 to over 1,300 insureds whom the Maryland Insurance Administration alleges were illegally charged a greater fee. It was noted that the Associate Commissioner testified that had the excess fees been categorized as a placement or preparation fee and shown on another line of the HUD-1, they would have been acceptable. This case has been appealed to the Circuit Court.

Stewart Title Guaranty Company has always taken the position that any fee charged for the preparation of a commitment (binder) is a work charge collected and is to be retained by its policy issuing agents. Our rate filing with the Maryland Insurance Administration requires that a fee be charged but does not specify a particular amount for a commitment/binder fee. The Maryland Insurance Administration now advises us that under our existing filing agents cannot show a charge on Line 1104 of the HUD-1 and be in compliance with the Administration's interpretation of what may be charged on Line 1104. Consequently we are filing an amendment to our current rates deleting the following language:

B. Policies

1. Commitment to Insure (Interim Title Insurance Binder)

A commitment to insure, also known as an interim title insurance binder, is a report showing the status of the title and the exceptions, if any, which will appear in the policy when issued. It is also a binding obligation of the Company to issue its policy in accordance with the terms and conditions of the commitment. When a commitment is required for the closing of a transaction, a preparation fee shall be charged, in addition to the regular title insurance premium. This covers a commitment issued in connection with a purchase or lease or with a permanent mortgage.

We have requested that it be replaced by the following:

B. Policies

1. Commitment to Insure (Interim Title Insurance Binder)

A commitment to insure, also known as a title insurance binder, is a report based on an abstract and examination of title to determine whether the seller can convey clear title and to disclose any matters of record which would adversely affect the title.

When a commitment is required for the closing of any transaction the charge for the same shall be the premium on the policy when issued at the applicable title insurance rates plus fifty ($50) dollars.

If a commitment is issued and the transaction not closed a cancellation charge may be made of up to forty (40%) percent of the applicable title insurance rates to cover expenses associated with determining the insurability of this transaction.

Consequently, line 1104 of all future HUD-1's must show only the filed commitment fee; any related charged must be shown elsewhere. Please understand that you no longer have the option of not charging a commitment fee - it must be charged as set forth above. This change shall become effective March 1, 1997.

Note:Please copy this Bulletin and review it with your staff. Should you have any questions, or require additional information, please contact our office at 410/547-9100.