Financial Title: 'Smooth Closings' Irony
According to a plugged-in tipster, Financial Title received a cease and desist order courtesy of the Insurance Commissioner a few hours ago. And while escrows were to be transferred to other title companies for closing, apparently some files have been confiscated which is making it difficult for some parties (like our tipster’s client) to locate their funds.
UPDATE: Following in the footsteps of sister company Alliance Title, Financial Title which was the largest real-estate title agent in Silicon Valley and has four offices in San Francisco has officially closed its doors.

Sources who have spoken to Financial Title employees said the title company began closing its doors in Santa Clara County Tuesday night. Those sources said all employees have lost their jobs, and Financial’s underwriter, First American Title Co., has been collecting open escrow files at the closed offices.

No update on the Insurance Commissioner angle, the “confiscation” (versus collecting) of files, or the irony of misplaced escrowed funds. Tipsters?
Tag Line Irony From Alliance Title: “Closing The California Dream” [SocketSite]
Financial Title company shuts down [Business Times]

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Comments from “Plugged-In” Readers

  1. Posted by tipster

    Gosh guys, we took your money and spent it and now we can’t provide the insurance you paid for. I guess you ended up on the hook for the risk we assumed after all!
    Um, all we can say is thanks, and God Bless America!
    See you in a few weeks when we open up under a new insurance company! You’re going to need the new us, since the old we isn’t going to provide what the old we promised when you gave us all that money!

  2. Posted by quiet nbroke

    Heads up to everyone who works with Financial. When Alliance closed the paychecks the employees received did not include vac or severance, and were only good for about 24hrs. CASH YOUR CHECK – DO NOT DEPOSIT IT. Pay the fee to cash it if you have to, but most deposited checks will not be honored.

  3. Posted by Trip

    Tipster, I’m not questioning your characterization of the management of this outfit. But those who have title insurance through Financial Title should not worry. Insurance is tightly regulated and even where there is a failure policyholders rarely incur a loss of any significance (rarely any at all). There is FDIC-like “insurance” in place through guarantee associations and also reinsurance, and policyholders go to the front of the line when winding up an insolvent insurer’s operations (and I don’t see anything even indicating that Financial Title is insolvent or will be thrown into a conservatorship).

  4. Posted by Question???

    Does anyone know anyone who actually has made a claim against their title insurance policy? The entire “title insurance” thing seems like a scam to me anyway. The fact that it is required by law is ridiculous.
    If you read the actual policy, they aren’t covering most things anyway.

  5. Posted by danalotus

    Um. I just closed on a house with Financial title a little over a month ago. Last week I got a letter in the mail about a lien on the house incurred by the previous owner. I figured that $4+k I ponied up in titled insurance was going to be exercised for something. Am I screwed?

  6. Posted by r

    “Does anyone know anyone who actually has made a claim against their title insurance policy? ”
    I know of a commercial property owner who filed claim for an undiclosed pipeline easment. The easment issue was unable to be resolved, and 1/3 of the property was rendered useless. Title company paid up.

  7. Posted by af

    I would think someone like Paul up there in the business would have a little more sense than to make a comment like that…
    Your money is safe and your title insurance will stand. I don’t think you have much to worry about.
    [Editor’s Note: Comment “bylines” are below, not above, each comment (i.e., you’re referencing tipster’s comment).]

  8. Posted by AngryHomeBuyer

    We were supposed to close escrow today with Financial Title! Now we are left in the dark with no knowledge of when we can close escrow or what will happen, where our money is, or when our docs will even be looked at by First American Title. Meanwhile, we have to be out of our place we are renting soon and now have no idea when we will even close escrow or what is happening!

  9. Posted by Trip

    Yeah, as far as I can tell from 30 seconds of poking around Department of Insurance regulatory filings, Financial Title is not even a title insurer but probably just an underwriter for another insurer. This may gum up closings for a short period but won’t affect insurance issues at all.

  10. Posted by Michael L.

    I was cleaning up my office and just tossed about $800 bucks worth of Financial Title promo material. Incrediable on how much branding garbage some these foilks issue to prospects.

  11. Posted by tipster

    Thanks Trip and others, I stand corrected.
    Amazing: they held no risk, the risk was held by someone else who is solvent, yet they got shut down by the insurance commissioner?
    I suppose there are a lot of reasons other than the fact that they couldn’t uphold their insurance obligations that the insurance commissioner might care about enough to shut them down.

  12. Posted by Trip

    The Insurance Commissioner also regulates underwriters and agents. I don’t know exactly why they took action against Financial Title. There may have been some substantive concerns of some sort, or when the corporate decision to close down was made the regulators may have just jumped in to make sure all the funds on pending transactions are handled appropriately. Our Department of Insurance is actually pretty on the ball.

  13. Posted by as

    Up to half of what you pay for a title insurance policy is used to create the “promo material” gifted to REagents as mentioned above, and other incentives provided to RE agents/brokers (used homes), developers (new homes), and lenders (refi, which requires new policy). This is b/c these folks steer the business to the underwriters. (who keep 80% of the premium while 20% goes to the actual insurer). Basically, half of your title premium is for kickbacks (“incentives”). There have been many creative ways of getting around RESPA and the financial incentive to break the law is much greater than the punishment when caught.

  14. Posted by as

    . . . as stated in this report found on the Insurance Dept. website re. competition in CA title insurance industry
    http://www.insurance.ca.gov/0400-news/0200-studies-reports/garamendi-report-12-15-05.cfm

  15. Posted by Miles

    Title claims are fairly rare, but can be a big deal when they happen. In the instance where the title company issued a free and clear title and then a lien appeared later, I believe they are liable for that lien as their search when issuing title insurance with the purchase did not show it.

  16. I’ve used them a few times, they seemed above the board. Most ‘title’ companies are just sales intermediaries for one of the big boys (First American, Fidelity, etc.) so I doubt if Financial Title was the one actually paying the claims.

  17. Posted by "RP McMurphy"

    yeah, the insurers issue the policy but the policies are sold by the underwritten title companies (“UTC’s”) — called “agents” in other states. The UTC’s keep about 90% of the premium & the insurer 10% — which evidences very little risk of loss. But the UTC’s themselves pay out on the smaller claims.

  18. Posted by Animo

    danalotus — you probably know this, but just in case, you have to give the title insurer notice of your claim. Since Financial is kaput (it also looks like their website & tel. #s are down)look for the title policy in your closing docs package & send a copy of the notice of lien by overnight delivery to the title insurance company (probably First American). If First American is indeed the insurer, you can call them directly. I would also check with the Ins. Commissioner to be on the safe side (I would also call my attorney, but that’s just me…).
    As for title companies or escrow agents (not insurers) they have a tremendous amount of financial responsibility in connection with a closing, principally in clearing title issues, mortgage payoffs, and transmitting loan docs in a timely manner. Failure to do the last can result in an unsaleable mortgage — do it often enough and the agent may find itself barred from closing the lender’s loans. Note — earlier this year Financial Title was briefly on a national lender’s do-not-close-with-list, although I don’t know the reason why.

  19. Posted by Jen

    Just a comment, Financial is (was) underwritten by First American Title. Any claim against your title policy you’d make with them, which is why First American was called in to take over the files.
    Also, claims happen all the time.

  20. Posted by Jen

    Just a comment, Financial is (was) underwritten by First American Title. Any claim against your title policy you’d make with them, which is why First American was called in to take over the files.
    Also, claims happen all the time.

  21. Posted by Jen

    Just a comment, Financial is (was) underwritten by First American Title. Any claim against your title policy you’d make with them, which is why First American was called in to take over the files.
    Also, claims happen all the time.

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