Streamlined Closing Costs Sought

First American Corp. said Thursday that it was seeking state regulators’ approval for a streamlined rate structure that would allow California homeowners to pay one fee for the various title and escrow services associated with refinancing a home loan.

The Santa Ana-based company said it expected to see at least a 6-cents-a-share drop in 2005 earnings if the Department of Insurance endorsed the rate change.

Title insurance and escrow charges are two of the biggest costs in selling or refinancing a property. The costs tend to swell substantially as additional charges, known in the industry as “junk fees,” are tacked on for things such as document processing, wire transfers and sub-escrow payments.

If approved, First American’s rate changes would apply only to refinancings, not purchases.

The company said that by establishing a single rate for its title and escrow services, it could eliminate many of these junk fees for California homeowners who refinance, lowering homeowners’ costs by an average of 30%. Much of the process is now automated, which inherently lowers costs, said First American Chief Executive Parker S. Kennedy.

“We reached a point where our systems have taken a quantum leap in terms of efficiencies,” he said Thursday.

Kennedy said the timing of the proposed rate changes was accelerated because of a pending investigation by state Insurance Commissioner John Garamendi, who is looking into title insurers’ arrangements with other real estate companies. So far, Garamendi has subpoenaed two First American rivals -- Fidelity National Financial and LandAmerica Financial -- for information pertaining to so-called captive reinsurance programs, which he asserts are elaborate “kickback” schemes that drive up consumers’ costs.

First American last month settled a similar investigation with Colorado regulators by agreeing to pay customers $24 million. The company has been cooperating with Garamendi’s office.

In California, insurance companies are required to submit proposed rate changes to the Department of Insurance for review before they can go into effect.

First American shares fell 46 cents, or 1.3%, to $34.53 on the New York Stock Exchange. The stock has gained about 15% in the last year.