Regulatory Momentum Builds Against Radian Product
June 24, 2002
WASHINGTON, DC -- With the cease and desist order issued last Thursday by the California Department of Insurance against Radian Guaranty's continued issuance of its Radian Lien Protection product, California joins five other states that have rejected the so-called alternative title insurance product. Those other states include Texas, Florida, Connecticut, North Carolina, and New Mexico. The following are some quotes from recent state departments of insurance on the RLP product:
From a California Department of Insurance press release, June 20, 2002 -- "Although Radian Guaranty refers to this program as an alternative to title insurance, the CDI has concluded that (the RLP is), in fact, title insurance() as defined in California Insurance Code. ... Radian ... must hold a Certificate of Authority from the CDI before being permitted to transact title insurance in California."
From a letter to Radian from the Connecticut Insurance Department, June 7, 2002 -- "Since a mortgage guaranty company may not do any line of business other than mortgage guaranty, Radian Guaranty may not offer the title insurance business provided in the Radian Lien Protection policy. ... (The relative costs of the RLP and title insurance products) do not support Radian's claims of dramatic savings for consumers. It appears the premium cost for Connecticut consumers would increase under Radian's program, not decrease."
James R. Maher, Executive Vice President of ALTA, commented, "We are pleased that state insurance departments are beginning to recognize that, not only does the Radian RLP product violate state law regulating both title and mortgage insurance, but that it's a bad deal for consumers and lenders as well." Mr. Maher noted, "The Connecticut Insurance Department has it right: not only in Connecticut, but in the majority of states and transactions, Radian's RLP product is actually more expensive for consumers than comparable refinance or other discount rates for title insurance in the same transaction."
Mr. Maher noted that the Radian product was also clearly inferior to title insurance on coverage. "The product provides only 50 basis points -- 1/2% -- of the value of a pool of mortgages in indemnity coverage. That's only $50,000 of total available coverage on a mortgage pool of $10 million in value. Although each borrower pays a premium to Radian for the RLP coverage, previous claim payments on other loans in the pool could reduce or even eliminate the ability to have their claim paid. In contrast, title insurance provides coverage for the full value of each loan, for comparable or less cost." Maher also noted that, "Radian's RLP only insures against loss due to the traditional title insurance risk of undisclosed liens. Title insurance, on the other hand, covers that and includes the even more important risks of vesting (insuring that the borrower owns the property securing the debt), validity and enforceability of the mortgage, and providing for the cost of a legal defense should the insured lender be faced with any of these insured risks."
Maher said, "I applaud all these state insurance departments for doing both the legal analysis needed to underpin their rulings but also the review of the consumer and lender impact from this illegal product. Clearly, they've concluded, as we have, that Radian's RLP is not in the best interests of their consumers."
The American Land Title Association represents title insurance companies and their agencies nationwide on a variety of industry and legislative issues. Members of the Association search and insure land titles to protect real estate investors including home buyers and mortgage lenders.
SOURCE: American Land Title Association
Contact ALTA at 202-296-3671 or [email protected].