Bulletin: FL2012004

Date:
October 22, 2012
To:
All Florida Issuing Offices
RE:
Permissible Premium Rate and Charges in Florida

Dear Associates:

We want to take this opportunity to reiterate what is mandated by Florida Statues, the Florida Title Insurance Promulgation Order and case law when calculating premium charges and remittances to Stewart Title.

  1. As established by Section 627.780, Florida Statutes, the promulgated rate is the maximum legal rate that may be charged for title insurance policies and endorsements. There can be no premium charged, collected or received in excess of the promulgated rate. This provision should not be confused by the fact that the promulgated rate for simultaneous issued loan policies and certain endorsements is a minimum of a certain amount -$25.00 in the case of the loan policies. Thus, whatever you charge for a simultaneously issued loan policy or such an endorsement is the promulgated rate for that particular transaction and, thus, 30% of whatever is charged must be remitted to Stewart Title.  Please note that for policies issued at the regular rate, the percentage of premium that must be remitted to Stewart Title increases to 35% for coverage exceeding $1,000,000 and to 40% for coverage exceeding $5,000,000.
  2. When referring to the promulgated rate, we are not referring to just the "original" rate but to all of the rates included in the order - original rate; simultaneous issue rate; reissue rate; new home buyer discount; substitution loan rate; and contract purchaser-lessee rates. When more than one rate applies, as in the case of reissue and substitution rates for a refinanced mortgage, consistent with the requirement that there be no premium charge in excess of the promulgated rate, it is mandatory that you calculate what the premium would be under the various rates and charge the lowest allowable rate for which the policy qualifies.
  3. In order for new purchasers to qualify for the reissue rate, an owner's policy insuring the current owner issued within the past three years must be produced. For refinance transactions, an owner's policy insuring the current owner must still be produced but there is no limiting requirement as to the age of the prior policy. Sales of unimproved land and first sales from the developer also qualify for reissue rate.
  4. Substitution loan rates (please refer to Stewart Bulletin FL2007009) are based upon the existence of a prior loan policy insuring a mortgage on the same property made by the current owner. For prior mortgages in an amount less than $250,000, the substitution loan rate only applies if the lender giving the new loan is also the insured under the prior loan policy. Unlike reissue rates, for substitution rates, the prior loan policy does not actually have to be produced; there only needs to be evidence that a prior loan policy was issued. However, as in a case with reissue rates, the agent must advise their clients of the availability of the rate and assist them in qualifying for it.
  5. In accordance with the requirement that the lowest legal rate be charged, please be advised that as stated in our original bulletin dated May 17, 2007, (FL2007001) which has been republished annually since then, all agents are required to inform both the buyer and seller, as soon as practical after being retained as the title agent, and in any event no later than the agent's first contact with the consumer paying the title insurance premium, that providing a prior owner's policy will permit a discounted reissue rate if the transaction is eligible. This should be accomplished by including the Notice of Potential Eligibility for Lower Reissue Rate with the initial contact letter.
  6. Pursuant to the ruling in the Butler Case by the Florida Supreme Court in 2000 and the law later included in the Florida Statutes, an agent may rebate a portion of its share of the premium to the party paying the premium. The amount of the rebate, commonly referred to as a Butler rebate, should be shown on the closing statement. Any rebate given does not impact the premium required by the Florida Statutes and Promulgation Order to be remitted to the insurer. For example, if the promulgated rate is $1,000.00 and the agent rebated $250.00 to the insured, the agent is required to remit $300.00 (30% of $1,000.00) to the insurer.
  7. As has always been the case since the Real Estate and Settlement Procedures Act (RESPA) was enacted, agents may not share their portion of the premium with any party (other than the party paying for the policy) that does not perform services incident to the issuance of the policy. Persons and firms may only be compensated for work actually performed incident to the issuance of the title insurance policy and for which liability is assessed. Florida law mandates that the requirement applies to both residential and commercial transactions.
  8. As of October 1, 2007, agents may no longer charge separately for title examination. Charges for the title search and closing are unregulated except in instances where a title company uses a third part to provide the title search or closing.

We remain available to discuss these matters with you and to assist you in calculating both premium and remittances.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.