2. When the Federal government does get involved in title acquisition, there is evidence that it can effect considerable savings for itself. Contracts negotiated with law firms in the Washington, D.C. area for the title searches necessary for acquisition of a subway right of way show that the government's cost is lowered by some 30% when compared to standard charges. Around the country, state highway, local urban renewal, and other authorities achieve the same savings. Similarly, many large banks are able to negotiate lower rates on credit reports, appraisals, etc. than can individual consumers.

3. Since 1971, HUD has by administrative order taken some action on its own, and these should not be curtailed by repeal of section 701 of the Emergency Home Finance Act of 1970 while they are in progress. On July 4, 1972, HUD issued for comment regulations proposing to set maximum amounts on four-six types of closing costs in several metropolitan areas around the country. 37 Fed. Reg. 13186 (1972). HUD was selective in its application of such controls, and numerous comments were received, mostly from title insurance companies, attorneys, and their employees. Having been published and commented on, these are now ready for final promulgation. Also proposed in 1972 was an uniform closing statement, and that too has been redrafted and is ready for release. The latter is most important. The use of a uniform sheet will enable a continuous and easilytranscribed monitoring of costs to proceed--to warn of future

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costs increases and problems as they arise.

These steps,

however, should not preclude further action by HUD to regulate costs. They constitute only necessary first steps to insure effective cost monitoring in the future.

4. Finally several state legislatures are now being offered (or soon will be) new title insurance regulatory bills by the industry. In light of this development, it seems an inappropriate time to withdraw the possibility of Federal involvement. The initial grant of regulatory authority to the state insurance commissioners was conditional on the proper exercise of the powers given, and in a time when the exercise of such powers is being tested, the Federal government should not withdraw from the field.

The Consequences

Since the major difference between the two versions lies in the area of maximum rates, what are the consequences of instituting such maxima?

a.

Eighteen months ago, I stated that maximum costs have a tendency to become minima, and that is logical if the housing markets and the problems involved are not defined with some precision, or if the administrative controls are used in areas lacking competition. But now, after the industry has had ample time to present its case, it can be said that economic justifications for many costs have not been forthcoming. Failing more adequate explainations, there is no reason why the government should not move, so long as it has adequate data on which to

base judgments.

b. Even if the costs controlled rise to permissable levels, tough decisions will have to be made by the regulators on the level of organization and efficiency required of those who offer the attendant services. In a great many areas, the real impact of such regulations will be long range ones, making possible later determinations about the efficiency of the various personnel, businesses, and firms involved.

Avoiding Further Impasse

Of course, such an impasse whould never have been reached. In fact, this refusal to cooperate and the regulator-regulated confrontation could have been avoided if changes had previously using been made in land title record systems/curative laws, marketable title acts, and better public land surveys in the states.

Further confrontations should be avoided. They can be, if the concerned parties can agree on some of the underlying facts. For example, it is a fact that title plants are unprofitable in large cities. Why else are they being phased out or combined in many cities, if not for their unprofitability? At the same

time, large sections of our center cities are being literally abandoned, and local governments, as well as the Federal government, are becoming large-scale landlords. This is both a problem and an opportunity.

ing.

One preferred solution is urban homestead

As a part of this program, governments might also provide a new method of land transfer for center cities. In such areas,

· why shouldn't the government underwrite the titles it confers

on such homesteaders?

Why shouldn't the government become a

self-insurer to that degree. Such activity would not entail

undue risk if:

1. the government first drafts and then uses a Federal
statute to foreclose on housing loans in default
and underwritten by Federal programs.

2.

the government creates a tract index or title registration system for use in such areas.

The constitu

If the government set the ground rules, some rejuvenation of
our central cities might be accomplished for the benefit of
present residents as well as future residents.
tional objections to such involvement are in my opinion slight
and unpersuasive.

The merits of the proposal are clear.

In this connection, it should be noted that the President's Message on Housing of September 19, 1973, noted in passing the need for "easing the Federal burdens in disposing of the large and still growing number of properties returning to the Government upon default." (p.14) This is a reference to the need for a Federal Mortgage Foreclosure Act. The obstacle to such legislation in the past has been the varied periods of time after a sale of the property during which states allow the borrowe to upset the sale or refinance his loan, so retaking possession. A few states have procedures disallowing such rights (at the same time, the borrower is saved from being pursued by the lender on the former's personal note). Courts give this remedy (called "strict foreclosure") in only a few situations--where the buyer has not improved the property, where the financing has been close to 100%, where the down payment was slight, and where the payments

amount to little more than rent. In effect, strict foreclosure

is readily adaptable to the use of Federal mortgage under

writing programs.

Similarly, after properties have been foreclosed in this way, a new type of deed registry could be instituted for future owners. A system of registration, as opposed to recording, is possible for "urban homesteaders" without constitutional objections. This would mean that the government would establish a registry for recording and certifying the title to lands and improvements. The certificate issued by the government to the homesteader would constitute the title itself, instead of merely being evidence of title as our recorded deeds are today.

Thus land could be transferred much the way automobiles are, with no lien or encumbrance on the title becoming valid without first appearing on the certificate of title.

There is ample precedent for such Federal involvement in title matters. The United States government intervened in the entangling of Spanish land grant throughout the Southwest, it has given numerous grants to set up title information data banks, and numerous court cases have said that a land transaction has

effects on interstate commerce.

Points and Front End Loading

It has been the position of the Cost of Living Council that discount points and closing costs constitute interest. Realistically, perhaps both are merely the cost of money. But in the