Landrecs.com – Land Title Consulting & Education

On July 1 of this year, H.B. 525 (Ohio) went into effect and many title agents in Ohio have been dealing with the disastrous consequences ever since.  It seemed simple enough, at least to the legislators… it was designed to require certain margins and font sizes on recordable documents.  If the documents didn’t conform, the recorder still had to accept them, but they had to charge an additional $20 fee.  Unfortunately, the recorders got a little carried away (to put it politely) and title companies (and lenders and consumers) began experiencing a huge increase in recording fees.

After a few complaints, there seems to be a fix in the works.  Finally… someone will seek to legislate a little common sense.

Basically, the new requirements consist of the following: 

• Computer font size of at least 10 point;
• Minimum paper size – 8 1/2 X 11, Maximum paper size – 8 1/2 X 14;
• Black or Blue Ink ONLY;
• No use of highlighting;
• Margins of 1 inch on each side of the page and on the bottom;
• 3 inch margin on the top of the first page, reserved for recorder, auditor, & engineer;
• 1 1/2 inch margin on the top of each of the remaining pages.

These requirements have been strictly enforced.  It is not sufficient that the printed document conform to the standards; there can be nothing in those margins at all.  Here are a few examples of things that have subjected recordings to the additional $25 filing fee that some people may not have considered.

• The title company’s "return to" stamp that lets the county know where to return the recorded document.  These stamps are often placed in the margins.
• The title company’s order number.  Many title companies place their order number on the documents so they can easily locate the corresponding file when the document is returned.
• The borrower’s initials on mortgages.  These are often located in the lower right hand corner of the document in the margin.
• The borrower’s signature extending into the right hand margin of the page.
• The notary’s stamp.  It may be difficult to place the notary seal far enough into the document to avoid the margins if you are using the crimping-style seal.
• The page numbers in the bottom margin and smaller than a 10pt font.

I sent letters to a few of our legislators with some examples of recordings that we had that were assessed the additional $20.  I explained that in many cases, we have very little control over the documents we record. Many are prepared by the lender and some are already executed by the time we get them.  As much as we are willing to comply with the requirements on documents that we prepare, we simply don’t prepare all of the documents we must record.

I did receive a reply from one of our Representatives.

This bill was intended to create a cleaner document the consumer can utilize and ensure documents can be legally clear and binding in court.  Unfortunately, some recorders have become overzealous and gone beyond the intention of the bill.

I have spoken with the former president of the Ohio County Recorder’s Association and he informed me they are working on corrections to the bill to fix the problems listed in your letter.  He informed me that a bill will be forthcoming in the months ahead.

I don’t really understand what kind of problems we had with recorded documents being "binding in court," but I certainly do know what "overzealous" means.  That was a good way to describe it. 

At times, I just couldn’t make any sense of the way in which the recorders were assessing the fee, and I’m sure it wasn’t any clearer to members of the public.  I overheard a conversation with a clerk and a member of the general public who was trying to record something.  I could only describe what I heard as "Dewey Oxberger logic." (Dewey Oxberger was a character in Stripes (1981) played by John Candy).  The conversation went something like this:

Jane Q. Public:  I need to record this.

Clerk:  This doesn’t conform to the law, we have to charge you an extra $20.

Jane Q. Public:  What do you mean?

Clerk: The law requires a three inch margin at the top and a one inch margin on the sides and at the bottom. These margins aren’t big enough, so the laws requires that I charge an additional $20.

At this point, Jane wasn’t very happy, but she didn’t say anything.  There was an awkward pause and for some reason, the clerk continued…

Clerk:  If it were signed before July 1st, we wouldn’t have to charge the $20. But, this was signed in September, so we have to charge the additional fee.

Compare that to the following scene from Stripes:

The platoon arrives in Italy and everyone heads for a bunk.  Pvt. "Cruiser" begins to climb up on the top bunk and Dewey "Ox" Oxberger stops him.

