Posted by Kary L. Krismer at 5/16/08 7:17 p.m.

Another alternative would be that when a litigant wants to get publicity, to simply not run the story. There have been all sorts of stories over the years where one side speaks out and the other can't, and it turns public opinion.

That said I too am awaiting an escrow response. The allegations by the plaintiffs' attorney did not seem all that compelling. For example--pricing things over what they cost. That's very common in most industries, and hardly a grounds for a cause of action.

Posted by spkyrmind at 5/16/08 10:47 p.m.

I agree, the allegations by the plaintiffs's attorneys do not seem all that compelling, and we all know that the only substantial winners in most class action suits are the lawyers who file a lawsuit simultaneously with a press release. Wasn't Hagens Berman a player in that ridiculous McDonald's French Fry lawsuit? I don't recall getting any check in the mail on that one but it would be a good time to recount the amount of money Hagens Berman pocketed versus what was passed along to consumers. As to this lawsuit, I don't really care if I was overcharged as much as a hundred bucks for some miscellaneous reconveyance fee. This class action isn't going to get me my hundred bucks back, but it will line the pockets of attorneys on both sides and tie up valuable court time. At least title policies and HUD-statements are printed in a larger font than those angel-on-a-pinhead missives sent from credit grantors who engage in usurious, deceptive and fraudulent practices that harm consumers far more than a once or twice in a lifetime overcharge on a deed reconveyance. It's hard to get consumers who are paying 31% interest on their credit cards to get all hot under the collar about some obscure charge that to me, frankly, seems justified given the Title companies exposure to liability. Hopefully we WILL hear from the other side on this case. Perhaps the title companies that have been sued haven't responded yet because they are trying to get a hold of Hagens Berman's PR agency to help them draft a press release to feed to the local media.... is investigative reporting a thing of the past? I'm not sure any of us are served by "journalists" who just regurgitate press releases and call it a day.

Posted by karen2 at 5/17/08 1:43 p.m.

I disagree with the other two posters, and here's why:

When you apply for a mortgage, you can't negotiate everything up front, and comparison-shop. You are given a bogus "estimate" of what the fees and such will be, but the final charges always seem to be much larger, and for no good reason. By the time you find out you've been fleeced, it's too late to back out - especially if you're trying to buy a house (as opposed to a refi).

That's starting to change now, with some lenders willing to give firm price quotes rather than "good faith estimates" - so everyone, PLEASE PATRONIZE THESE FIRMS!!!

spkyrmind, the escrow firms ARE usually title insurance companies, but the company that does the escrow is picked by the lender and is not necessarily the company that is insuring the title.

The last time I bought a house was 10 years ago, so maybe things have changed, but it used to be that the buyer chose the title insurance company (not the one that does the closing but the one that actually insures the title) based on the recommendation of the seller (title companies used to give a good discount if the buyer used the same company as the seller did back when they originally bought the property).

Posted by karen2 at 5/17/08 1:52 p.m.

An interesting question is why don't other industries do things the way the real estate lending industry does?

Why doesn't the local Toyota dealer (or seller of anything that is very popular) give you an estimate, expect you to sign that you will buy from them and not another dealer, THEN tell you what they will actually charge you and expect you to cough it up?

Is there a law, or are mortgage brokers the only ones not afraid of being lynched if they try this?

Posted by unregistered user at 5/17/08 2:05 p.m.

I too feel that the attys handling this lawsuit do not know the whole process of how escrow closes a file and the reconveyances fees that are being charged. Yes, they will be making the money. Yes there are times the lenders being paid off charge a fee that is included in their payoff. But do you know have any idea how many DO NOT follow thru and do it. So then escrow is left holding the bag when the reconveyance is not done and there is no money left to do it. I have worked for both for an escrow company and also have worked at a third party provider company, I believe that this will definitely change the way the process works, but the attorneys had better get their facts straight.

Posted by nonstopjoe at 5/17/08 6:27 p.m.

So-called "good faith estimates" are nothing more than licenses to overcharge. Buyers should insist on a "fixed" price which will not be exceeded at settlement. Keep in mind there's lots of lenders and escrow agents looking for business.

Posted by Kary L. Krismer at 5/17/08 9:14 p.m.

karen2 wrote: "That's starting to change now, with some lenders willing to give firm price quotes rather than "good faith estimates" - so everyone, PLEASE PATRONIZE THESE FIRMS!!!

spkyrmind, the escrow firms ARE usually title insurance companies, but the company that does the escrow is picked by the lender and is not necessarily the company that is insuring the title."

This is about escrows not lenders. And the escrow company is typically picked by the buyer (although the seller often suggests the escrow or even insists on the escrow).

I think the highest reconveyance fee I saw was at a non-title company escrow.

Posted by Kary L. Krismer at 5/17/08 9:16 p.m.

nonstopjoe: "So-called "good faith estimates" are nothing more than licenses to overcharge. Buyers should insist on a "fixed" price which will not be exceeded at settlement. Keep in mind there's lots of lenders and escrow agents looking for business."

