Title Insurance is a SCAM (commission, mortgage, mortgage, settlement)
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All of it. Lender's policies and Owner's policies each perform exactly one function; they provide revenue to title companies.
I don't have a problem with companies making money. However, given how heavily regulated the real estate and mortgage industries are, its shocking that this racket is not only tolerated but actually mandated by the government.
Fannie Mae, Freddie Mac, FHA and VA all require title insurance on the loans that they purchase, secure or guarantee. It's no loss to them because they make consumers pay for it.
I closed on a house yesterday. I thought I was being a smart consumer because I had the foresight to tell my lender that I didn't want Owner's Title Insurance. It seems that the majority of the time if you don't specifically say you don't want Owners Title Insurance, it will just appear on your settlement statement. Most lenders/brokers won't even preemptively explain what it is or why you need it.
Anyhow, I was taken aback when I saw the breakdown of the $775 worth of Lender's Title Insurance that I was required to have. The settlement statement was nice enough to breakdown the actual premium and the Title Company's Commission on the "SALE" of this product that I was forced to buy.
Premium to Underwriter: $75
Commission to Title Company: $700
This is over and above the title exam fee, closing fee, etc.
If they need to make an extra $700 off of me to stay in business, so be it. However, why are they able to hide this in a mandate fee? How many industries would even be allowed to sell a product where 90% of the price is commission?
The only way a product that delivers so little value to the customer relative to the price can succeed is if people are forced to buy it. I guess you could try and negotiate the rate down. I tried and failed. They said that's the standard rate, everybody does it, blah blah.
Apparently the title industry contributes to the right politicians because I never hear any regulation loving legislators talking about this.
Has anyone ever heard of any kind of "claim" being filed on their title insurance? I'm guessing the claims department is pretty small at the companies that underwrite these policies. '
Well......The title insurance you are required to buy is title insurance that covers the bank. Not you. If you wish to buy your own title insurance, that is optional.
Do you need title insurance in a refi situation? I am planning in refinancing my loan in a few months and was curious if i had to pay for that again. (I just bought the house last year)
yes, you do. It will be at a reduced rate - though not as much as you'd like/expect.
You basically WAY overpaid for the insurance for the first mortgage, which covers that loan company for the life of the loan. Now you're paying that mortgage off, so the new loan company also requires title insurance.
the theoretically reduced "rate" is for the search (since they only have to search a year back), not the loan amount
Note that it is title Insurance. That means when something back in the train of deeds was overlooked, the title insurance company will pay for the remedy. Was there an easement someone forgot about? You might have fewer rights to your land than you are imagining. However, it might be possible for you to trace the deed back to forever and still protect your self when someone sues you about it. So go for it.
momtothree: For a refi I found that going with the same title company as before should get you a reduced rate.
Do Title Insurance companies ever refuse to cover a property? I know that they go back and check for a unencomberd title - do they fix problems they find? My guess is that the payout ratio is very low so it is a very profitable business.
Do Title Insurance companies ever refuse to cover a property? I know that they go back and check for a unencomberd title - do they fix problems they find? My guess is that the payout ratio is very low so it is a very profitable business.
Yes. During the bust with all of the MERS issues, the large banks had to indemnify the title companies to issue policies on MERS involved properties.
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