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FLORIDA HOMEBUYER'S CHOICE ACT

Presented to the Florida Title Insurance Study Council November 30, 2009

Florida Homebuyer’s Choice Act – an emergency Act to combat unethical, anti-competitive practices occurring in the State of Florida as they relate to the sale and purchase of foreclosed homes from Lenders. 

Florida homebuyers are suffering serious consequences when they purchase a foreclosed home in today’s real estate market. They currently have no ability, nor do they possess the legal right to select their own title insurance company to handle the closing or to insure their homeownership – this important decision is either being made by a Lender, whose sole interest in the closing is, or should be, the receipt of a proceeds check; or by unregulated Asset Management Companies operating under lucrative contracts with the Lenders. 

These Lender/Asset Management Company contracts have become quite prevalent in the Florida real estate market over the last two years and have resulted in creating a suspicious motivation for Lenders and Asset Management Companies to control, or steer closings and title insurance business to a small select group of non-local title insurance companies who are operating under their own unique contracts with Lenders and Asset Management Companies. 

Lenders and Asset Management Companies are able to control, or steer homebuyers, by simply refusing to accept the homebuyer’s offer to purchase the foreclosed home unless the homebuyer agrees to use the title company of the seller’s choosing. Some are not as blatant and will dangle a proverbial carrot by agreeing to pay for the homebuyer’s owner’s title insurance policy; however when the final HUD-1 closing statement is presented at closing, the homebuyers will end up paying far more in the way of title related fees and other premiums than if the homebuyer had paid for the owner’s title insurance policy themselves in the first place. 

Florida homebuyers purchasing a foreclosed home are ultimately being insured by title insurance companies not of their own choosing, are receiving inadequate closing services from non-local title companies who are unfamiliar with the local real estate customs and are being charged exorbitant title and closing related fees which far exceed what’s customarily charged by local (non-lender directed) title insurance companies. 

Florida homebuyers require and deserve protection from the current abuses taking place in the real estate market today – they need the same type of urgency protection recently enacted in California under AB 957 – the “Buyer’s Choice Act” – their emergency Act mirrored that of current federal law, the Real Estate Settlement Procedures Act (RESPA) which prohibits a seller of a residential property from requiring or influencing a homebuyer to purchase title insurance or closing services from a company chosen by the seller. California’s bill essentially expanded these same federal laws into California state law to govern the sale of foreclosed homes. 

An Act similar in nature is proposed for the protection of the citizens of the State of Florida; a byproduct of the Act would also enable thousands of small businesses (title agencies) located throughout every community in the state the ability to compete to provide title insurance products and closing services at more competitive prices and deliver homebuyers the level of closing services that only local title insurance companies can provide. The Act would include a time limit of approximately 5-years as a lifespan and would include a vehicle to provide Florida homebuyers the right to accept a Lender’s chosen title company or escrow agent, provided proper written disclosure is first provided to the prospective homebuyer.

Author: R.F. "Bob" Booth, Jr.