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Understanding the Current Legislative and Regulatory Landscape in Illinois: As a Real Estate Lawyer, What’s in the Long-term Interest of My Practice? Separating Fact from Fiction

Following the end of the spring legislative session, ATG traveled the state to meet with our beloved and loyal membership via four Town Hall meetings. The Town Hall meetings were a great vehicle to introduce Deb Feinen, our new Vice President - Downstate Operations, and celebrate the 37-year career of retiring Downstate Operations chief, Jerry Gorman. The educational portion of the meetings focused on the current market as well as regulatory and legislative issues of concern to ATG member agents.

The same week as the last Town Hall, we were pleased to be invited to a meeting of the Illinois Real Estate Lawyers Association (IRELA). That event, attended by almost 450 practicing real estate lawyers, was the ideal setting to discuss the current marketplace and why some form of regulation is needed to help bring rationality to the market and protect the long-term viability of lawyers in the real estate practice.

In both settings, while we discussed the past legislative session (described below), we also explored issues that, in our view, make the need for a solution increasingly urgent. To that end, our discussion focused on ATG's values:

1. ATG’s core beliefs support your practice for the benefit of the public.
   
   1. Consumers benefit from having lawyers advocate for the largest transaction of their lives.
   2. Providing title services as a part of that representation is a service that must be delivered by a lawyer.
   3. Doing good is good business over the long run.
   4. But for ATG, lawyers would be out of the real estate practice.
   5. ATG is committed to preserving and protecting your practice today and into the future.
2. Commercial companies’ marketplace shenanigans put your practice at risk.
   
   1. Hidden fees and an insatiable desire to increase market share with unjustifiable splits drives up consumer pricing.
   2. Controlled business arrangements that require lawyers to use the captive company of the referring party are bad for the public and the profession.
   3. Challenges to marketplace practices will result in wrongly assigning blame to lawyers for marketplace dysfunction.

I was joined at the IRELA event by attorney Tradd Fromme of the Professional National Title Network (PNTN). His remarks concentrated on SB 1317 and did an able job explaining what he saw as its flaws. While I did not agree with everything he said, nor did he embrace my views, we were able to disagree without being disagreeable. In the end, I felt PNTN’s choice to focus relentlessly on a failed legislative effort was not timely and not productive. The audience would have been better served had PNTN shared its views on the current market and the challenges facing the profession.

The following week, Kevin Cooney of PNTN penned a Monday Morning Memo predictably contending that the IRELA forum should have been a single-issue debate of the merits of SB 1317, as opposed to a forum of open discourse. Kevin further complained that my presentation was simply a sales pitch for ATG.

While I typically stay out of the fray with Kevin’s assertions, I feel compelled to point out a few things:

1. While PNTN prefers to write thunderous editorials, we are deeply engaged in the legislative process. Our goal is always the same, to find a common ground that will protect the long term interests of the real property bar.
2. Despite the fiery rhetoric, PNTN proffered two substantive amendments to SB 1317:
   • raise the fees PNTN (not the lawyer) stands to make in a transaction; and
   • water down the prohibition on reciprocal referrals between real estate sales people and lawyers.
3. Ironically, it was PNTN’s amendment that ILTA agreed to that forced ATG to move off on our own to introduce SB 2262, discussed below.
4. PNTN’s continuing objections to SB 2262 prohibiting illegal reciprocal trading by realtors obfuscates the fact that its affiliated company is active in the market promoting realtor-controlled business in the exact same manner of which we and many others in the legal profession complain.

As for the sales pitch comment, it should be noted that PNTN received my proposed topics and my materials well in advance of the IRELA program. For him to say he was somehow misled indicates he either ignored the email or is perseverating on issues he thinks will mislead lawyers into believing that he is their sole advocate – all while setting up realtor-lawyer programs that violate the very principles we all embrace.

Read on for an update on the real issues at hand.

Title Insurance Legislation and Regulation Update:

A New Amendment to the Illinois Title Insurance Act Would Level the Playing Field on Referrals. The Rewrite of the Title Insurance Act Will Not Move This Session, And More....