Dewey Oxberger:  What are you doing?  No, no… get off.  Get off.  See… you gotta make my bunk.  See, we’re in Italy.  The guy on the top bunk, he’s gotta make the guy on the bottom’s bunk… he’s gotta make his bed, all the time.  See, it’s in the regulations.  See, if we were in Germany, I’d have to make yours.  But we’re in Italy, so you gotta make mine.  [shrugs his shoulders] Regulations.

I guess its hard to argue with logic like that.  I’m sure Jane didn’t understand why a document would be assessed a different fee based on when the document was signed.  The margins are the same no matter when the document was executed – so if the fee is assessed based on the margins, why should it matter when it was dated?  Well… Jane, we’re in America… if we were in Germany, the clerk would have had to give you $20, but we’re in America, so you gotta pay her.  That’s the law.  That kind of logic only works in the movies… and in our government, I guess.

The good news is that the State Representative was right… they are working on changes.  Nothing has been officially introduced in the legislature yet, but there is a draft floating around for comment among the state’s county recorders.

ORC 317 (B)(2)

The county recorder shall accept for recording an instrument or document that does not conform to the requirements set forth in division (A) of this section but shall not charge and collect the additional fees specified in division (b)(1) of this section for page numbers, hand-written initials, bar codes, copyright information, typed or printed initials, or any other incidental information that is no essential to the indexing process or to the legal validity of the document and that may appear in either of the side margins or in the bottom margin of the document.  In addition, any signatures and initials that may appear within the document need not satisfy the font size requirement and no additional fees may be charged or collected by the county recorder for such a nonconformance.

This will certainly go a long way to alleviating the problems.  Although many of the problems we have encountered should not have been issues, anyway, because ORC § 317.114 should not be read to apply to anything in the execution of the document.  ORC § 317.114 states, "an instrument or document presented for recording to the county recorder shall have been prepared in accordance with all of the following requirements." To me, this means signatures, initials, notary stamps, etc., were not intended to be scrutinized for strict compliance with the statute.

I still contend that this legislation was never necessary.  First, if the issue was legibility sufficient for reproduction, ORC § 317.112 requires that instruments presented to the county recorder for recording “shall be sufficiently legible to permit their reproduction by photographic or micrographic processes.”  This gave the recorder the authority to reject documents that were not adequate for reproduction and the latitude to apply their reasonable judgment.

Second, if the issue was sufficient space for county recording stamps, a better solution would have been for the recorder to attach a blank page for their stamps, if needed, at a cost to the consumer of only $8.00 per ORC § 317.32.

But, there is nothing wrong with the statute in theory.  It creates standards that make it easier for our documents to be recorded and copied into the official records. It just would have been nice to see the county recorders apply a little common sense in deciding when to assess the fee. 

Hopefully, something like the draft language above will pass in the General Assembly and we will finally be able determine the actual recording fee again. 

On one occasion, we were told that four documents we were attempting to record for a client each required the additional fee.  We notified the client and waited for them to send us an additional check.  After delaying the filing for four days, we took it back and were told that only one of them required the extra $20, the others were all fine.  This shouldn’t happen.  Even with very specific standards set forth in the Revised Code, and overzealous recorders, there was still no consistency. 

Though I’d be happier if they would just repeal the whole darned thing, I’ll settle for a reasonable fix like the one being considered currently. 

Robert A. Franco
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I dropped my membership in ALTA several years ago, but I hadn’t completely given up hope on the organization.  I have been watching them to see if they could make me change my mind.  Unfortunately, they have not.  In fact, just the opposite… I am much less likely to re-join now than ever before. 

It appears that ALTA gave up on trying to reinvent itself and show us all that it could represent the small, independent agents along side the underwriters and large agencies.  Rather, they have decided to license the ALTA forms that we all need to conduct our business.  Surely, this is a blatant attempt to get money from agents after they have completely failed to give them any real reason to join. 

First, let me highlight a few of the reasons that caused me to cancel my membership in ALTA.  It basically boils down to two things: 1) I felt that they were not representing my interests as an independent title agent; and, 2) they seemed to be more in the business of soliciting me than representing me. 

On the representation issue, there is an inherent conflict of interest between the big underwriters and agents, and the small, independent agents.  It seems to me that ALTA either stands with the large companies that line its pockets or they duck the issues that small agents really care about. There are a few areas where those interests overlap, such as RESPA reform, but even there it only goes so far.

