The title industry is considering taking Radian Group to court over a new product the mortgage insurer is offering through one of its subsidiaries, several industry sources said.
Though no lawsuit has been filed, the American Land Title Association has been authorized by its board of directors to explore legal action and other measures to address industry concerns, according to ALTA officials.
At issue is an alternative to title insurance that Radian is offering through ExpressClose.com, a mortgage service provider it acquired last year, at a much lower price than the traditional product.
While the coverage is basically the same, according to Roy Kasmar, Radians president and chief operating officer, the ExpressClose product, Radian Lien Protection, costs about half the $650 of traditional title insurance. Currently, Radian is offering it only for refinance, second mortgages, and home equity loans.
Radian, of Philadelphia, began offering Radian Lien Protection about two months ago. It has promoted the product as a faster and more affordable alternative to title insurance, saying it is particularly useful for refinancing transactions.
Radian looked at the prices title insurance companies were charging consumers, Mr. Kasmar said, and executives decided there might be a more efficient, cheaper way to do it. The product relies on three credit reports, a mortgage lien report, and an affidavit from the borrower that there are no intermittent liens on the property.
Mr. Kasmar stressed that the lien protection is not title insurance but a mortgage pool insurance policy, which he calls an elegant alternative to title insurance. Weve simply taken a different approach to this, he said. We think weve improved the product.
The title insurance industry thinks otherwise. It is worried that it will lose business, and it says the Radian product carries more risk with its lower price.
Ann vom Eigen, legislative regulatory counsel for the Washington-based American Land Title Association, said title insurance is based on a title search, while Radians product is based on borrowers credit quality. Were concerned that people are buying something that isnt what they think it is, she said. Theres risk associated with that normally people get title insurance to make sure the title is clear. Radians product wouldnt address that.
Ms. Eigen noted that Florida, Illinois, and Pennsylvania have issued cease-and-desist orders against an ExpressClose.com product called Lender Master Protection, also a title insurance alternative, stating that the companies are not licensed to author or sell title insurance.
That product, however, was the first incarnation of Radians title insurance alternative, a spokeswoman said. The company has addressed concerns, she said, and has received approval for Radian Lien Protection from several states, including California, which Frank P. Filipps, Radians CEO, said has the toughest criteria for such approval.
Mr. Kasmas said Radian expected the title industrys response, but called it unfortunate. Radian Lien Protection is a better product for the consumer and the lender, he said.
We think were on very strong ground relative to this being fully legal from a regulatory perspective and for that matter any other perspective, he said. Weve done our homework and we are quite confident that it meets all the tests. Radian is working with a number of lenders, among them GreenPoint Mortgage, ABN Amro Mortgage Group, and First Horizon, officials said.
Mr. Kasmar pointed out that Radian is not offering the product for purchase mortgages, nor can it meet the demand of the entire refinance, second mortgage, and home equity market.
At the same time, because title insurers have had a lock on the business and not been challenged, Mr. Kasmar said, they have had no reason to dramatically change the title insurance product. Now, he said, the title industry is facing that challenge.
Theyve been receiving a substantial amount of the revenues from, and we have figured out a way to deliver a much more efficient, more effective product for the consumer and the lender, he said. We are clearly happy to do this and confident that we are going to continue to do this and expand into the future.
