Consumer Financial Protection Bureau (CFPB) On January 26, 2022, the CFPB launched an eight (8) page initiative to crack down against Junk Fees charged in real estate. The CFPB is a unit within the Federal Reserve charged with ensuring markets for consumer financial products and services are fair, transparent, and competitive. [1] Spotting Junk Fees. Companies are increasingly charging inflated, back-ended fees, to households and families. In order to make another quick buck, additional fees are piled one-on-top-of-the-other to unsuspecting consumers. The hidden fee lays dormant, springing up when the consumer is so far along in the transaction that it becomes commercially impracticable for them to do anything about it other than pay. Consumers are forced to pay to play or risk being in default or otherwise suffer damages. Baiting consumers into a seemingly low price only to play the shell game by revealing and switching the original cost for one much higher, prompted us years ago to combat an industrywide practice by federally trademarking our own “No Junk Fee Guarantee!®” It’s the bottom line that matters. It kills me when a realtor tells me how insultingly cheaper someone else is, to the point of impossibility for that title company to survive. Our response is simple, “Ask your title company to give you what’s called a closing disclosure (CD), a HUD, or Settlement Statement, and we will show you all of their padded and unauthorized fees.” Realtors are shocked when they see that title companies are either up charging for reimbursable expenses, or charging multiple line items on top of their quoted base price. Alone the fees look small, but cumulatively those fees add up big time! It’s like going to a fancy dinner and thinking well I ordered a $15.00 cocktail, and a salad, and an appetizer, and an entrée, and desert but when you get to the end of the bill those line items add up to over $100 per person at the dinner table. It’s the bottom line that matters. Most of the time we’ve found that title companies who hide their fees actually windup charging more in the end than what we charge. This article is a call to action and for more transparency in the title insurance industry, which in turn will create a more fair marketplace by enabling consumers to accurately compare apples-to-apples.
Examples of Junk Fees in Real Estate Closings. Our title company charges a flat upfront and fully disclosed “Settlement Fee” (also known as fees for “Closing Services” defined more fully below) regardless of the price of the property. In large part, the “Settlement Fee” is where title companies play gamesmanship and fudge numbers. When I see an unusually low “Settlement Fee” it almost a virtual certainty that there are going to be additional hidden fees. The Settlement Fee may appear artificially low, and this is what many title companies advertise, but their published Settlement Fee shadows all of the other unmentioned line item and ticky-tacky fees they add at closing. As outlined below, virtually all services provided by title companies really should be included in their “Settlement Fee,” without a bunch of additionally added line items for more fees. Many title companies advertise low attractive rates, but often pad their pockets, and sweeten their coffers, by adding hidden undisclosed extra fees at the closing table like:
(1) Wire Fees. I regularly see $75.00 wire fees being charged. According to the Commission, with very limited exception, this fee should be included in the settlement fee and not be charged as an extra; [2]
(2) Postage, Mailing, and Handling Fees. [3] I regularly see $100.00 fees being charged for DHL or FedEx. According to the Commission, with very limited exception, this fee should be included in the settlement fee and not be charged as an extra;
(3) Storage Fees. [4] Title companies are already obligated to store their records. [5]
(4) Warehousing Fee; [6]
(5) Document Retention Fee; [7]
(6) Electronic Storage Fee; [8]
(7) Archive Fee; [9]
(8) Scanning Fee; [10]
(9) Printing or Copy Fee; [11]
(10) Thumb Drive of Cd Fees; [12]
(11) Notary Fees. [13],[14]
(12) Origination or Loan Service Fee – we are a title company not a lender;
(13) Title Exam Fee or Title Review Fee in addition to a Settlement Fee;
(14) Recording Service Fee; [15]
(15) Escrow Service Fee; [16]
(16) Outside Notary Fees (this does not include Remote Online Notary Services Fla. Stat. §117.275); [17]
(17) Convenience Fees;
(18) Telecommunication Fees (i.e. faxes, long distance); [18]
(19) Up charges to title commitments, condo or HOA estoppels, and municipal lien searches; [19]
(20) Title Update or Recertification Fee – This is a normal part of the process, the public records should be reviewed again after the parties sign at the closing and prior to issuing the title policy, this is called “insuring the gap”; [20]
(21) Obtaining Mortgage Satisfactions; [21]
(22) Waiver of excess/overages being held in escrow if $25.00 or less. [22]
(23) When you buy a title insurance policy and pay the “Title Insurance Premium,” that price already includes “Primary Title Services” (Explained in more detail below). That means title agencies are not allowed to charge extra for “Primary Title Services” such as:
The Florida Bar has published numerous ethics opinions relating to proscribed attorney fees in real estate transactions. Mainly the focus has been on attorney conduct when performing title services for buyers, sellers, lenders, whether non-clients are paying for the title insurance services, disclosure, and informed consent. Scenarios that arise where attorneys’ fees have been challenged as improper in a real estate closings are as follows:
Fla. Bar. Ethics Opinion 63-21 Bank Forces “Borrower” to Pay Bank’s Legal Fees. A bank, which furnishes a mortgage in connection with a matter … MAY require the borrower to bear the resulting legal fee as a condition of the loan. It is not improper for the bank’s attorney to insist upon a fee for the service rendered the bank even though the work of the attorneys involved in the matter may be duplicated on behalf of their respective client.
