For the first time in 10 years, the Pennsylvania Department of Insurance has approved an increase in title insurance costs, which will be effective for all closings occurring on or after July 1. In addition, the manner in which title charges are calculated will be simplified.

Title insurance can be highly regulated, as it is, for example, in Delaware, New Jersey and New York, where the cost of insurance is strictly set by each state’s Department of Insurance. In some states, rates are negotiable, but there may be caps and floors to the permissible charges. Other states are very much unregulated and allow for totally negotiated costs. Pennsylvania’s current rate structure is somewhat unique in its approach in that it maintains a two-tiered system that is strictly regulated up to a certain threshold amount, which has changed over the years but which is completely negotiable for liability amounts above that threshold. For the past decade or so, the rates were set for transactions up to $30 million and insurance purchased above that amount has been unregulated as to price. As a result of the new changes, costs will be set for all transactions, including that portion of the insurance policy that is over $30 million.

In addition to setting the cost of insurance, the Pennsylvania title insurance regulations cover a wide range of matters, including types of policies, coverages and endorsements that are available. The overall system of regulations under the current laws is rather complex. In fact, it’s probably safe to say that the details are only understood by title companies. Those rates and coverages include basic; reissue; leasehold; subdivision; condominium; refinance for loans that are up to two years old; refinance for loans that are two to four years old; modification rates for loans that are up to five years old, five to seven years old and more than 10 years old; permanent loans following a construction loan; assignments of mortgages; properties covered by the community investment act; short-form residential policies; and enhanced residential coverage policies.

 Most of these classifications have been simplified to two categories: sale rates and nonsale rates. The loan modification and assignment rates and the various residential policies will continue to be available. The basic reissue, leasehold, subdivision, condominium, refinance, permanent loans following a construction loan, and community investment act rates will no longer be available.

Unit of Insurance Or Fraction Thereof Sale Rate
$0 to $30,000 $500.00
$30,001 to $45,000 Add per 1,000 $6.50
$45,001 to $100,000Add per 1,000 $5.50
$100,001 to $500,000Add per 1,000 $5.00
$500,001 to $1,000,000Add per 1,000 $4.00
$1,000,001 to $2,000,000Add per 1,000 $3.00
$2,000,001 to $7,000,000Add per 1,000 $2.00
$7,000,001 to $30,000,000Add per 1,000 $1.50
$30,000,000 and above $1.25
Unit of Insurance Or Fraction Thereof Nonsale
$0 to $30,000 $450.00
$30,001 to $45,000 Add per 1,000 $5.25
$45,001 to $100,000Add per 1,000 $4.75
$100,001 to $500,000Add per 1,000 $4.25
$500,001 to $1,000,000Add per 1,000 $3.75
$1,000,001 to $2,000,000Add per 1,000 $2.75
$2,000,001 to $7,000,000Add per 1,000 $1.75
$7,000,001 to $30,000,000Add per 1,000 $1.50
$30,000,000 and above $1.25

Most of these classifications have been simplified to two categories: sale rates and nonsale rates. The loan modification and assignment rates and the various residential policies will continue to be available. The basic reissue, leasehold, subdivision, condominium, refinance, permanent loans following a construction loan, and community investment act rates will no longer be available.

Sales transactions will be charged at the sale rate and all other transactions at the nonsale rate, although there are some limited exceptions to that rule. One example is the simultaneous issue of an owner’s and lender’s policy. Similar to the existing regulations, it will still be possible to charge only for the higher liability amount policy with the lower liability policy being provided at no additional charge, other than endorsement costs to the loan policy. The charge for the larger policy will be based upon the sale rate regardless of whether that higher liability policy is an owner’s or lender’s policy. Another exception to the sale/nonsale application of rates relates to purchase and sale transactions in which a buyer declines to obtain an owner’s policy but a loan policy is issued. In that case, the loan policy would be charged at the sale rate.

Endorsements for simultaneously issued owner’s and lender’s policies that are based upon a percentage of the premium will be charged at the sale rate using the highest liability amount policy being issued, regardless of whether that policy is an owner’s or loan policy. If only one policy is being issued, the percentage endorsements would normally be charged at the sale rate for owner’s policies and at the nonsale rate for lender’s policies. However, if the transaction represents one of the exceptions discussed above and the loan policy is being charged at the sale rate, percentage lender endorsements would also be charged based upon the sale rate. It should be noted that the regulations will continue to allow the title company to hold the owner’s policy open for up to one year for a subsequent loan policy.

Although the charges for loan modification endorsements have not changed, calculating these costs can represent a somewhat complex process as loan modifications are charged at 50 percent of the nonsale rate for loans up to five years old, 70 percent for loans five to 10 years old and 100 percent for loans of more than 10 years. These reduced rates apply only to the outstanding balance of the loan being modified. To the extent that the modification includes an advance of additional funds over the then-existing balance of the loan, those additional funds will be charged at the full nonsale rate and not at one of the reduced modification rates.

The revised regulations will be effective for all closings that occur on or after July 1. Although a title order may have been placed with a title company prior to that date, it does not appear that the regulations allow for any exceptions to the July 1 effective date and, as such, the new charges should be utilized. •

Bernie Bittner is vice president and commercial underwriting counsel for Fidelity National Title and Chicago Title Insurance in the company’s Philadelphia commercial services office. He has practiced real estate, banking and title insurance law for 25 years. He obtainedhis J.D. at Georgetown University and an MBA from NYU’s Stern Business School.