Tuesday, October 27, 2015

The Claims Canard

You’ve probably heard some version of this refrain: "Why should I buy title insurance? It’s a scam. Title insurers never pay claims." That canard has been knocking around the real estate business for decades and is simply not true.
Following that type of thinking, each year, approximately 20 percent of homebuyers fail to protect their investment by not being certain they obtain an owner’s title insurance policy. Unfortunately, this leaves them exposed to serious financial risks. Title insurers do pay claims – millions of dollars worth each year – but the focus of title insurance is on preventing claims rather than assuming risk the way other types of insurance such as auto and homeowner’s do.
So our efforts are upfront. During the home-closing process, title professionals diligently examine public records, and if a problem is discovered the title professional works to resolve it before a purchase closes. In fact, during the title search, title companies find and fix problems with the title in more than 30 percent of transactions – usually unbeknownst to the consumer or lender.
While most problems can be located in a title search by skilled professionals, there can be hidden hazards that even the most thorough search will not reveal. Examples include:
  • Undiscovered tax liens
  • Forged signatures in the chain of title
  • Recording errors
  • Undisclosed easements
  • Title claims by missing heirs or ex-spouses
Owner’s title insurance protects property rights from threats like these. Here’s a real-life example of how it works.
True Story
A family in Missouri unknowingly purchased their home from a seller who had taken out a $419,000 loan on the property. This fact was not discovered during the closing process, and the family’s lender paid the seller directly instead of paying off the existing loan. The family eventually faced foreclosure because that other lender had a claim against their property. Fortunately, the family had owner’s title insurance. The title company paid the debt and the family kept their home—and peace of mind. 
This story has a positive ending, but without owner’s title insurance, the family could have faced serious costs, and even eviction.
The next time you hear that claims canard, assure the speaker there is no basis in fact for it. No home owner should ever be without title insurance.
 

Tuesday, October 13, 2015

Notes from Boston


Mary and I are just back from the annual American Land Title Association Convention, held in Boston this year. Two topics were top of mind for title insurance professionals as we gathered from across the country: TRID and outreach to homebuyers.

As far as TRID is concerned, we’re now a week past the implementation date, and new loans are being processed under the new rule. In the title business, most of us are still awaiting our first new Closing Disclosure Forms as lenders work their way through the new process. Most of the talk about TRID at the convention revolved around potential issues that title underwriters and agents feel might be coming down the pike and efforts in Congress to institute a formal grace period for those moments when good faith efforts fall a little short.

The House of Representatives passed the Homebuyer Assistance Act in veto-proof, bipartisan fashion last week, and we hope the Senate will follow suit soon. While the White House has threatened a veto, let’s hope that the President will relent when the bill reaches his desk, or at least the Senate also passes the bill with a veto-proof majority. Asking Washington to institute a grace period is not asking for special treatment. Lenders, attorneys and title industry members simply want to be able to implement the new rule as seamlessly as possible in the coming months without being overly concerned about daunting repercussions for honest mistakes. 

I urge you to contact your senators in support of this bill. As third in command of Democrats in the Senate, Illinois Sen. Dick Durbin is a particularly crucial leader to get on board.

Regarding consumer outreach efforts, ALTA is urging members to get more deeply committed to educating home buyers and sellers about the residential real estate process. There is growing awareness that consumers in the coming years will increasingly be making decisions regarding vendors throughout the transaction process. Arming them with comprehensive, easy-to-understand information is a first step in helping consumers make good choices.

Take a look at
ALTA’s homeclosing101.org web page and direct your customers to the page for more information about our industry. The Realtors’ and Mortgage Banking Association’s web sites also have consumer-oriented educational tools. Better consumer outreach is critical, I believe, as members of the home-buying public become more sophisticated in their approach to the residential real estate process. Let’s help them get there.

Questions, comments? Please post your thoughts for all to see and respond to. 


Frank