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ALTA Statement Regarding Inaccurate Commentary about Title Insurance

Recently Daily Mortgage News’ Chrisman Commentary amplified inaccurate assertions about title insurance. Below are the facts that undercut the false claims.

Myth: Title insurance is “seriously overpriced.”

  • Fact:  While other forms of insurance have seen rate increases in recent years, the cost of title insurance coverage actually decreased 7.8% nationally since 2004 and roughly 5% from 2019 to 2021, based on recent industry financial statements. For title insurance, a homebuyer only needs to pay a one-time fee at closing, which is about .5% of the purchase price of a home.

    It is critical to understand the difference between an owner’s policy of title insurance and a lender’s policy. A lender’s policy protects against claims that may affect the lender’s loan and does not protect the owner’s property rights, which is why title professionals recommend that consumers purchase an owner’s policy to protect one of life’s greatest investments.

    Without title insurance, homeowners are not protected from a devastating financial loss – sometimes in the tens of thousands of dollars – that may result from a title defect, a tax lien, an undisclosed easement, fraud, or forgery. Importantly, title insurance also covers legal fees and court costs to defend a consumer’s property rights if a legal dispute arises. This means that title companies will fight for homeowners to stay in their homes for no additional cost.

    In approximately half of the states, the seller helps pay for title insurance in some form – whether the seller splits costs with the homebuyer or pays for the owner’s policy fully, with just a nominal cost to the homebuyer for lender title policy coverage. Title insurance companies also offer numerous methods to reduce the cost of title insurance – including a discount when the owner’s and lender’s policies are issued simultaneously.

    When a homeowner refinances, they are also required to purchase a lender’s policy of title insurance on a new loan. In the time period between the purchase of a house and refinancing, problems could have arisen that the lender must know about before approving a new loan, such as a lien from a contractor or a judgment on the house due to unpaid taxes. A new lender’s policy is necessary when refinancing to protect the lender, but most title insurance companies offer discounted refinance rates to reduce the cost.

Myth: Title insurance companies have “fat profits” because they pay out so few claims.

  • Fact: Title insurance is fundamentally different than other insurance products. Unlike other insurance products where most of the upfront cost is marketing, for title insurance, significant upfront expenses are related to conducting public records searches, examination, and rectifying problems found. The work of title insurance professionals is to not only prevent claims from being made, but also to provide coverage if a defect arises. Claim prevention is paramount because a claim on someone’s property can be devastating and costly, and it would not be resolved by simply receiving a check. Low claims rates means that the title professionals did their jobs properly at the outset.

    Importantly, title insurance also protects against “unknown” risks that are not found in a public records search – such as federal tax liens, HOA liens, and fraud or forgery of title documents. That is why much of the cost/expense goes toward paying expert title professionals to review title and correct any issues before issuing a title insurance policy.

    It is the title insurance company’s willingness to stand behind this work – even if the defect originated in faulty public records or was unknown – that provides lenders with confidence that they have a first lien mortgage, and homeowners with peace of mind that their property is truly theirs.

Myth: In Iowa, title insurance “costs $175 for home purchases up to $750,000” compared to “$1,400 to $2,700 for the median home” in the rest of the country.

  • Fact: The current government-operated system in Iowa is often cited as an alternative to traditional title insurance. However, while the cost for title insurance in Iowa can be lower than rates in some other states, comparing title insurance in Iowa and title insurance in other states is comparing apples to oranges.

    In Iowa, title insurance costs do not reflect all the necessary costs that are normally included to produce a title insurance policy. The total cost that consumers pay for title searches, examinations, and clearing of any title problems in Iowa do not differ substantially from other states. In 2021, Iowa’s total closing costs were higher than 12 other states.


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