Comments on: Title Insurance: A Totally Legal Scam

By: Goodmigrations

Goodmigrations — Fri, 02 Oct 2009 02:54:52 +0000

Excellent documentation, KR B. We just closed on our house today, and we refused the owner’s insurance b/c it just didn’t sit right with us. No one at the Title company could (or would) tell us the rate of claim incidence. It has to be the lowest risk in any of the insurance industries. Sure, car insurance is mandatory, but everyone has an accident at some point during their lifetime. Based on median home prices in 2005 and the amount that was paid in insurance claims that year (about 1/4 billion), the rate of incidence is about a thousandth of a percent. That’s a pretty acceptable risk level for me.

By: BK

BK — Sun, 20 Sep 2009 23:14:55 +0000

I’ll admit up front that I’m an Escrow Assistant (processor) for a title insurance company. Being completely honest, title insurance companies don’t get very much of the title insurance premium (regardless of how much work they put into a file). Unless a search is completed in the same county as the title insurance company, the company has to pay a large amount of that premium to the local plant doing the actual search (from 40% all the way up to 90%). So, for instance, if your title insurance premium is $1,000, the title insurance company may be getting a meager $100.

Something else you need to keep in mind is that the borrowers who have tried to scam or fraud mortgage and title insurance companies have hurt everybody. As a result of those who try to do this, both mortgage companies and title insurance companies have to protect themselves from fraud…just as government regulations help protect borrowers from overpaying for title insurance and related services. One example from an actual refinance was a borrower who tried to refinance the house right out from under their sick mother. Both the borrower and their mother bought the house together but, when the borrower tried to refinance, they tried to do it without the company knowing the mother was still around. Can you imagine what would’ve happened if the company had used the search completed when the house was bought instead of doing a completely new search? The mother would never have shown up and the borrower would’ve gotten away with it…and the company could’ve been sued by the mother when she found out.

Another examples of why a new policy is needed is shown above…Mechanics Liens, Tax Liens, and other types of judgments. From the time you buy a house until you’re ready to refinance it, a myriad of liens and judgments could’ve been filed which affect your property. One of the problems I came across recently was a judgment creditor who was paid off when the house was refinanced. Several months later, the borrower came to us wondering why the release of judgment hadn’t been filed…and when the judgment creditor was contacted on this, they tried saying that they weren’t paid on time and wanted more money before releasing the judgment. If the borrower hadn’t purchased a new policy, it wouldn’t have covered this problem. As stated above, title insurance policies don’t cover future problems…so since the judgment was filed after the first policy was purchased, it wouldn’t have covered this judgment. However, since a new policy was purchased and there was proof of how much the creditor was paid and when, and even though it was several months after closing, the company took care of the problems and got the release for the borrower.

Before you go around bashing all title insurance companies, you should do proper research. In every single industry, there are companies that will try to scam their customers. It is your responsibility as a borrower to do your research and make sure you are using a reputable company. Get recommendations from friends of companies they’ve used and have been happy with. Do some research and see what (if any) complaints or scam claims there are against the company you’re thinking of using. Get quotes from multiple companies but also keep in mind that the cheapest doesn’t always mean the best and don’t forget that, many times, you get what you pay for.

By: John Gainer

John Gainer — Sat, 12 Sep 2009 01:57:58 +0000

The purchase of a home is basically a scam for scavenger lawyers and other unscrupulous persons.(This may sound like a very vicious and angry statement, but it is true!) The consumer is burdened with unnecessary fees and charges that they don’t understand and no one explains to them. I guess “buyer beware” is a term coined and practiced often by lawyers. Title insurance certainly falls within this category. The number of claims ever made against a title are extremely small and the amount of commission paid by these companies to lawyers is unconscionable. You pay an attorney to do a “title search” and of course the lenders don’t have much confidence in the average attorney’s ability, so they require lenders title insurance. But lenders then require title insurance just in case lawyers didn’t do their search thoroughly. Well, I guess that’s OK, but the lender requires the borrower to pay for their insurance!!! That is not OK. Plain and simple there needs to be an overhaul to the entire practice of buying, selling,and refinancing real estate, to determine what are legitimate charges and what are not. Title insurance is probably the biggest fraud being committed against borrowers that there is, but it will not go quietly into the cold dark night….unless we all help it.

By: Mark

Mark — Thu, 13 Aug 2009 12:14:20 +0000

You don’t need to get title insurance ever. It is that simple. You also don’t need to buy a home with financing or refinance a mortgage that you have. Title insurance is required by your lender. You, without financing, don’t HAVE to get it, but you SHOULD. With financing, you must get it as lenders require it. I agree that the chance of a claim being made and a company paying out is small, but…….

