On July 6, 1993 the Department of Insurance (DOI) issued an advisory concerning title agents issuing First Lien Letter Certifications. DOI is concerned that the practice may be becoming more common and therefore issues this Advisory to underscore the obligations of a title agent under the Idaho Insurance Code.
The issue arises when title agents are asked to certify that a recorded deed of trust constitutes a valid first lien against the mortgaged property. To accomplish this request the DOI understands that the title agents may issue “first lien letters” certifying the priority of the lien. Such a written certification that a recorded deed constitutes a valid first lien is an insurance product and issuing such is considered transacting the business of insurance. Title agents, however, are only authorized by their license to issue title insurance products on behalf of licensed title insurance companies to which they have been appointed and contracted. Title agents are not authorized to issue title insurance products on their own thereby subjecting themselves to the risk and liability associated with title insurance products.
Idaho Code §41-117A states that the director may impose an administrative penalty not to exceed fifteen thousand dollars ($15,000) upon any person who transacts insurance of any kind without proper licensing. As title agents are not licensed as title insurance companies it is the DOI’s opinion that title agents issuing “first lien letters” are engaging in the transaction of insurance without the proper licensing and are therefore in violation of §41-117A. Any title agents engaging in such activity are instructed to stop this activity immediately to avoid administrative investigation and action.
Examiner Title & Market Insurance Specialist
Idaho Department of Insurance