As a small agent, the issues that I care about the most, and where I need the representation of a national association, are the ones that seem to slip through ALTA’s fingers.  For years, this industry has been giving away profits to Realtors, lenders, and builders through Affiliated Business Arrangements ("AfBAs") and ALTA has blindly accepted the practice. 

The underwriters have largely embraced AfBAs because it allows them, or their largest agents, to capture referral sources and lock out competitors.  They get the same split of the premium whether it comes from an independent agent or an AfBA.  Meanwhile, small agents are being excluded from more and more of the market.  Where was ALTA as the small agents suffered?

Similarly, a few years ago there was an "off-shoring" craze that hit the title industry.  Orders that used to get handled by local title professionals are now being done in India and the Philippines.  What did ALTA do?  ALTA began incorporating off-shoring segments at their conferences.  They embraced the practice as local title professionals saw work leaving the country to boost the profits of ALTA’s largest members. 

In 2007, when I wrote the blog about ALTA’s position on off-shoring, I checked its directory to see who the members were in my county.  Surprisingly, they were overwhelming small, independent title professionals.

What is most perplexing to me is the make-up of the ALTA membership. I checked their online directory to see what their membership looked like in my home county. There are seven ALTA members here: six are single-person, independent abstractors and one is a title agency. Of the three large title agencies in town, only one is listed. There are four small independent title agencies here and none of them are listed as members. We no longer have any of the large direct operations in town.

The conclusion that I drew was that ALTA did not really represent the majority in terms of numbers, it represented the majority in terms of dollars of dues paid.  Since I was never going to be in the latter category, I saw no representation from ALTA that made me want to be a member.

So, what other benefits did ALTA offer?  Well, there was the opportunity to acquire E&O insurance through ALTA’s risk retention group, TIAC.  But, once I priced insurance through a traditional insurer, I found that I was able to get a lower premium elsewhere.  This was surely not a reason to pay dues to ALTA when I wasn’t getting the representation I wanted.

ALTA also offers various educational and marketing materials.  I have purchased a few items in the past but I largely found them to be very expensive for a small agent.  And, it seemed that I was solicited to purchase them quite frequently. 

I hear that ALTA does put on a great conference, several of them actually.  Unfortunately, they too are very expensive. The 2009 ALTA Annual Convention is $850 for members ($1,400 for non-members) and when you look at the topics they have covered in the past, you really have to wonder if they even had the independent title professional in mind.

The 2007 ALTA Tech Forum listed abstractors, searchers and examiners among those who should attend.  But, take a look at some of the event sponsors:

GATORS® Unit of Fiserv Lending Solutions Introduces On-line Title Abstracting Tool:
"GatorSearch provides GATORS users the ability to execute self-service title searches, greatly reducing the turnaround times associated with traditional examiner/courthouse abstracting. Reports can be run from the office or home computer to provide searches that are fast, comprehensive, reliable and precise."

NEXTACE GIVES TITLE INDUSTRY FIRST AUTOMATED RESALE CAPABILITY THROUGH TITLE EDGE®
"NextAce is expanding its automated title software and services offering, Title EDGE®, to deliver full resale and long-form commitments. By automating the resale process, the consumer can benefit from a faster settlement, title insurers can deliver a faster and more consistent product while reducing their associated production costs, and lenders realize process improvement and faster application-to-close turn time.

NextAce has led the title technology charge to service both large and small title insurers with Title EDGE. Founded in 2003, NextAce has processed over 300,000 preliminary title reports and commitments, and is delivering on more than 80 percent of submitted orders. Title EDGE is the nation’s leading automated title examination and report generation product".

String Real Estate Information Services:
"Online title examination current owner to chain of title and all varieties of searches in-between using online county plants and private sources."

Also from String Real Estate Information Services, Outsourcing Decision Has Benefits, Challenges:
"Another benefit of off-shoring results in (sic) a 24/7 processing. Since most of the outsourcing does go to India, many processes can be completed overnight, allowing U.S. businesses come back the next day with a day’s work completed.