While SB 1317 is Mired in Debate, SB 2262 Would Level the Playing Field on Referrals from Brokers with Captive Title Agencies

On May 31, 2019, with our full support, Senator Don Harmon introduced an amendment to the Illinois Title Insurance Act (TIA) intended to add more consumer protection to the TIA's market conduct provisions. SB 2262 provides as follows:

The Secretary of Financial and Professional Regulation may refuse to issue and may suspend or revoke a certificate of authority, registration, or license under the Act or discipline the holder of such for referring a consumer to another producer of title business on the express or implicit condition that the producer of title business to whom that consumer is referred use a particular title insurance company or title insurance agent. Effective immediately.

This bill prohibits a referral source from referring a client on the condition that the party receiving the referral use any particular title company or agent. In recent years, the proliferation of affiliated business arrangements has resulted in some arrangements that impair a lawyer's ability to exercise independent judgment in the selection of a title insurer. While SB 1317 contained a similar provision and was a more sweeping rewrite of the TIA, it did not make it out of committee this session. SB 1317 has many positive attributes, but also has provisions totally unacceptable to ATG. SB 1317 will require much more discussion and debate before ATG will support it.

While the industry debates the merits of the sweeping legislative amendments in SB 1317, SB 2262 takes a more surgical approach, focusing on what we feel to be one of the most significant market practices that is damaging to our industry. We are advocating for SB 2262 to be on the legislative agenda during the Fall Veto session. We will ask for your support at that time.

Illinois Department of Financial and Professional Regulation (IDFPR) Issues Multiple Cease and Desist Orders for TIA Violations

The IDFPR Division of Financial Institutions issued three Cease and Desist Orders against attorney agents, alleging that they discounted fees to obtain title business in violation of Sections 21(a)(5) and 24 of the Act and Section 2607(a) of the Real Estate Settlement Procedures Act (RESPA). The basis of the allegations appears to be print and website advertisements distributed by the attorney agents. The IDFPR issued a fourth Cease and Desist Order against a title insurance agent for doing business without the required license or registration. Read those orders and the applicable statutes on the IDFPR's Financial Institutions Disciplinary Actions page.

DS-1 Litigation

ATG filed a temporary restraining order (TRO) against the Department in June 2018 (read our post, Consumer Protection: ATG Files Suit to Enjoin the State from Implementing New DS-1 Disclosure of Financial Interest Form) to enjoin the state from requiring Producers of Title Insurance to provide a certain disclosure to consumers. ATG believed the disclosure was, among other things, confusing and damaging to the attorney-client relationship. The Illinois Land Title Association filed a separate complaint and its case was consolidated with ATG's. Professional National Title Network (PNTN) filed a lawsuit making separate allegations; that case was ordered to run simultaneously with ATG's for judicial efficiency. That TRO was extended until the resolution of the litigation (read our post, Update on ATG's Litigation Regarding the IDFPR's Proposed DS-1 Disclosure). We are working with the IDFPR to find a resolution to the litigation. Stay tuned for more information.

New IDFPR Secretary, Deborah Hagan

Deborah Hagan was recently appointed as the new Secretary of the Department. Ms. Hagan previously led of the Consumer Protection Division of the Office of the Illinois Attorney General. In that role, she defended the interests of Illinois consumers in critical areas such as mortgage origination and servicing, student loan servicing, debt collection, identity theft, and other areas of financial risk. Ms. Hagan has played a critical leadership role in many groundbreaking settlements on the state and national level, helping to recover billions of dollars in restitution for victims of consumer fraud and other wrongful conduct.

Under the new leadership of Secretary Hagan and Financial Institutions Director Francisco Menchaca, ATG believes the IDFPR is more engaged and more proactive than what we have seen in prior administrations.

ATG will continue to monitor all legislative and regulatory issues that affect the industry and the consumers it serves. We renew our 55-year commitment to preserving and protecting the role of the lawyer in real estate transactions by staying focused on serving your interests each day. We appreciate your ongoing support.

Peter J. Birnbaum
ATG President and CEO

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