HOUSING AUTHORITY OF THE COUNTY OF UNION, Hon. KENNETH J. GRAY, DEAR KEN: The Banking and Currency Committee will be considering major issues in the pending HUD Act of 1972 on June 12 and 13. These issues have already passed the Senate. Would you please contact Wright Patman, Chairman or any other members of the committee urging immediate passage of the following amendments: 1. PROTOTYPE The House Subcommittee bill includes the cost of land and site improvements under the 110 percent of local prototype ceiling. An amendment is required which will exclude these items from the prototype and retain the prototype calculation as it is in present law and in the Senate-passed bill: Prototype plus 110 percent, excluding the cost of land, site improvements, demolition, and nondwelling facilities. Retention of the provision in the House Subcommittee bill could result in pressures for local housing authorities to select below-standard site locations, and reduce the quality and amenities of housing construction. 2. CONTINUED OCCUPANCY LIMITS The House Subcommittee bill retains "continued occupancy limits" although it advocates a "cross-section of income occupancy" in public housing. An amendment is needed to eliminate the continued occupancy limits so that both economic and social stability can be maintained in public housing projects, permitting families to stay in occupancy and provide leadership and social stability, while paying economic rent without subsidy when their income rises sufficiently to afford it. Since the House bill also requires from 15 to 30 percent of low income families to be housed in new FHA-assisted housing projects, this should provide additional housing opportunities for the very lowest income families waiting for housing. The Senate bill passed on March 2, eliminates the continued occupancy limits in public housing. 3. WELFARE RENTS EQUAL TO OPERATING COSTS An amendment will be presented to the full Banking and Currency Committee requiring that welfare agencies make Payments equal to operating costs for welfare tenants living in public housing. This will reduce the requirements for operating subsidy from public housing funds by about 60 million dollars annually, and free it to be used for important purposes like deferred maintenance, improved management and maintenance, etc., as was intended under the HUD Act of 1969. Your assistance will be greatly appreciated. VICKI D. CHAMNESS, NEW ORLEANS, LA., May 26, 1972. Hon. HALE BOGGS, U.S. House of Representatives, House Office Building, Washington, D.C. DEAR HALE: It has come to my attention that the latest version of the omnibus Housing and Urban Development Act Amendments of 1972 contains a provision in Title IX wherein Section 907 (a) purportedly reads as follows: "No attorney who performs any legal services which are incident to or a part of any real estate settlement with respect to which any party to such settlement has obtained a Federally related mortgage loan shall receive any commission in connection with the issuance of title insurance for any real property which is a part of such settlement." Frankly I am distressed to learn that the draft containing this language has cleared the subcommittee and is now before the full House Banking and Currency Committee chaired by Representative Wright Patman. The inclusion of this language in the Amendments to the Housing and Urban Development act would be disastrous on the legal practice of many lawyers, particularly lawyers in Louisiana. I do not consider myself an exception. As you are well aware, title insurance in Louisiana with one or two exceptions is handled as an adjunct to the legal practice of the lawyer, who is likewise the authorized agent and representative of a title company in Louisiana. It is inconceivable to me that a provision such as this is necessary since the federally insured mortgage loan which is likewise the subject of title insurance has the benefit of the title insurance company regardless of the position of the attorney who makes the examination. In the event the attorney making the examination were in error, this does not preclude collection of any losses or damage by virtue of a title defect from the title company and it is then between the lawyer and the title company to determine whose ultimate responsibility the loss is. I honestly do not feel that there is any conflict between an attorney handling the closing of a mortgage transaction or a federal project and likewise either by agent for or an examining attorney of a title insurance company. Frankly I can see no reason for this type of legislation. By way of example, in my office Claude Champagne, who I believe you know, has been a notary public for over ten years but he is not a lawyer. He has absolutely nothing to do with examining titles, but he is the closing notary on any number of single family residences on which there are federally insured or guaranteed mortgages. Since Claude works in my office, I would presume that if this legislation were adopted I would be precluded from Claude handling the notarial work and my office handling the title work and would have to choose between the two. In many cases it is not possible to choose between the two, and I may in all likelihood lose both. It should also be recognized that this particular provision that is proposed would not be effective in most states. In most states, and I have been involved in real estate transactions in a number of them, the title insurance and the closing itself is handled by a title company that has a large abstract plant, and lawyers themselves seldom are involved in both the title insurance and the legal work. I would assume that for that reason the reaction to this proposed legislation will not be the same in other states as it is in Louisiana. I have tried to consider the reason for this type of provision, and I can only assume that this provision is inserted somewhat along the same lines of thinking as a cost certification requirement on a construction contractor. If the appropriate federal agency involved feels that there is a duplication of fees, I believe that should be stated, and it should be handled to prevent a duplication in fees. but a broad sweeping prohibition such as is proposed is improper. I have no hesitancy in stating that if the legislation is to prohibit duplication or unknown charges involved in the transaction that disclosure of the collection or title premium being charged would be required. Actually there is no duplication of fees since the handling of the