The more obvious benefits include lower labor cost. However, there is also the possibility of obtaining additional services."
 

Perhaps what they were really saying to the abstractors, searchers and examiners was "come and meet the folks that are going to put you out of business."  Hardly an event I want to pay to attend. (see Lose Your Job And Win a High Definition TV!).

But, as I said, I hadn’t completely given up hope on ALTA, largely due to one man – Mike Pryor, ALTA’s current President.  Mike seemed to understand the plight of the little guy.  He wanted to reach out to small agents and title abstractors.  When I first found out Mike was going to be taking the helm at ALTA, I wrote a blog about him.  (see I Like Mike).

Just when it seemed to me that the traditional title insurance industry was giving up on thorough searches, Mike wrote about the importance of the title search.  (see Mike’s Email).

Oh, I know, we can argue all day about how good is good enough, but unfortunately, we as an industry, have spent too much time arguing about how good a search should be before issuing a title policy when we SHOULD be discussing how good a search is necessary to satisfy our duty to our customers.

Finally, someone seemed to "get it," and he was going to be the President of ALTA!  I knew he would have an uphill battle in an industry dominated by the "short-search" and "off-shoring" mentality, but I had hope.  I was skeptically optimistic.

I wished Mike luck and I told him that if ALTA could show me that it was going to represent my interests, I would re-join in a heartbeat. 

Well… apparently, having a traditional title agent at the helm of ALTA just wasn’t enough.  Nothing changed… except ALTA’s new plan to charge a licensing fee for ALTA forms.  I find this despicable, deplorable, degrading, and, for lack of another word that begins with "d," offensive!

ALTA forms have become the standard in the title industry.  Title agents are required to issue ALTA policies and endorsements.  What choice will agents have but to pony up the money and pay ALTA’s ransom? None at all… This much, ALTA knows.

"ALTA’s uniform policy forms have become the ‘gold standard’ throughout the lending and legal communities. Because land title insurance coverage is standardized, the secondary market readily accepts mortgages that carry title insurance. This has greatly contributed to the growth of demand for title insurance across the country," said Mike Pryor, president of ALTA.

…

"Licensing of the policy forms will reduce the drain of critical resources to the association and protect the value of ALTA forms far into the future. "ALTA is doing more than ever to carry the banner for our industry. We want to keep up that level of advocacy on behalf of our members and for all in the title business. And, we want to do it in an environment where all beneficiaries share in the cost," Pryor continued.

The problem here is simple… ALTA does not advocate for "all in the title business."  And, as a result, many have chosen not to join and support an organization that does not represent them or, more bluntly, an organization that seems content to see them go out of business.

ALTA could have chosen to direct more energy to representing the independent agents.  It could have chosen to give them a reason to join voluntarily.  But, it did not.  It didn’t float this idea for public comment from the masses of independent agents who have stayed away from ALTA.  It didn’t ask what it could do to help the independent agents.  It simply said "support us, or get out of the business."

ALTA knows what troubles the independent agents face.  If it doesn’t, it has had its head buried in the sand deeper than I thought.  Does ALTA think that forcing unwilling agents to fork over money to an organization they do not want to support is going to place them in a better light with those agents?  No.  It just doesn’t care.

As a small agent, I am operating in an environment where I can’t compete.  The industry is experiencing a severe recession. AfBAs, many of them shams, have prevented me from accessing many referral sources for what work remains. Ohio now requires an expensive independent audit by a CPA every year.  Work we used to do is now being outsourced to foreign countries.  Remaining in business is a constant struggle and ALTA’s response is to tell me that I have to pay them a licensing fee to do what little work I can manage to find.  How does that help me?

This is just a shame.  Mike said that "this program will be a small step toward reestablishing a level playing field for all industry participants."  What Mike fails to realize is that it is precisely because ALTA has NOT advocated for a level playing field that I have chosen not to support it.  Let me state in no uncertain terms that I am not interested in helping the industry maintain a playing field if they aren’t going to fight for my right to play in the game.

Utterly disappointed,

Robert A. Franco
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