Despite dutifully making mortgage payments for 20 years, a homeowner could still lose his property if someone notes a mistake in the title and makes a valid claim on it.

What's called a "worst case scenario" in the Maryland Insurance Administration's "Consumer Guide to Title Insurance" rarely occurs.

Lenders require anyone buying a house or refinancing to pay for title insurance as part of the settlement costs to make sure such a scenario doesn't happen.

State Sen. Delores Kelley is leading a commission of legislators and industry insiders to address the large and small problems that arise when unwary consumers enter the complicated process of buying a home.

Consumers should know, for example, that they can shop around for insurance providers, and that it's beneficial to have a provider with local experience.

"We need to make sure the public is protected and is more informed than it has been," said Kelley, whose District 10 includes parts of Catonsville.

"There should be more transparency," she said.

"And the public should be able to understand the affiliated arrangements (involved in title insurance) more thoroughly."

Kelley is co-chairwoman of the "Commission to Study the Title Insurance Industry in Maryland," established under legislation she sponsored in 2007, and is due to make recommendations to Gov. Martin O'Malley and the General Assembly in December.

The commission's next work session, which is open to the public, is Sept. 17 at 5 p.m. in the Lowe House Office Building, 6 Bladen St., in Annapolis.

The commission started studying the industry last year and has found diverse problems, Kelley said.

For example, some home buyers learned only in the final stages of settlement that the advance "good-faith" estimates they received for their settlement costs were off by thousands of dollars, Kelley said.

"In fact, in some cases, they were so many thousands of dollars off that people couldn't go through with settlements," she said.

In other instances, buyers or refinancers had been led through settlements by inexperienced "notary closers" who had been hired by out-of-state lenders and insurers and were often unfamiliar with Maryland law, Kelley said.

Those "closers" were often unable to answer questions consumers had about the settlement. They simply walked into consumers' homes and said, "Sign here, go here, on line 13 you need to sign this," Kelley said.

Other problems included escrow funds that had been mishandled, proper documentation that had not been filed and payments on prior mortgages in refinancing situations that hadn't been made or weren't recorded, she said.

Consumers' lack of awareness is a big problem, according to Michael Grace, senior vice president and regional director of Sage Title Group, a title services company with offices on Frederick Road in Catonsville.

"If a person doesn't get hooked up with someone who knows what's going on, it can be a disaster," said Grace, who has been in the business for 25 years.

Many times, consumers receive incorrect settlement estimates because out-of-state lenders or insurance processors are unfamiliar with how property taxes and tax increases work in Maryland, Grace said.

Local title service providers may be more aware of local laws and requirements and can also let consumers know about items such as reissue rates, which are discounted prices on title insurance for those who already obtained title insurance on their first mortgage and are now refinancing, Grace said.

Kelley said the commission is aware that there are many in the industry who serve consumers well.

She said she doesn't want to harm anybody in the industry who needs to be in the industry.

Still, there are people consumers should be protected from, she said.

Kelley said the commission "hasn't come up with any recommendations yet," and will be taking input from "rank and file citizens" through October.

"It is important for people to know the record is still open," she said.

After next month's public work session, the committee will "need to go through and review entirely what we have learned and then begin to work to decide what the recommendations will be," Kelley said.

The commission includes Sens. Jennie Forehand, a Democrat from Montgomery County, and Douglas Peters, a Democrat from Prince George's County, as well as Dels. Warren Miller, a Republican from Howard County; Doyle Niemann, a Democrat from Prince George's County, and David Rudolph, a Democrat from Cecil County.

It also includes representatives from the Maryland Land Title Association, the Maryland Coalition of Title Insurers, the Maryland Association of Mortgage Brokers, the Maryland Mortgage Bankers Association, the Maryland Bankers Association, the Maryland State Builders Association and the Maryland State Bar Association.

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