legal work is different than the handling of the title examination. With respect to the closing of the loan itself, if it is an insured closing through a title company that is included as part of the premium and the lawyer who represents the company does not get additional compensation out of the title insurance. What his legal fee might be on any particular closing is established by other governmental regulations on projects ranging in size from single family houses to the most sophisticated housing developments, dormitories, nursing homes and the like. I don't think that there has ever been a piece of federal legislation that would be more injurious to my personal practice as what is proposed here, and I would ask that you exert every effort that you reasonably can to have this proposed provision excluded from the proposed amendments to the Housing and Urban Development Act. If you need any additional information from me, please do not hesitate to let me know, and I would appreciate if you would have someone in your office keep me up to date as to the progress of this matter during its walk through the Congress. With my best regards and again I earnestly solicit your support, I am Sincerely, LOUIS G. SHUSHAN, Attorney. NEW ORLEANS, LA., June 2, 1972. Re Federal regulation of title insurance. Hon. HALE BOGGS, U.S. House of Representatives, House Office Building, Washington, D.C. DEAR HALE: I previously wrote you regarding the captioned matter to its effect on attorneys who likewise do title examination work. I have also written some of your other colleagues and I am using this method for clarifying one point. I am not certain that my previous letter made it clear that a distinction should be made between commissions or forwarding fees received by attorneys who do no title examination work and the collection of a title insurance premium by a title agent who in turn pays the attorney who actually examined the title. It is my belief that the draftors of this legislation failed to understand the difference between an attorney who provides a service which includes a title search, title examination and possibly closing and a lawyer who receives a "referral fee" but provides no service other than the directing of business. Again let me state how very important this is, and I would appreciate hearing from you on any reactions you have been able to muster as well as the present status of the matter. With warmest personal regards, I am LOUIS G. SHUSHAN, Attorney. DUTTON, KAPPES & OVERMAN, Re Housing and Urban Development Act of 1972, title IX. Hon. WILLIAM A. BARRETT, DEAR CONGRESSMAN BARRETT: Title IX of the House version of the Housing and Urban Development Act regulates closing costs on federally related mortgage transactions. The way Title IX is currently worded it will have the effect of depriving lower and middle income groups of the benefit of being represented by independent legal counsel at federally related real estate closings. I can appreciate the fact that Congress is anxious to put a stop to the real estate closing cost abuses by attorneys and others in the D.C., Maryland and New York areas which have recently been publicized by the Washington Post. The practice whereby a lawyer receives a split of the title insurance premium simply for referring title business to a commercial title insurance company is deplorable and should be proscribed by appropriate legislation. The Senate version of the Housing and Urban Development Act of 1972 (S. 3248) does proscribe this practice and deserves the support of every Senator and Representative. The House bill has a similar anti-kickback provision. However, in an attempt to strengthen the House version, the Housing Subcommittee has added a number of other well-intentioned but little understood amendments. The result is that the House version of the Housing and Urban Development Act of 1972 as reported by the Housing Subcommittee on May 11 contains provisions contrary to the public's interest. If Title IX of the Subcommittee's bill becomes law it will have the effect of eliminating the family lawyer from federally related real estate transactions. The reason for this is that the title insurance must be purchased from someone other than an attorney already representing a party to the transaction. Therefore, in order to have the family lawyer involved in the transaction, two fees must be paid-one to the title insurer and another to the attorney. Since Title IX allows the title insurance company to provide all title services, most lower and middle income families will have to forego the benefits of independent legal counsel and depend on a title insurance company which has no fiduciary responsibility with respect to them to provide closing services. Of course, the more affluent buyers and sellers as well as the financial institutions involved will be represented by their own lawyers even if they are forced to go elsewhere for their title insurance. However, it would be unwise for Congress to place this burden on lower income familes. The solution is to allow the lawyer to be paid for all legal services rendered including compensation for drafting and issuing title insurance but to prohibit him or anyone else from receiving a payment simply for referring the business to another. Therefore, it is respectfully requested that you support the protection of home buyers by opposing legislation which discriminates against lawyers and which would deny the middle and lower income families legal services in real estate transactions. You can do this by opposing the Housing Subcommittee's amendments and voting for the Stephens' substitute which is similar to the Senate anti-kickback provisions as set forth in S. 3248. In terms of the bill currently before the Banking and Currency Committee that would mean substitution of the anti-kickback provisions in S. 3248 for Title IX of the Housing Subcommittee's bill. Sincerely, PHILIP S. KAPPES. CHEYENNE, Wro., May 30, 1972. Hon. TENO RONCALIO, Washington, D.C. DEAR TENO: I am advised that the latest version of the omnibus Housing and Urban Development Act Amendments of 1972 contains a provision in Title IX which applies to the operation of most lawyers in Wyoming, to wit: "Section 907 (a) No attorney who performs any legal services which are incident to or a part of any real estate settlement with respect to which any party to such settlement has obtained a Federally related mortgage loan shall receive any commission in connection with the issuance of title insurance for any real property