Again you're confusing lenders with escrow. You're also confusing buyers with sellers. It's the seller that pays the reconveyance fee, because they have to deliver clear title. That has nothing to do with a good faith estimate.

But I'm sure if you call around, every escrow company will give you their charges.

Posted by Kary L. Krismer at 5/17/08 9:26 p.m.

Unregistered user wrote: "I too feel that the attys handling this lawsuit do not know the whole process of how escrow closes a file and the reconveyances fees that are being charged. Yes, they will be making the money. Yes there are times the lenders being paid off charge a fee that is included in their payoff. But do you know have any idea how many DO NOT follow thru and do it. So then escrow is left holding the bag when the reconveyance is not done and there is no money left to do it."

I would agree, but explain it differently. When the loan is paid off, the lender should send in a request to the deed of trust trustee to reconvey. The deed of trust trustee then has to act. The escrow has to track this, and if it doesn't happen, they have to follow up.

To say that an escrow company is charging too much for their service isn't even a cause of action. They can charge what they want to charge for their service, just like everyone else (including attorneys) can charge what they want to charge. That someone fails to ask before utilizing their services isn't typically actionable, unless perhaps the charge is outside the norm for the service provided.

For example, you can't go to the barber, get your hair cut, and then complain that they charged you $50.00. Well, you can complain, but you can't sue them over that. Sure you could get a haircut for $20.00 somewhere else, and if that's what you want, you have to ask.

Posted by Marc Holmes at 5/19/08 9:30 a.m.

I have long felt that reconveyance practices in this state were a total abuse by escrow companies and used as a means of squeezing slightly higher margins on each transaction. I recently spoke to a woman employed by a company that provides this service on a contract basis to many escrow companies and she freely admitted that most of the time they don't do anything to obtain the reconveyance. That's right, nothing! She told me the lenders, in most cases, simply do what they're supposed to do and thus it wasn't worth my money to hire them in light of the very few loan pay off transactions I handle.

And it's Washington law (RCW 61.16.020 and .030) that obligates lenders, if requested, to reconvey there interest in property used as collateral for a loan within 60 days of the debt being satisfied. I believe it is common practice for a reconveyance request to be included in every payoff submittal when a seller sells his or her home and, IMHO, if such a request is not included, it most likely constitutes malpractice by the escrow agent.

Therefore, charging $75 to $150 per loan for reconveyance "services" are totally "illusory" – the escrow companies represent it as a valid fee for valid work but much more often than not, they don't actually do any meaningful work to justify the fee. Plus, this is something they should be ethically and legally obligated to do. Sadly, the dollar amounts are too low to justify any individual fighting over it thus, the escrow companies can continue to charge the fee with impunity. This is the very essence of a deceptive practice.

It's industry practices like these that exemplify why class action litigation is so important – it allows many injured plaintiffs to band together to force change in a way that none of them individually could ever do. It's absolutely true that individuals in the class will not see a huge individual awards if they prevail in court, but the rest of society will see a big net gain when this fee is no longer charged or is greatly reduced to accurately reflect the work involved.

Posted by Kary L. Krismer at 5/19/08 9:46 a.m.

Marc Holmes wrote: "Therefore, charging $75 to $150 per loan for reconveyance "services" are totally "illusory" – the escrow companies represent it as a valid fee for valid work but much more often than not, they don't actually do any meaningful work to justify the fee. Plus, this is something they should be ethically and legally obligated to do. Sadly, the dollar amounts are too low to justify any individual fighting over it thus, the escrow companies can continue to charge the fee with impunity. This is the very essence of a deceptive practice."

Well of course it's something they should do. But why should it be included in the base fee? That makes zero sense. Some transactions have zero reconveyances, some one, some two, etc. I was involved with one transaction that had five deeds of trust.

And it's incorrect to say that they have nothing to do (besides prepare the request to send to the bank). At a minimum they have to check to see whether the bank actually reconveyed. The buyer wants to make sure that they have clear title, and they don't want to discover they don't when they go to sell or refinance.

I've seen banks take over 60 days to do a payoff. Thinking that they will actually reconvey when they're required to do so is a bit of a stretch.

Posted by Marc Holmes at 5/19/08 10:42 a.m.

Kary,

I think you give escrow companies too much credit for the work involved. In many, if not all, western Washington counties reconveyance deeds can be pulled up online by anyone with internet access. It takes me about one minute to pull up the records on a given tax parcel number. Getting reconveyances issued probably involves a certain number of phone call or form letters asking the bank to do what it's required by law to do. A highly skilled employee is simply not necessary to do this type of work so I believe it can be done by someone who sits at a desk all day at reasonably low cost. Let's say it's $20 per hour. If the escrow company charges a reconveyance fee of $150 per loan that amounts to 7.5 hours of work per loan payoff. There's simply no way it takes an average of 7.5 hours per loan payoff to get a reconveyance deed issued.

