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Title Insurance: A Totally Legal Scam

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When my friend refinanced her mortgage, I was surprised that she had to pay for title insurance all over again (and title insurance is not cheap, in fact, it’s pretty ridiculously expensive for what you get). See, the way I saw it, she paid for title insurance the first time around and it insured that her title was clean for her. So… if it was clean then (and insured against mistakes, fraud, etc.), why would she have to get it again considering there was only one change between the first time she bought it and the second time, the lender providing the loan. When you get title insurance, they’re supposed to double check that all the t’s are cross and all the i’s are dotted, and then insure you against their own mistakes. If you’re still the owner, why do you need to buy it again?

Well, it turns out that the title insurance follows the loan and the insurance policy expires when the loan is paid off. When you refinance, the new lender pays off the old lender, which means the old loan is paid off, and the title insurance expires… and you get the opportunity to pay for title insurance all over again. Talk about a scam that is totally legal…

{ 80 comments, please add your thoughts now! }

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80 Responses to “Title Insurance: A Totally Legal Scam”

  1. Ruby Dalton says:

    We have been with the same lender for15 years. they suggested we us First Canadian Title to do the searches on the property. We had to use the equity in our home12 months ago to raise grandchildren. We now want to consolidate line of credit and mortgage, We are being told we have to pay again at the same Bank of Montreal for a title search and a new appraisal with First Canadian Title. We feel this is a rip off.

  2. 6alpha says:

    How about this one for a legal scam. I bought a new home from pulte/Del Webb, cash,7 years ago.
    I recently sold the home to a cash buyer.
    The home was vacant for about 2 years prior to the sale. I had to buy her a title insurance policy. MY agent wrote it into the sales contract without pointing it out to me. These things are always done in a big hurry. My fault. This policy,which I read, had an out clause stating if all the I’s and T’s weren’t seen to. the policy was void after 6 months.
    This title company did this without a gun and a clear consience. Or no conscience.

  3. Grapenut says:

    I am refinancing now, and my (new) lender is informing me that there are 2 types of Title insurance. One for the lender only and a different type that protects the buyer. This was very misleading to me during my initial purchase & loan process. I actually picked the title insurance company and paid their fee; and now they are telling me that I infact do not have title insurance, that all I actually did was pick and pay for the bank’s title insurance. So misleading, that a huge transaction like this could be this way. Absolutely livid.

  4. Bill Faust says:

    I have BOUGHT & SOLD 22 PROPERTIES IN THE LAST 33 Years and I am really tired of this Title Insurance scam. I was on line looking for some one to e-mail but could not find a site. It is time for home owners/buyers to come together and stop this rip off. Bo you/or any one else have any ideas.
    Thank you,
    Bill Faust

    • Richard Smith says:

      Simply refuse to pay it. You may not get the loan you are applying for but it your selling your property, then insist that the buyer pay for it if they want it. You are, after all, guaranteeing the right to sell under the Warranty Deed.

  5. Bill Faust says:

    We need to come up with a web site to give everyone who has complaint a Senator or a Representative a place to go to ask that person to change the laws. I am available to help

  6. laura pierce says:

    We bought a brand new property in Myrtle Beach and are paying cash. It was our option to pay Title insurance for almost $500 and another $100 for the binder – to hell with that – if it comes down to it we’ll sue the builder who dotted all their T’s and dotted their i’s with lawyers of their own!!!

  7. Don George says:

    Buying a new constructed home in Nocotee Fl, Pulte Builder, paying cash.
    Fl has the highest title insurance rates I have every seen.
    This property had one owner the Winn Dixie had it as a hunting perserve and was subdivided among builders like Pulte.. Since Pulte is at least warranting the property with A special warranty deed I’m going to skip the title insurance, and buy flood insurance with the money.. Think the flood insurance would pay off way before any title claims…

  8. Gkrauss says:

    Title Insurance scam: if you read their 10Ks and 10Qs you find that a title insurance pays out only 8% of the collected premium (any other insurance pays over 80%!!), this is better than drug-trade. They spend over 60% (!!!) of the premiums to pay commissions to agents, title companies, attorneys as sales commission.

    And the biggest scam: They all work with FUD, often say its “mandatory”.

    And: Even after intensive search you will NOT find any claims and cases paid by a title insurance.

    I want to own one. A license to print money.

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