ANNAPOLIS -- Despite the threat of higher home closing costs, the General Assembly yesterday approved a bill that would require title companies to donate their escrow account interest to a new fund for affordable housing.
The 81-53 vote by the House of Delegates sent Senate Bill 594 to the governor for his likely signature. And it ended a five-year battle between law firms and title companies, who sought to protect what they argue is their money.
The money -- small amounts of interest earned when a title company holds a client's home purchase money in an escrow account -- will go to a fund to establish housing for the poor.
Current state funding "does not meet the extraordinary needs of the homeless in our community today," said Del. Clarence Davis, a Baltimore Democrat who had sponsored an unsuccessful House version of the measure. On the House floor, he defended the Senate bill, which was sponsored by Sen. Clarence W. Blount, also a Baltimore Democrat.
Title companies unsuccessfully offered a series of amendments, including one to change the source of funding for the housing trust.
Any change would have required another vote by the Senate. At that point the title companies had hoped to launch a filibuster in the waning days of the legislative session to kill the bill.
The state Department of Fiscal Services has estimated the legislation will raise about $1.2 million from title companies. The Maryland Land Title Association has said that figure is conservative and will result in higher home settlement costs.
"We're going to have a separate line on the settlement sheet called 'check disbursement reconciliation fee,' "and it's going to be about $45," said Michael Gisreil, the association's lobbyist.
The bill also closed a recently created loophole that threatened to diminish legal funding for the poor, according to legal advocates.
Lawyers who work in law firms are required to donate their client escrow account interest to the Maryland Legal Services Corp., which funds legal programs for the poor. But a January ruling by an attorney regulatory commission gave lawyers the freedom to set up title companies and keep the escrow interest without incurring sanctions.
With the passage of the affordable housing bill, lawyers in law firms now have no incentive to set up title companies and will continue to donate escrow interest to Maryland Legal Services Corp., the corporation said.