Last
month,
the
Biden
Administration

announced
the
revival
of
a
previously
abandoned
pilot
program
that
would
waive
the
requirement
for
lender’s
title
insurance
on
certain
home
refinances
–
part
of
a
misdirected
effort
to
address
housing
affordability.
Additionally,
the

CFPB
has
shortsightedly
questioned
the
benefits
and
cost
of

title
insurance.

It’s
uncertain
whether
federal
regulators
are
purposefully
misleading
Americans
about
the
potential
savings
or
just
don’t
understand
how
title
insurance
works.
The
truth
is
the
cost
of
title
insurance
coverage
has
decreased
nearly
8%
over
the
last
two
decades
due
to
innovation
in
the
industry.

Critics
of
title
insurance
highlight
a
limited
understanding
of
the
vital
nature
of
title
insurance
protection
by
mistakenly
and
repeatedly
referring
to
the
industry’s
lower
claims
rate
relative
to
other
lines
of
insurance.
A
70%
claims
rate
—
standard
for
other
insurance
lines
—
on
property
rights
would
be
catastrophic
to
our
economy.
Success
in
the
title
insurance
industry
is
measured
by
preventing
claims
in
the
first
place.
A
lower
claims
rate
means
that
title
agents
are
succeeding
in
their
job
by
resolving
any
title
issues
and
reducing
risk
upfront
–
protecting
the
largest
asset
most
households
will
ever
own
and
source
of
their
greatest
wealth
over
time.

Title
insurance
is
significantly
different
from
other
lines
of
insurance.
For
a
one-time
fee
paid
at
closing,
title
insurance
provides
homeowners
protection
for
as
they
or
their
heirs
own
the
property.
Other
types
of
insurance
charge
monthly
or
yearly
premiums.
The
facts
are
clear:
title
insurance
is
essential
to
protecting
homeowners
and
their
most
important
investment
both
during
the
initial
purchase
of
a
home
and
refinancing
–
and
it
exists
for
a
reason.

Without
a
title
insurance
policy,
homeowners
can
find
themselves
fighting
for
their
property
over
issues
they
never
knew
existed.

Here
are
some
real-world
examples
of
how
title
insurance
protects
consumers:

Surviving
Spouse
Left
Without
Deed

Under
the
new
pilot
program,
the
requirement
for
a
lender’s
title
insurance
policy
on
certain
refinances
would
be
waived
–
but
this
can
leave
homeowners
vulnerable.
For
example,
a
property
owner
passes
away
and
leaves
behind
his
surviving
wife.
If
the
widow
isn’t
listed
on
the
deed,
issues
regarding
ownership
could
arise
when
the
wife
goes
to
refinance.
During
the
refinance
process,
title
insurance
professionals
would
do
their
due
diligence
to
disqualify
any
potential
heirs
who
may
attempt
to
claim
the
property
down
the
road.
This
would
allow
the
surviving
wife
to
officially
claim
ownership
of
the
property.
The
proposed
pilot
program
would
not
identify
this
type
of
issue
with
a
search
engine.

IRS
Tells
Couple:
“You
Don’t
Own
Your
Home”

After
purchasing
their
home
from
an
individual
who
had
acquired
it
from
an
IRS
auction,
a
couple
found
out
the
government
agency
had
rescinded
the
original
sale.
The
IRS
refused
to
turn
over
the
deed
to
the
new
homeowners
because
of
unpaid
tax
bills
by
a
previous
owner.
The
couple
contacted
their
title
company
and
were
told
they
had
coverage
for
this
dilemma.
Thanks
to
their
title
insurance
policy
and
the
great
work
conducted
by
their
title
professionals,
the
couple
was
able
to
keep
their
home,
and
they
didn’t
have
to
pay
a
dime
out
of
pocket.

Fannie
Mae
is
not
capitalized
to
address
these
issues,
nor
is
set
up
to
be
able
to
pay
these
types
of
claims.

Sold—But
Not
by
Homeowners

After
a
California
vacation
home
was
left
unused
for
several
months,
the
county
notified
the
homeowners
that
the
property
had
sold
–

but
the
owners
hadn’t
put
the
house
up
for
sale.
This
was
a
case
of
seller
impersonation
fraud,
where
an
unsavory
actor
posed
as
a
homeowner
and
fraudulently
“sold”
a
property.
Thankfully,
due
to
their
title
insurance
policy,
the
homeowners
were
protected
against
post-policy
fraud;
title
professionals
were
able
to
expunge
the
fraudulent
deed
from
the
record.
The
“buyer”
also
had
a
title
insurance
policy
for
the
transaction,
and
their
title
company
paid
them
the
purchase
price
of
the
home
–
money
that
they
otherwise
would
have
lost
without
their
policy.

Fraud
and
forgery
claims
account
for
more
than
20%
of
claims
expenses
and
dollars
paid
to
insureds.
Approximately
one-third
of
all
claims
are
for
issues
that
would
not
be
found
in
a
public
records
search
–
demonstrating
that
title
insurance
could
not
be
effectively
replaced
by
an
automated
search
engine
that
will
be
used
under
the
title
waiver
program.

Title
Insurance
Provides
Essential
Protection

The
above
examples
barely
scratch
the
surface
when
it
comes
to
the
protection
provided
by
title
insurance.
Time
and
time
again,
seasoned
title
professionals
have
saved
American
homeowners
from
their
homes
being
seized,
stolen,
or
defrauded.
The
Biden
Administration’s
pilot
program
would
put

Fannie
Mae
and

Freddie
Mac
in
charge
of
resolving
any
title-related
claims
that
arise
for
qualified
borrowers
refinancing
–
a
seismic
shift
in
the
housing
finance
system.

Title
insurance
is
equally
important
when
homeowners
refinance.
When
a
homeowner
refinances,
they
obtain
a
new
loan.
Lenders
require
a
new
title
search
for
a
title
insurance
policy
on
that
loan
to
protect
their
investment
in
the
property.
If
this
is
not
done
correctly,
the
homeowner
could
still
face
collection
on
a
previous
mortgage
thought
to
have
been
paid
off.
Similarly,
a
lender
could
face
the
risk
that
they
do
not
have
the
required
lien
priority.

Under
the
Administration’s
title
waiver
plan,
title
insurance
professionals
will
be
eliminated
from
refinance
transactions,
removing
a
key
layer
of
anti-fraud
protections
for
consumers
and
lenders.
Consumers
and
lenders
who
are
victims
of
refinance
fraud
would
have
to
investigate
and
negotiate
a
resolution
with
some
unidentified
department
within
the
GSEs,
and
consumers
could
ultimately
be
forced
into
property
sale
or
foreclosure.

By
turning

Fannie
Mae
and

Freddie
Mac
into
title
insurers,
the
GSEs
would
also
be
moving
beyond
its
charter
into
a
primary
market
activity.
The
2008
financial
crisis
happened
the
last
time
these
entities
took
on
significant
risk
for
which
they
were
ill-equipped
to
handle.

The
title
industry
agrees
that
homeownership
should
be
more
attainable
and
affordable
for
more
Americans.
However,
the
notion
that
title
insurance
is
in
any
way
a
principal
driver
of
affordability
challenges
is
misguided.
Title
insurance
is
crucial
to
protecting
American
homeowners,
lenders,
and
their
most
important
investments.

To
contact
the
editor
responsible
for
this
story:


[email protected]

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