which is a part of such settlement." As you know, in order to meet the present FHA and VA requirements that all loans be supported by a title insurance policy, my office has been designated as an insurance agent, and in accordance with the canons of the American Bar Association has indulged in the practice of issuing title policies based upon the attorney's review of title records in the Courthouse. This prevents the title companies from having a monopoly in the field and doing away with title opinions involving attorneys. There are also incidental benefits to this system, as you well know, in that when an attorney is involved he can correct defects which are always noted on title policies at the time when he issues the policy; and this does not require the independent employment of an attorney in the transaction. The language quoted above does provide ambiguity as to the definition of the world 'commission' and would seem to put attorneys in the position where they might not be entitled to charge any fee for services performed in connection with doing title policies. Certainly, if this kind of language is to apply, it should also apply to Title Companies and Abstract Companies who take their own commission for the issuance of title policies. I would appreciate it if you would express my concern to the House Banking and Currency Committee before which the legislation is pending, inasmuch as it would seem that attorneys should be allowed to participate in this field. Very truly yours, CHARLES E. GRAVES. STEWART, STEWART & JACKSON, Hon. WRIGHT PATMAN, U.S. Congressman, Washington, D.C. DEAR MR. PATMAN: I am writing you about the Housing and Urban Development Act of 1972 under consideration by the House Banking and Currency Committee. I am a practicing lawyer engaged in a general civil practice. I am one of a three-member firm which includes my father who has been engaged in a general law practice for over sixty years. A fair proportion of our practice consists of representing buyers and sellers in real estate transactions. We do not represent any institutional lender. We have never received a "kick-back" of any nature from anyone on a real estate transaction. We have always examined abstracts for our client, rendering a title opinion. For this we have always charged a fee based primarily upon the purchase price involved because our liability is commensurate with the amount of money involved. Since 1948 we have been members of Lawyers' Title Guaranty Fund, a mutual trust started by Florida lawyers. Belonged to Lawyers' Title Guaranty Fund enables us to issue a title insurance guarantee which covers the client for things that we are not able to guard against such as forgeries, missing entries in the abstract, etc. However, we furnish a service that no title insurance company can furnish. We give our client personal legal service in protecting his interest, and we have never had a client who lost anything on account of a title which we examined. We strongly urge you to vote for the amendment submitted by Congressman Robert G. Stephens, Jr. of Georgia to the House version of this bill. This bill would allow a title company (non-lawyers in most instances) to perform all of the legal services incidental to a real estate closing and to charge a fee based upon a percentage of the amount of money involved, while a lawyer could perform the same services, issue a Lawyers' Title Guaranty Fund policy and be prohibited from charging on the same basis. Since most of the lending agencies involved require title insurance, and since they pass on this charge to the borrower, this would mean that the borrower would not have the services of his personal attorney, or that he would be charged doubly. It really seems to me that the object and purpose of Congress is to see that the borrower gets quality legal services with title protection at the most reasonable cost. It is obvious that this can be done by a lawyer who is a member of Lawyers' Title Guaranty Fund representing the borrower and furnishing the lending institution with a title policy, all for the single charge. Once again, on behalf of myself, my father and all of the individual practitioners in this country I urge you to vote for the Stephens amendment. A vote otherwise will strongly discriminate against the individual practicing lawyer and will result in either the borrower not having an attorney or paying twice in order to get his services. Very truly yours, WILLIAM L. STEWART. HOUSTON, TEX., June 13, 1972. Re 1972 housing bill. HOUSING COMMITTEE, House of Representatives, Washington, D.C. GENTLEMEN: I understand that Section 912 of the Bill that you are considering provides that a title company shall not issue a title policy where the seller directly or indirectly controls the title company and you define control to be where a seller directly or indirectly owns, controls or has power to vote 25% or more of any class of the voting security of the company, etc. I think this is a very fine provision and I recommend this to you. Anyone who has an interest by way of being a seller or a lender should not control a title insurance agency or company which is issuing a policy on the particular transaction. A few years ago, I acted as counsel for the Liquidator of the State Board of Insurance for the State of Texas, and I had the unpleasant duty of having to work on liquidating Elliott and Waldron Title Guaranty Company, which had a title agent in Houston, Texas which was controlled by two men who dealt in property. These two men purchased some apartments and placed a new loan on the apartment, but failed to pay off the existing lien that was on the apartment. They were able to do this because they controlled the title insurance agency that issued the Elliott and Waldron Title Guaranty Company policies, and when they issued their policy on the new loan, they failed to pay off the old loan. This caused a loss of several hundred thousand dollars. Further, these men had an interest in a hotel in Corpus Christi on which there were title problems and they intentionally overlooked these in issuing title policies on these hotel properties which caused additional losses. The losses in this one title insurance agency were so great that it caused the Elliott and Waldron Title. Guaranty Company of Texas to become insolvent and it had to be liquidated by the Liquidator of the State Board of Insurance. I highly commend you on the action that you are considering to prevent this type of thing from happening. Sincerely, V. C. MCNAMEE, |