Don’t Be Forced Into Costly Title Insurance

Title insurance, typically, is a mandatory and rather large cost for those seeking a home purchase loan or mortgage refinancing - often in the $1,000-$2,000 range. But is it priced too high for what you get?

Equally important: Do referral relationships among reeal estate agents, title agents, lenders and mortgage brokers restrict price competition, create anti-consumer conflicts of interest and discourage buyers from shopping around for lower-cost title insurance and closing service options?

The Government Accountability Office (GAO), a non-partisan watchdog agency, made an in-depth examination of the title industry during the past year and came up with some unsettling findings:

• “Multiple characteristics of current title insurance markets, as well as allegedly illegal activities by a number of those involved in the marketing of title insurance, suggest normal competitive forces may not be working properly, raising questions about the prices consumers are paying.”

• Unlike most forms of insurance, where claims paid by the insurer often amount to 70 percent or more of the premium collected, with title insurance the claims amount to just 5 percent of premiums. Where does the rest go? Title agents pocket up to 90 percent of your premiums.

• Although in many states, premiums are set to reflect the work that title agents perform to check public records and remove any clouds on the title chain, agents also tack on separate fees for a title search, analysis of the abstracts, and a variety of fees.

The GAO acknowledges that title insurance is an important service and “can provide real benefits to the consumer and mortgage lender by protecting them from undiscovered claims against property they are buying or selling.”

But most home buyers are vulnerable when required to purchase coverage: They don’t know where to shop for the best deal.

The American Land Title Association, which represents insurers and agents nationwide, welcomed the GAO’s study of the industry, but disagreed with its findings on price competition and affiliated businesses.

In an interview, Ed Miller, chief counsel and V.P. for public policy, said:

“We would argue that there are a large number of agents competing pretty fiercely for business, and they offer real choices on pricing and services for consumer who shop.”

Bottom line for the mortgage seeker: Don’t roll over when it comes to title and settlement services. Be aware you can shop for lower-cost alternatives. Find them and you could save hundreds of dollars.

SOURCE: Detroit Free Press