FARMERS BRANCH, Texas – Credit unions in the state are exploring a way to work around a legal obstacle that has blocked them from earning income from mortgage title insurance sold to their members. On Nov. 15, the Texas Credit Union League Services Board approved the formation of a management company to pursue the formation of a joint venture title insurance company. Linda Winkfein of TCUL Services emphasized the plans for the CUSO are still in the preliminary stage, and details concerning the structure of the CUSO still have to be worked out. One of the ideas being considered is that the company would be managed by TCUL Services, Steve Trimmier & Associates, Birmingham, Ala. and Stewart Title, which has been processing members' title insurance for area credit unions. Steve Trimmier & Associates is the general counsel for the Alabama Credit Union League. The firm has been instrumental in putting together similar types of CUSOs in Alabama and Florida. Stewart Title would provide the title insurance expertise to the CUSO, and take over the personnel part by providing the staff for the CUSO. Credit unions are prevented by RESPA restrictions from receiving anything in return for title insurance sold to members. But under the CUSO structure, participating credit unions would process their member title insurance through the CUSO and receive dividends based on the percentage of their respective ownership in the CUSO. Seventy-five percent of the income would flow back to the owner credit unions. Last month, TCUL Services invited six credit unions to participate in a focus group to gauge the CUs' interest in forming a title insurance CUSO. The six Texas credit unions were: Advantial CU, Dallas; American Airlines FCU, Fort Worth; Educational Employees CU of Fort Worth; Fort Worth Community CU; Texans CU, Richardson; and Vought Heritage CU, Grand Prairie. Advantial's President/CEO Gary Jester was one of those who attended. "Because of RESPA restrictions, we now have to send our members to title insurance companies. We have to pay them a fee, and they're the ones that wind up participating in the profits. There is a significant margin between the costs of title insurance and what credit unions have to pay. As part owners of the title insurance CUSO we'd be eligible to get a share of the profits." Advantial has about 1,538 first mortgages outstanding worth about $88 million. It holds both first and second mortgages on its books. "Like every credit union, we're trying to find ways to generate more revenue. Participating in the CUSO will give us a way to share in the CUSO profits," said Jester. Although his interest in the CUSO has been peaked, Jester still has questions he wants to ask Stewart Title and Steve Trimmier when the group meets again at a second meeting tentatively scheduled for December or January. For one thing, Jester wants to know how much of an investment participating credit unions will have to make in the CUSO. He assumes there will have to be some buy-in, and he wants to know how much. "Our percentage of ownership is still in limbo," he said. Sue Travis, manager of Texans CU's mortgage lending department has the same question – and some others of her own. "Before I recommend Texans commit to the CUSO I want to know how much we'll have to pay in and how much we'll be getting out. What will the dividends be? Title insurers get to keep a percentage of each policy they sell. This would be a way for the credit unions to earn dividends from the title insurance sales, but the question is, how much?" -

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