Possibly preempting federal law to bar bifurcated title insurance is questionable, according to three Republican lawmakers.
SB65, sponsored by Rep. Ann Williams (D-Chicago), would eliminate bifurcated title insurance policies and mandate policies for the sale and purchase of a residential real property are issued through the same entity unless seller and buyer decide otherwise.
Beginning the May 24 House floor debate, Rep. Peter Breen (R-Lombard) confirmed the bill only applies to a residential area in a 500,000 or more populace, specifically the traditional collar counties including Lake, Kane, DuPage, Will and Cook.
Rep. Steven Reick (R-Woodstock)
“The consumer harm you are seeking to remedy is lenders who are requiring a buyer of property from using the lender's title of insurance instead of getting a potential cheaper policy,” Breen said, adding he wonders whether Williams is attempting to preempt the federal Real Estate Settlement Procedure Act.
“It demands that no seller of property shall require that the title insurance covering the property be purchased by the buyer from any particular title company,” Breen said.
Breen asked Williams how the bill does not violate federal law. Williams said as Breen would know as a practicing attorney that federal preemption of state laws is generally disfavored except when there is a direct conflict.
“We don’t believe there is a direct conflict there,” Williams said.
Breen asked about the bill's opposition, particularly questioning the Illinois Department of Financial & Professional Regulation’s (IDFPR) concern.
“Why are we remedying this when the IDFPR has not received any complaints or issues?” Breen asked.
Williams said after changes in the Senate were made, she characterized the IDFPR’s objection as philosophical. Breen said the aim of the bill appears positive as far as consumer protection is concerned, but he still questioned the legislation, noting he wanted to hear what other representatives had to say on the issue.
But the session chair was not going to let that happen, cutting off the debate due to the long back-and-forth between Williams and Breen. However, Williams said she would take it out of the record for further discussion if no one else would be permitted to speak.
With permission to continue, real estate professional Rep. Mark Batinick (R-Plainfield) said title issues are confusing to begin with. He asked Williams whether her bill removes the ability of a bifurcated closing in the Chicagoland area only.
“It doesn’t remove that possibility; it just changes it to the default,” Williams said.
Batinick brought up the Professional National Title Network initiative and wanted to know more about the company and the suggested the change. Without receiving a direct answer, Batinick said his concern is that one title company is asking for potential consolidation of title services.
“I am wondering if there are going to be other title companies that are going to be hurt by this,” Batinick said.
Unlike his peers, Rep. Steven Reick (R-Woodstock) had no questions, just an opinion. Bottomline, her bill would cost money to consumers, not protect them, he said.
“The buyers title charge is for title insurance going forward from the moment of transaction, so I fail to see how bifurcating these transactions will do anything but drive up costs to buyers,” Reick said.
Williams told Reick he had it wrong, and the two were on the same page in that her bill bars bifurcated polices.
But Reick still didn't budge, calling her bill complicated. "I have done a lot of title work in my time," he said, adding he could not vote due a conflict of interest as a title agent.
Despite concerns, SB65 passed 60-44.
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