ANNAPOLIS -- Members of a Senate panel were given a choice yesterday between putting the screws to homebuyers, already suffering from high closing costs, or denying money to fund legal services for the poor.
That, at least, was how advocates and opponents of Senate Bill 573 characterized the legislation during a hearing before the Senate Judicial Proceedings Committee yesterday. The committee is expected to vote on the bill in the next few weeks.
The bill would require title companies, which conduct real estate settlements, to donate to the Maryland Legal Services Corp. the small amounts of interest earned when money passes hands from a real estate buyer to a seller.
Title companies, like lawyers who do this kind of work, maintain trust accounts to hold the money for all of their clients' transactions. That money earns interest as it passes through the trust account.
If the interest for any one transaction is less than $50, the title company keeps it because it would be almost difficult to separate and calculate such small amounts of interest.
Lawyers who maintain such trust accounts for clients must donate the interest to the legal services corporation, which funds legal programs for the poor, and members of the bar in Maryland have been trying to persuade the General Assembly to impose the same requirement on their competitors in the title industry.
Seymour Stern, president of the Maryland State Bar Association, estimated that the bill would end up sending at least $1 million a year to legal services, and probably more.
But title industry members argued that since they are unable to give the interest to their clients, taking the money from them would mean either higher closing costs for homebuyers or a financial blow for the title companies.