Comments on: Title Insurance Rant

By: Diane Cipa

Diane Cipa — Tue, 05 Jun 2007 20:40:23 +0000

Title insurance as a product is NOT a scam. The problem is that the bad guys in the business took over and created an environment that eliminated competition. It’s the delivery system that is broken. Steve Poizner, the Commissioner of Insurance in California isn’t getting rid of title insurance. He is restoring integrity and real competition. Please, if you are concerned about this issue, visit Title Insurance Talk and also Radical Title Talk. I’m not posting on Radical anymore because the solutions are in play and the problems are being fixed.

Consumers have a real need for the insurance product BUT you have to shop around to find the honest, fairly priced companies.

By: Rhonda Porter

Rhonda Porter — Tue, 05 Jun 2007 13:07:04 +0000

I don’t know what title insurance rates are in California…in Washington state, the title rate for a refi is lower than for a purchase. Title insurance is only paid for when you have a transaction–it’s not a monthly or annual insurance cost, such as your auto or home (talk about a scam). I think title insurance is misunderstood a bit. The title fee that is paid during a refi is to insure the lender; not the home owner. So when a loan is paid off for a new mortgage, a new policy needs to be issued. The home owners policy was issued back when they bought the home.

With that said, it’s my opinion where a lot of the trouble for title insurance is with the ABAs. In my area, many real estate companies have business arrangements with title insurance providers (and mortgage companies). Some consumers are led to believe that this arrangement is a matter of convenience to them by their real estate agent.

There are indeed just a few big (giant) fish with many brands in this market.

By: Morgan Brown

Morgan Brown — Sat, 02 Jun 2007 21:27:37 +0000

Hi Schahrzad, The policy amounts are based on the loan amounts; so it is a function of the increased dollar amount liability they carry, not just the work needed to be done on the chain of title. But you are right, figuring out the title process and why they charge what they charge is not easy.

By: Morgan Brown

Morgan Brown — Sat, 02 Jun 2007 21:24:59 +0000

Brian Brady wrote a post called is Title Insurance a Scam? and pointed to an amazing story about tribal land rights in New Jersey. You can read it here: http://tinyurl.com/3actjp

I responded to this with:

Hey Brian,
That is an amazing story. I guess where I get caught up with the problem of title insurance fees is that for people that refinance multiple times over multiple years the need for a full new policy seems excessive. If the chain of title has been proven clear on the previous 3 refinances of the property can’t there be some savings to the customer?

My other complaint comes from actually “seeing” the true cost of title policies – the dollar amounts that aren’t supposed to be published. I didn’t want to go there in my post because I don’t want to get blasted for hearsay, but needless to say I was shocked at the discrepancies.

One last piece – I definitely think that title insurance is valuable and important. It is essential to protect the lender to allow them to continue to provide financing. It’s also important to the home owner to protect them against any claims – particularly in purchase transactions.

By: Schahrzad Berkland

Schahrzad Berkland — Sat, 02 Jun 2007 04:30:36 +0000

After I got “ripped off” by my title company, they insisted they deserved every penny. I think I paid 1/2% of my loan amount, so as housing prices rose, their fees are now double what it was 5 years ago.

I said, “You charged me twice for the same amount of work you did for me on this same house 5 years ago!”

She said, “We charge on a sliding scale, just ilke realtors. We work hard” blah blah blah.

I got taken for a ride by everyone, and what did I know? The entire title/escrow/loan/realtor process has practically no disclosures. It’s a mysterious black box through which you are led by your realtor. And you basically feel like you have no choice in any of it.

By: Morgan Brown

Morgan Brown — Sat, 02 Jun 2007 04:10:18 +0000

Ben – I agree. Insurance plays an important role in all aspects of our life and the home is no different.

I also agree that the problem is not being able to shop the insurance. The bigger problem is that title companies have to win business and hold on to accounts. Their account reps are just sales people trying to earn a commission and generate more business.

How would you go suppose people go about holding on to accounts that deliver you thousands of dollars in commissions a month?

By: Ben Keen

Ben Keen — Sat, 02 Jun 2007 03:58:00 +0000

PMI and title insurance are unacceptable because the person buying them or forced to buy them isn’t offered the opportunity to shop the business. I don’t mind the lender shopping their own title insurance, and charging for whatever coverage they want, but that should be grouped as part of the lender’s fees.

Likewise, if I was someone required to pay PMI, I’d certainly like to shop around for it, possibly providing additional information to the mortgage insurer that might allow them to write the business at a lower premium.

Just for comparison, I financed about 200K as part of my first house purchase in MD recently. The lender title insurance fee was about 600, and mine was about 600 too. I talked with my title agent (who was also the one selling the title insurance and who wanted to sell me the insurance but who was also an honest guy) and I thought, gee, for about 50K at risk initially, at less than a 1 in 1000 chance in having a claim, and knowing that early on the lender’s interest in the property is at risk, and their policy would be relevant to any problems — after all that, 600 is too high a premium.

And I LIKE insurance. If the title ins. were priced in what seemed a fair fashion, I’d have bought it, but this way? NHope.