BILL ANALYSIS
C.S.H.B. 766
By: Counts
04-19-95
Committee Report (Substituted)
BACKGROUND
For the purpose of protecting consumers of Texas who purchase
real property and mortgage lenders who make loans to consumers on
real property, Texas has long had a legislatively enacted policy of
requiring that every contract or policy of Title Insurance issued
is to be based upon an examination of title evidence furnished from
an abstract plant owned or leased and controlled by a licensed
title insurance agent in the county where the real property is
located.
The Statutes recognize that title to real property is only
recorded in the records of the county where the property is located
and producing the title evidence can only be performed from the
records in the county where such record exists.
Now, however, the requirement for evidence only as the basis
of policy issue has been economically discovered as a method of
capturing of the premium through a direct issue of the policy by a
company remotely located from the property and recorded title.
Closing of the transaction, included in the premium, being an
investigation before final issue of the policy and made on behalf
of the issuing agency, has become an avenue for premium capture if
performed by or on behalf of the agency placing the order for title
insurance. The economics and safeguards provided in the Statutes
are being circumvented and it is necessary to amend the Statutes to
restore protection to the consumer, and provide a level playing
field for the distribution of proceeds for this service.
PURPOSE
As substituted, House 766 would provide for a level playing
field for payment of examination of the title evidence and a direct
issue of the policy by a company remotely located from the property
and recorded title. This bill provides for payment to agent's
based on population of county with 50,000 or less and counties with
population of 50,000 and above, and gives the commissioner
responsibility for determining percentage amounts.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not
expressly grant any additional rulemaking authority to a state
officer, department, agency or institution.
SECTION BY SECTION ANALYSIS
SECTION 1.
Amends Article 9.30, Insurance Code by amending Section B and
adding a new Section F to read as follows:
A. Prohibits payment, direct or indirect, by any person in the
business of title insurance for soliciting or referring title
insurance business.
B. Changes wording from may to shall and adds, however, be
construed as prohibiting:
(1) Amends this section to read that the article shall not,
rather than may not, prohibit foreign or domestic title
companies from doing business in Texas.
(2) Makes the change from having the Board establish the
amounts of payments for services to close transactions and
furnish title evidence or examination to state that the
payments for services to close transactions and furnish examined
title evidence shall be based on a percentage of the
premium.
(a) Provides details for division of agent's retained
premium, and (ii) closing as a 70% and 30% split in
counties with 50,000 population or less.
(b) In counties with a population of more than 50,000
payment for closing the transaction or furnishing examined
title evidence shall not exceed percentage of premiums or
amount established by the commissioner.
(3) Adds new language to say or other reasonable payment for
goods or facilities actually furnished and received.
(4) No substantive changes.
(5) Is deleted, which gave title companies an exemption from
the division of these premiums between themselves and their
subsidiary companies.
C. Provides that persons receiving compensation under Section B
(2) must be licensed.
D. Adds new language that states no unauthorized person may
accept payment for solicitation or referral of title insurance
business.
E. No person shall receiver payment for service that have not
been performed.
F. This section is new and addresses the division of premiums
between a title insurance company and its subsidiary title
insurance agent on a direct issue. Also defines composition of
subsidiary title insurance agent.
SECTION 2. Effective date of this Act September 1, 1995
SECTION 3. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
As substituted, House Bill 766, would amend Article 9.30,
Section B(1) of the Insurance
Code requiring the article shall not, rather than may not prohibit
a foreign or domestic title company from doing business in the
state of Texas, and provides conforming language to §(1).
Additionally, the substitute amends Section B (2) requiring the
Board to establish the amounts of payments for services to close
transactions and furnish title evidence or examination to state
that the payments for services to close transactions and furnish
examined title evidence shall be based on a percentage of the
premium.
Further, the substitute adds §(a) which states in counties
having a population of 50,000 or less, the payment for examined
title evidence shall be 70% of the agent's retained premium, and
the closing transaction shall be 30% of the agent's retained
premium. The substitute also adds §(b) which states in counties
with a population of more than 50,000 payment for closing the
transaction or furnishing examined title evidence shall not exceed
percentage of premiums or amounts established by the commissioner.
The substitute omits §(5) which gave title companies an
exemption from the division of these premiums between themselves
and their subsidiary companies and adds Subsection D which states
that no unauthorized person may accept payment for solicitation or
referral of title insurance business and E. which states that no
person may accept payment for services that were not actually
performed.
SUMMARY OF COMMITTEE ACTION
In accordance with House rules, H.B. 766 was heard in a public
hearing on April 19, 1995. The Chair laid out H.B. 766 and a
substitute to H.B. 766 and recognized Representative Counts to
explain the difference between the substitute to H.B. 766 and the
filed bill. The Chair recognized Representative G. Lewis who moved
the Committee adopt the substitute to H.B. 766. The Chair heard no
objections and the substitute to H.B. 766 was adopted.
The Chair recognized G. Lewis who moved the Committee report
H.B. 766 as substituted to the full House with the recommendation
that it do pass and be printed. Representative Averitt seconded
the motion and the motion prevailed by the following vote: AYES
(7); NAYES (0); ABSENT (2); PNV (0).