Opinion: Title insurance is an essential consumer protection

By BrokerOwner.net June 28, 2024 Housing News

Title
insurance
provides
vital
protection
to
the
largest
and
most
important
purchase
most
Americans
will
ever
make—their
home.
Without
this
essential
product,
owners
could
be
forced
to
pay
out
of
pocket
to
settle
costly
challenges
to
their
ownership
rights—or
even
worse—lose
their
home.

Unfortunately,
the
Consumer
Financial
Protection
Bureau
(CFPB)

recently
issued
a
Request
for
Information
(RFI)
on
mortgage
closing
costs—including
title
insurance—that
continues
a
concerning
pattern
of
labeling
legitimate,
well-regulated,
and
transparently
disclosed
costs
and
services
as
“junk
fees.”

The
agency
alleges
that
so-called
hidden
“junk
fees”
in
closing
costs
are
at
the
root
of
housing

affordability
challenges.
However,
the
term
“junk
fee”
is
vague
and
subjective
and
should
never
be
used
to
describe
title
insurance—a
crucial
product
that
protects
homeowners
and
their
property
rights
to
the
largest
asset
most
consumers
will
ever
have.
Director
Rohit
Chopra
himself,
in
a
recent
appearance

before
the
House
Financial
Services
Committee,
shook
his
head
“no”
when
asked
whether
title
insurance
was
a
“junk
fee”
in
questioning
from
Rep.
Brad
Sherman
(D-CA).

Title
insurance
products
are
comprehensively
regulated
at
the
state
level
by
departments
of
insurance,
and
title
insurance
companies
are
required
to
file
their
policies
and
rates
with
state
regulators
to
ensure
they
are
fair,
non-discriminatory,
and
adequately
protect
consumers—all
of
which
must
be
justified
using
actuarially
supported
data.
It
is
also
important
to
note
that CFPB has
no
authority
to
regulate
insurance
products
or
pricing,
as
that
is
the
distinct
purview
of
the
states—which
the
Bureau
itself
has
clearly
acknowledged
numerous
times
on
the
record
to
policymakers
on
Capitol
Hill.

The
services
provided
by
title
professionals
and
the
long-term
protection

title
insurance
provides
are
the
least
expensive,
yet
the
most
essential
components
of
the
homebuying
process.
Despite
increased
inflation,
our
industry
has
continued
to
innovate
to
improve
efficiency,
which
over
the
last
five
years
has
led
to
a
5%
decrease
in
the
cost
of
title
insurance
coverage.

The
one-time
fee
paid
at
closing
is
transparent
and
comprehensively
regulated,
and
most
importantly,
protects
consumers’
property
rights.
Without
it,
consumers
would
be
exposed
to
great
financial
risk.
Far
from
being
“hidden,”
title
insurance
fees
and
other
closing
costs
must
be
provided
and
disclosed
to
consumers
as
required
by
the
TILA-RESPA
Integrated
Disclosure
(TRID)
rule—which
was
developed
by
the

CFPB
in
2015
after
significant
consumer
testing
and
hundreds
of
millions
of
dollars
invested
in
partnership
with
our
industry
and
others.
Five
years
later,
the
agency
gave
itself
a
pat
on
the
back
when
its
own

research
showed
the
TRID
rule
improved
“consumers’
ability
to
locate
key
information,
compare
terms
and
costs
between
initial
disclosures
and
final
disclosures,
and
compare
terms
and
costs
across
mortgage
offers.”

Purchasing
a
home
is
a
significant
milestone
for
most
Americans,
and
the
title
industry
wants
to
protect
that
purchase,
which
is
why
title
professionals
go
beyond
just
issuing
a
title
insurance
policy
and
calling
it
a
day.
They
cure
defects
in
the
chain
of
title
that
could
jeopardize
a
new
homebuyer’s
dream,
collect
$3
billion
annually
in
unpaid
federal
and
property
taxes
and
child
support
as
well
as
rectify
other
liens
that
might
not
otherwise
be
found.
According
to
a

recent
study,
title
professionals
spend
approximately
22
hours
to
close
a
standard
transaction
and
45
hours
on
more
difficult
transactions,
which
make
up
36%
of
all
transactions.

They
also
combat
fraud
schemes,
like
wire
and
seller
impersonation
fraud.
Fraud
and
forgery
claims

represent
21%
of
the
total
dollars
spent
by
title
insurers
on
claims
expenses
and
losses,
with
the
average
fraud
and
forgery
claim
cost
exceeding
$143,000.
No
one
is
immune
from
such
schemes—even
Graceland,
Elvis
Presley’s
famous
estate,
was
almost

auctioned
off
last
month
in
a
brazen
example
of
seller
impersonation
fraud.

In
addition
to
being
an
essential
consumer
protection,
the
title
industry
significantly
impacts
the
economy.
The

total
contribution
of
U.S.
title
and
settlement
companies
in
2022
was
an
estimated
560,000
workers
earning
$43
billion
in
wages
and
benefits
and
generating
$82
billion
of
GDP
in
the
United
States.
Directly,
U.S.
title
and
settlement
companies
employed
155,000
workers
and
generated
$30
billion
of
GDP.
The
overwhelming
majority—90
percent—of
title
insurance
companies
nationwide
are
small
businesses.

ALTA
appreciates
the
opportunity
to
educate
federal
agencies about
the
title
insurance market
and
collaborate
on
thoughtful
approaches
to
address
housing
affordability
challenges.
We
strongly
believe
that
title
insurance,
and
the
essential
protection
it
provides,
is
something
that
consumer
protection
agencies
and
advocates
should
be
supporting,
not
questioning.