The simple fact is that reconveyance fees should not be a significant independent profit center for escrow companies where they do not explain it to consumers and treat it as a sacrosanct fee that is a non-negotiable cost of doing business for the consumer.

Posted by Kary L. Krismer at 5/19/08 12:24 p.m.

I'd agree that it's typically simple. That's probably why they contract it out (as mentioned in your first post). But what about when it doesn't go as planned? The deed of trust trustee doesn't reconvey? There they're going to have to track down why it's not happening (bank's fault or trustee's fault), and get it to happen.

As to your last paragraph, where does the burden of explaining fees fall? Does the escrow company have to actively explain every fee prior to being named, or does the buyer and seller have to ask? I'm not aware of anything that puts the burden on the escrow company to actively disclose their fees when not asked.

I guess they could do it on an hourly basis, and then withhold $500 from the seller for each deed of trust, and pay the net funds back when the reconveyance occurs. I'm not sure how many sellers would prefer that.

Posted by Jillayne Schlicke at 5/19/08 1:24 p.m.

@Karen, you asked a question about real estate v. other industries:

Escrow and title companies are subject to the provisions of RESPA.

Charging a fee for a service that was not performed is a violation of section 8 of RESPA.

http://www.hud.gov/offices/hsg/sfh/res/respamor.cfm

The law firm pursuing this class action has found an interesting angle to explore. I am curious to learn more about this suit, which has potential national implications.

I predict that the four companies named decide to settle rather than go all the way to court.....which should tell us something.

Posted by Kary L. Krismer at 5/19/08 2:09 p.m.

Jillayne, wouldn't sending in the paperwork requesting the reconveyance, and then following up to see that it was reconveyed be performing a service? Maybe it would be a well paid service, but remember that John Edwards got a $500 haircut.

I don't think settling would tell you much. A lot of class actions settle because they're too expensive to defend. And in the settlement the "victims" often get next to nothing. I once got a coupon to buy another food processor that came with a lifetime warranty at a slight discount. The company probably still made a profit on any food processor they sold. I'd guess the attorneys probably got something in the 7 figures.

Posted by Marc Holmes at 5/19/08 3:31 p.m.

Kary,

The closing agent "explains" the fees on every deal they close. Now, in most closings I believe they they gloss over their fees by simply saying that this what we charge to close your transaction (i.e., escrow fee) and this is what we charge to make sure the underlying lender retires the loan we'll be paying off (i.e., reconveyance fee). I further believe that most borrowers simply nod their head in false understanding and figure that a $150 fee is tiny compared to all of the other dollar amounts on the HUD-1 and they figure it's not worth disputing. And that is the problem.

Posted by Kary L. Krismer at 5/19/08 3:35 p.m.

Marc, by the time that occurs, it's way too late--it's typically at the signing only a couple of days prior to closing.

What I'm talking about is the buyer calling up the escrow and asking what their fees are before they put them down as the closing agent on a Purchase and Sale agreement. And the seller doing the same thing before they agree to that. I don't think that ever really occurs. So it's like the example I gave with the $50 haircut at the barber--you're in a position to complain, but not to sue.

Escrow isn't typically picked because of their price structure. They're picked because of the service they provide.

Posted by Marc Holmes at 5/19/08 5:11 p.m.

Kary said:

"What I'm talking about is the buyer calling up the escrow and asking what their fees are before they put them down as the closing agent on a Purchase and Sale agreement." And, to paraphrase, if you don't call to learn what they charge "you're in a position to complain, but not to sue."

So, failure by the buyer or seller to inquire about the reconveyance fee charged justifies escrow in charging an excessive fee for an illusory service? And never mind that most homesellers have no idea what a reconveyance fee is or that they will be charged one!

Kary, at what point would the fee be so great as to justify something more than a mere complaint? $500? $1,000?

Since no one ever challenges the reconveyance fee and "Escrow isn't typically picked because of their price structure," escrow companies can theoretically jack up the fee with impunity. That is not a reasonable justification for denying someone the right to sue. In fact, that's one of the very reasons why state legislatures pass Consumer Protection Statutes in the first place: to discourage people from engaging in abusive business practices that would otherwise go undeterred.

Posted by Kary L. Krismer at 5/19/08 5:26 p.m.

Well apparently for haircuts the price that is actionable is something above $500.00. ;-)

I think you're taking a great leap from saying buyers don't know what something is, to saying it's an abusive business practice that they can successfully sue over. If a law firm charges 25 cents a page for copies, is that an abusive business practice because the client only asks what the attorney's hourly rate is? That's probably more than 100% over cost, but I don't see it being a consumer protection act action.

Posted by Kary L. Krismer at 5/20/08 9:14 a.m.

BTW, one other point on this would be that the work the escrow does on a reconveyance begins before closing: Getting the payoffs. That can be a lot of work, especially if the bank is not responsive or if the closing date gets changed.

Connecting that up, again I'm not sure why the fee charged by an escrow company should be the same where the seller has no deeds of trust outstanding, as where they have one, or as where they have two. Each deed of trust is clearly more work for the escrow.