PhillyDeals: Some borrowers take heavy hit from insurance fee increases

Starting this month, it costs more to buy state-mandated title insurance, so you know the papers for the Pennsylvania house you're buying from the bank are for real.

The Pennsylvania Insurance Department agreed to let title-insurance companies boost their government-mandated fee by what it says is an average 7 percent. It's the first increase since 2002.

But the state has also "simplified" the title-insurance fee system at insurers' request, eliminating past discounts for homes that were already sold and title- insured in the last decade, and newly constructed homes.

For some recent purchasers, that's meant much higher increases.

Fred Glick, of Philadelphia-based U.S. Loans Mortgage L.L.C., cites a Delancey Street client "who was supposed to have paid $3,458 but will now have to pay $5,350" after losing the 10-year discount for a $1.5 million home purchase. Some borrowers hit by big insurance increases may no longer qualify for their loans, he added.

"Appraisal costs have also skyrocketed," Glick told me, but those are set "by the market," while title-insurance fees are imposed in Harrisburg under the influence of insurance companies and agents.

"Real estate agents can't set commissions at 6 percent" under federal antitrust limits, Glick said. "But the insurers can set title-insurance rates. It bothers me."

Tables posted by the department show charges now total $500 for the first $30,000 in property value, plus $6.50 for each additional $1,000. That's for home purchases; refinancings cost less.

"This is not something that happened overnight," counters lawyer Murray Levin, owner of title-insurer Grateful Abstract L.L.C. (he's a Dead fan.)

While some discounts have gone away, the new rate schedule gives new discounts to people who refinance repeatedly, Levin told me.

In their joint application for higher rates, insurers claimed "the average production and underwriting costs" for Pennsylvania titles "almost doubled from 2000 to 2010, increasing from $1,133 to $2,254," putting low-end loans below the industry's target "5 percent profit margin."

Overall, "claims are way up, mainly as a result of identity theft and property theft," Levin added. He cited the 2008 bankruptcy of LandAmerica and the sale or disappearance of other title insurers as signs of the industry's difficulties.

Shouldn't online public records make it tougher to phony up titles, driving title-insurance costs lower as digital systems improve?

"It seems to be about a tie" in the race between technology and fraud, said Glick. "Making information more accessible also makes it easier for the bad guys."

Amoroso's, the century-old, family-owned Philadelphia bread-roll maker that supplies hundreds of hoagie shops and grocers with the region's distinctive soft sandwich rolls, plans to move from its 50-year-old plant at 845 S. 55th St., according to workers and the bakers' union president.

"The company says they are going to move, in a couple of years. According to them, they don't have a facility yet," Barry Fields, president of bakery workers' union Local 6, told me after I called to confirm reports from employees.

The union is in negotiations for contract renewal for 150 workers at the bakery, which is also the hub for dozens of daily-delivery drivers. Fields said the bakers average $15 to $16 an hour.

Employment was higher when the Amoroso family made rolls for Wawa stores at the site. But that work moved to the Omni bakery, owned by a partnership between cousins Daniel and Leonard Amoroso and Atlantic City's Mulloy family, in 2008. New Jersey lured the new bakery, which eventually employed over 350, with tax breaks and $14 million in cut-rate financing.

(Around the same time, Pennsylvania was investing more than $30 million in cheap loans for Tastykake's new dessert bakery in South Philadelphia, now owned by Flowers Foods.)

Leonard Amoroso didn't return calls seeking comment Tuesday.