79 FRB 517 (May 1993)

Norwest Corporation
Minneapolis, Minnesota

Norwest Corporation, Minneapolis, Minnesota ("Norwest"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23(a) of the Board's Regulation Y (12 C.F.R. 225.23(a)) to acquire through its indirect subsidiary, American Land Title Co., Inc., Omaha, Nebraska ("American Land Title"), substantially all of the assets of Community Title Guaranty Company, Lombard, Illinois ("Community Guaranty"), and thereby engage in title insurance agency and real estate settlement activities. These activities will be performed in five offices in Illinois./1/

Notice of the application, affording interested persons an opportunity to submit comments, has been published (57 Federal Register 61,601 (1992)). The time for filing comments has expired, and the Board has considered the applications and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.

Norwest, with total consolidated assets of $35.3 billion, is the largest commercial banking organization in Minnesota./2/ Norwest controls 79 banking subsidiaries that operate in 12 states and owns a number of subsidiaries engaged in nonbanking activities.

The Board previously has determined that title insurance agency activities are permissible under section 4(c)(8)(G) of the BHC Act ("exemption G"), which authorizes bank holding companies that engaged in insurance agency activities, with Board approval, prior to 1971, to engage, or control a company engaged, in general insurance agency activities./3/ Norwest qualifies for exemption G rights./4/

Real estate settlement services include activities associated with the closing of a real estate purchase transaction,/5/ and the Board previously has determined that these activities are closely related to banking./6/ The proposed activities of Community Guaranty are identical to those activities previously approved by the Board, and Norwest has proposed to conduct the settlement activities under the same terms and subject to the same conditions as in the earlier Board Order regarding this activity./7/ Thus, the Board concludes that Notwest's proposal to engage in real estate settlement services is closely related to banking for purposes of section 4(c)(8) of the BHC Act.

The Board is also required to determine whether the performance of the proposed activity by Norwest is a proper incident to banking-that is, whether the proposed activity "can reasonably be expected to produce benefits, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8).

Consummation of this proposal can reasonably be expected to result in public benefits by providing added convenience to Norwest's customers. In addition, the activities of Community Guaranty represent a small share of the total market of these services, and there are numerous competitors that provide title insurance agency and real estate settlement services. Accordingly, the Board concludes that the proposal would not have any significantly adverse effect on competition in the provision of these services in any relevant market.

There is no evidence in the record to indicate that consummation of these proposals is likely to result in any significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices that are not outweighed by the public benefits in this case. The financial and managerial resources of Norwest and its subsidiaries are also consistent with approval. Accordingly, on the basis of all of the facts of record and commitments made by Notwest, the Board concludes that the public benefits that would result from approval of these applications outweigh the potential adverse effects, and that the public interest factors it must consider under section 4(c)(8) of the BHC Act are consistent with approval.

Based on the foregoing and all the other facts of record, the Board has determined to, and hereby does, approve the application subject to all of the terms and conditions set forth in this order, and in the above noted Board Orders that relate to these activities. The Board's decision is specifically conditioned on compliance with all of the commitments made in this application, including the commitments discussed in this Order and the conditions set forth in Norwest/American Land Title. For the purpose of this action, all of these commitments and conditions will be considered conditions imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law. The Board's determination is also subject to all of the terms and conditions set forth in the Board's Regulation Y, including those in sections 225.4(d) and 225.23(6), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the provisions of the BHC Act, and the Board's regulations and orders issued thereunder.

This transaction shall not be consummated later than three months after the effective date of this Order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Minneapolis, pursuant to delegated authority.

By order of the Board of Governors, effective March 8, 1993.

Voting for this action: Chairman Greenspan and Governors Mullins, Kelley, LaWare, and Lindsey. Absent and not voting: Governors Angell and Phillips.

JENNIFER J. JOHNSON
Associate Secretary of the Board

Endnotes:

1. Community Guaranty also performs title abstracting activities, including title searches of real estate. The Board believes that title abstracting is incidental to conducting title insurance agency activities, because it provides necessary information needed to authorize the sale of a title insurance policy.

2. Data are as of June 30, 1992.

3. Norwest Corporation, 76 Federal Reserve Bulletin 1058 (1990) ("Norwest/American Land Title"); see First Wisconsin Corporation, 75 Federal Reserve Bulletin 31 (1989), aff'd sub nom. American Land Title Association v. Board of Governors, 892 F.2d 1059 (D.C. Cir. 1989).

4. In 1959, Norwest received Board approval to retain its general insurance agency subsidiaries and, accordingly, is a grandfathered bank holding company for purposes of exemption G. Northwest Bancorporation, 45 Federal Reserve Bulletin 963 (1959); Norwest Corporation, 70 Federal Reserve Bulletin 235, 470 (1984); Norwestl American Land Title, supra.

5. Specifically Community Guaranty will:

(1) Review the status of the title in the title commitment, resolve any exceptions to the title, and review the purchase agreement to identify any requirements in it in order to ensure compliance with them;

 

(2) Verify the payment of existing loans secured by the real estate and verify the amount of and then calculate the prorating of special assessments and taxes on the property;

 

(3) Obtain an updated title insurance commitment to the date of closing, prepare the required checks, deeds, affidavits, and obtain any authorization letter needed;

 

(4) Establish a time and place for the closing, and ensure that all parties properly execute all appropriate documents and meet all commitments;

 

(5) Collect and disburse funds for the parties, hold funds in escrow pending satisfaction of certain commitments, prepare the HUD settlement statement, the deed of trust, mortgage notes, the Truthin-Lending statement, and purchaser's affidavits; and

 

(6) Record the appropriate documents as required under law.

6. Norwest/American Land Title, supra.

7. Id. Norwest has committed to advise its customers that they are not required to purchase its real estate settlement services in connection with the purchase of title insurance in a real estate transaction. Norwest has further committed that it will not require its customers to purchase its real estate settlement services in connection with a loan origination. In addition, section 106 of the Bank Holding Company Act Amendments of 1970 generally would prohibit Norwest from tying extensions of credit to the purchase of services from American Land Title or Community Guaranty.