Title Plants and Market Activity

Texas Title Industry - 101
The Title Industry in Texas is regulated by the Texas Department of Insurance which also regulates Automobile, Homeowers, Life and Casualty Insurance. Title insurance is only a fraction of the products regulated by the Department. There were approximately $1.5 Billion in Title Pemiums written in the State of Texas in 2005.

Premium rates in Texas are regulated and the basic title premium on a $100,000 sale is $871. In Texas, premiums are earned three ways:

1. Title Evidence
2. Title Examination
3. Closing the Transaction

"Direct" operations are wholly owned Agencies of Underwriter and "Affiliates" are Agencies owned partially (at least 10%) by Underwriters. By law, Underwriters earn 15% and Agents earn 85% of the title premium. If you are both the Underwriter and the Agent then you capture 100% of the premium (plus escrow fees.)

Affiliates and Direct operations represents approximately 60% of all title premiums written in the state. There are 254 counties in Texas and most counties have at least one or two independent agents. This means, the 4 or 5 major Underwriters' Directs and Affiliates operations dwarf the number of premiums generated by independent agents for the entire state.

Title Plants and Market Control

A Title Plant is a 25-Year geographically indexed set of records and other related indexes. By law, to be a licensed Title Agent you must either own or lease access to a title plant, which are expensive to build and maintain.

Direct operations and large independent Agencies have managed over the years to control a large part of the title market (in the Dallas, Houston, Austin and other metro markets) through what are commonly called "Joint Plants." The original concept of a Joint Plant was to share the cost of posting a title plant so the expense to maintain the databases could be reduced in purportion to the number of owners.

Over time, Joint Plants became profit centers, which in itself is not a bad thing, but at the same time Joint Plants became a tool to control the title market in large metropolitan areas. Now they are moving into smaller markets too.

For example, in 2002 if you wanted to be a Title Agent in Harris County, Texas there was only one title plant provider, a "Joint Plant" (owned by the major underwriters and a couple of large independents) and the access fee was approximately $18,000 per month plus other fees. At this cost, you could only be a very large agent to afford plant access. In 2003, a new Title Plant entered the Harris County market and within 30 days the Joint Plant lowered its monthly fee to under $8,000. See Houston Business Journal Article dated September 26, 2003 and follow up story dated October 4, 2003.

In Dallas County, there were two Joint Plants and the upfront cost to become an owner, if allowed, was over $2,000,000 and the monthly fee was over $25,000 per month. Therefore, in Dallas County (population 2.5 M) there were only 14 Title Agents. But, in Collin County, just north of Dallas, (population .5M) there were over 50 Agents. This was the result of reasonable plant fees in Collin County compared to the much higher entry and monthly access fees in Dallas County.

Underwriter owned plants in Dallas county have recently reduced their monthly fee to under $15,000 per month since a new title plant entered the market.

How have the Underwriter Directs and few large Independents Agents managed to control the Dallas County title market for an approximate 25-year period? In short, the owners of these plants kept the cost of access to the plants arbitrarily high. Additionally, the Vendor for the two Joint Plants in Dallas County was also the Vendor for the Dallas County Clerk and were instrumental in keeping others from obtaining the records.

To illustrate, the cost to purchase certain public records, the foundation for a title plant, in Harris County was about $5-10K. But, the cost to purchase the same records in Dallas County was approximately $2.4 Million. Our firm complained to the Attorneys General Office, Open Records Division about this desparity. A part of our complaint was that the Vendor for the County was paying nothing for the records while generating hundreds of thousands of dollars per month and at the same time keeping the records out of the hands of competitors. This is a great untold story.

Nothing was done about this until a new County Clerk took office. When this happended, our firm again requested the records as we had done before. This time, the new County Clerk was told by the County Vendor that they, the Vendor, had a copyright on the public records and how they were organized. This prompted the new Dallas County Clerk to file her own compaint with the Attorney General Open Records Division. As you might expect, the Attorney General let the county Vendor know in a 14 page opinion (framed in my office - our attorney had written a brief in support of the County) that in fact, these records were NOT copyrightable and they must be released to the County Clerk.

End of story, right? Wrong.

This same company turned around and sued the State of Texas Attorneys General's office in a Travis County District Court (which was their legal remedy.) In Texas, we have a saying, "that takes huevos."

Violations of the Texas Open Records Act are a criminal offense and the State had recently gotten it's first criminal indictment. A few weeks later, there was a meeting in Austin between this Vendor and the AG's office and not long after the County was able to release the records.

It took our firm over three years to acquire this information from the county. Since that time, the Vendor has been replaced by the County but remains the Vendor for the Dallas title plants.

If you control the Title Plants (where Title Evidence originates) the Title Examination, the Underwriting and the records from the County Clerk's office then you control the market.