Letting the foxes go back to guard the chicken house, as one official put it, is a mild way of describing the state's lax regulation of title insurance companies. Agents convicted of stealing escrow funds deposited by home buyers can return to their old tricks, and state regulators can't do much about it. Even if the Maryland Insurance Administration tried to crack down on crooks in a business handling millions of dollars of citizens' money, the application for licenses to sell title insurance is so inadequate the agency may not even know who's selling for the company.
Insurance regulators know that they have a problem; they recently beefed up their staff of investigators to check on the accuracy of license applications. That doesn't explain why an industry that is entrusted with huge sums of the public's money has been so grossly under-regulated for so long. It's not that the scandal is just coming to light; large thefts of money entrusted by home buyers have been cropping up for years. In a state that has had two whopping savings and loan scandals in the past 30 years because of shoddy state regulation, that is inexcusable.
Powerful business and professional interests with a lot of clout in Annapolis have stymied what few attempts have been made in the last few years at strengthening regulation of title insurance sales. The biggest loophole in the law is an exemption for lawyers. They don't need a license to sell title insurance. There is no check on them whatsoever. Why? Because the state bar association wants it that way.
Even when an agent can be held responsible for misusing a home buyer's money, there is little consumer protection. Agents are required to hold only a $100,000 bond (lawyers have more coverage). That's just one home sale these days. An attempt this year to strengthen the bonding requirement was vetoed by Gov. William Donald Schaefer.
Now that Sun reporter Mark Guidera has exposed the state's disgracefully flimsy control over the industry, officials are belatedly scrambling to tighten it. The exemption for lawyers is indefensible and should be removed immediately. The bond required to sell title insurance should be increased sharply to keep pace with higher home values. Recently, $2.3 million disappeared in a single incident. The state insurance administration should be given the resources to police and regulate the industry effectively. Anything less is begging for a major scandal.