By: Robert

Robert — Sun, 28 Jun 2009 13:56:14 +0000

I was in the process of refinancing my house in Staten Island when my Mortgage Broker presented to me a bill from a Title Company he was using on my file. Let’s say I was very surprised to see such high numbers, I was not expecting my closing cost to be so high. At that point I was very upset and my friend, who used to work in that industry, advised me to shop around. He told me that Title Insurance premiums are regulated everywhere in US but title fees are not. My friend advised me to get quotes directly from few different Title Insurance Companies in NY because their fees are not regulated and could be very different.
I followed his advice and called several Title Companies to get quotes for my refinance. After advising my mortgage broker that I was shopping for Title Insurance he was surprised and told me that other Title Companies won’t do a good job and most likely they’ll charge me even more at the closing. After comparing quotes from 5 different Title Companies I noticed that their fees were indeed very different. In fact, my mortgage broker’s Title Company gave me the highest bill. It was about $600 higher than others. Prudential Abstract 646-434-0888 was one of the Title Companies which I called. They provided me with good customer service and waived almost all of their fees. To make the story short I saved almost $900.00 by ordering Title Insurance directly through the Title Company. I was very satisfied and my advice to anyone would be to shop around when buying or refinancing a Real Estate.

By: KR B

KR B — Thu, 18 Jun 2009 19:22:19 +0000

What a surprise, a title company person defending title insurance. So tell me Dave, what is the percentage payout of received premiums in this industry? It’s among the lowest in the insurance industry.

It’s a scam that’s rife with overcharging and kickbacks.

http://www.consumerfed.org/pdfs/Title_Insurance_Testimony042606.pdf

By: Alex

Alex — Wed, 13 May 2009 21:51:56 +0000

Unbelievable! First you pay a seller who supposed to have CLEAR title. Then you pay closing attorney to do title search to make sure title is CLEAR. And even this is not enough: you pay to ensure yourself from screw ups of the first two. Seems like paying three times for the same thing: CLEAR title.

By: steve

steve — Mon, 12 Jan 2009 13:55:06 +0000

Philip – I agree with you. Any chance you can point me to where you got the 8% figure? I want to raise visibility to this evil tax on home onwership….

By: jim

jim — Tue, 06 Jan 2009 13:30:50 +0000

I agree. Why should I pay for it when I’m refinancing? That makes ZERO sense. Shouldn’t the insurance the first time cover me? Of course not! Because that would earn them less money!

By: Philip

Philip — Tue, 06 Jan 2009 08:05:32 +0000

Those on here defending the price of title insurance definitely work for or own a title insurance business. When you refinance you pay for a title search then pay for a whole new title policy. If there is a lien that doesn’t come up in the overpriced title search then the title insurance would pay. At the rate they charge every buyer/refinancer they pay out less than 8% of the total premiums they charge. In Florida there is no comparison shopping either. This is the biggest racket and should be illegal. Someone needs to sue and bring this to light. I am refinancing now and I may just have to be that one.

By: DanyO

DanyO — Sun, 01 Apr 2007 17:19:28 +0000

I guess the lenders are covering their butts, on your dime. They get you to pay the research, so “THEY” can make sure the title is clean and they won’t endup in troubles.

By: Dave Wirsching

Dave Wirsching — Sat, 31 Mar 2007 01:00:39 +0000

Every state’s rates and rules are different. In PA the binder doesn’t exist, but the discount for refinances within 2, 4 and 10 years does. In NJ the discount is even more complex.

Best advice – get multiple quotes. Use a service like TitleInsurance.com or GetTitleInsurance.com if you are looking for a quick way to get multiple quotes. They’re free.

By: Wealth Building Lessons

Wealth Building Lessons — Fri, 30 Mar 2007 18:59:42 +0000

if you know you’re going to refinance within 2 yrs, ask the title insurance company for a binder. it costs 10% extra but the next title insurance is supposed to be free.

it also works if you’re going to be selling within 2 yrs.

Also, the title insurance company should be giving you a discount if you refinance within a 2-3 year period but don’t have a binder. I always ask for one and get it.

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Free Money Finance — Fri, 30 Mar 2007 10:20:28 +0000

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By: broknowrchlatr

broknowrchlatr — Fri, 30 Mar 2007 04:04:24 +0000

I couple points to extend on John’s points above

You go to the title company. They check the history. Then they sell you insurance, just in case they screwed up.

You refinance. You very well may go with the same title company. They check again (to see if they screwed up the first time). Then, they re-sell you insurance against the possibility that they missed something both times. The kicker is that this insurance covers you for a time period that would be covered for by the first policy.