Fla. Bar. Ethics Opinion 87-8 Bank Forces “Borrower” To Pay Legal Fees, Limited to Bank’s Actual Cost. A bank MAY require borrowers to reimburse the bank for the actual cost to the bank of salaried in-house counsel’s services in connection with closings of loan transactions and may pay in-house counsel a bonus based on such charges to borrowers.
Fla. Bar. Ethics Opinion 64-56 Mortgage Company Forces “Seller” to Pay “Borrower’s” Legal Fees. Mortgage company’s attorney CANNOT charge Seller an attorney’s fee in the absence of any agreement between the attorney and Seller. HOWEVER … the attorney MAY collect a reasonable fee for his services provided Seller has agreed with Buyer to pay all closing costs and providing the fee is part of the closing cost.
Fla. Bar. Ethics Opinion 69-39 Mortgage Company Forces “Seller” to Pay “Borrower’s” Legal Fees. Mortgage company MAY requiring those borrowing or receiving funds from it to bear or contribute to the payment of the fee of the attorney employed by it or to other expenses; HOWEVER, if such expenses are to be charged to a party other than the borrower (e.g. if the charges in connection with obtaining the loan are going to be charged to the Seller), such parties should be at liberty to decline to bear such expense and to insist upon some other agreement with the buyer.
Fla. Bar. Ethics Opinion 75-6 Shifting Fees To Other Side, Generally. No impropriety in arrangements that shift to a purchaser or borrower part or all of a seller’s or lender’s attorney’s fees and other costs.
Fla. Bar. Ethics Opinion 76-36 Attorney Gets Discounted Insurance Rate. Where an attorney orders title insurance from a commercial company at a discounted rate from that charged the general public, the attorney CANNOT charge his client at the rate charged the general public without disclosing the attorney’s actual cost to the client.
Fla. Bar. Ethics Opinion 65-34 Seller’s Attorney who Prepares All Docs Charging The Buyer Attorney Fees. A seller’s attorney who prepares all of the documents used in a real estate transaction CANNOT present a statement to the buyer for a portion of the attorney’s fee for these services when the buyer did not employ the attorney or agree to pay him a fee.
Fla. Bar. Ethics Opinion 76-36 Distinction between Attorney Fees for Services and charging for Title Insurance – SCENARIO #1. An attorney, on the real estate closing statement, CANNOT list the cost for title insurance at the rate charged the general public without disclosing the attorney’s actual cost.
Fla. Bar. Ethics Opinion 70-49 Distinction between Attorney Fees for Services and charging for Title Insurance – SCENARIO #2. It was the duty of the Florida attorney to obtain the title insurance at the lowest applicable premium and where a rebate is received, the saving should be passed on to the client.
Fla. Bar. Ethics Opinion 61-60 Distinction between Attorney Fees for Services and charging for Title Insurance – SCENARIO #3. Where the lawyer simply charged a blanket fee and then provided the title insurance policy at his own cost out of his fee, no duty rested on him to inform his client of his interest in the Fund. A distinction appears where the title insurance is sold and a portion of the fee retained —in which case it is incumbent on the lawyer to make a disclosure to his client — and where the title insurance is furnished as an additional protection to the client without any additional charge therefore.
Fla. Bar. Ethics Opinion 75-6 Condo Developer’s Attorney Charging FULL Title Insurance Premium, When Disclosure Must be Made. A purchaser pays the same amount for the title insurance regardless of where the premium goes. Attorney for a condominium developer MAY properly retain as part or all of his fee for representing the developer the part of the title insurance premium the lawyer retains as agent provided that disclosure of that fact is made to the purchaser. We believe that the disclosure should be made at a time and in a manner that gives the purchaser a choice and not at the closing after the purchase agreement has been signed, presumably a deposit made and title insurance already obtained.
