Average Reviews:
(More customer reviews)1. I am positive there are abuses taking place in the industry
2. State regulation and pricing are WIDELY varied. Having purchased homes in Indiana, title insurance was cheap, efficient and valued. The same cannot be said in Texas. The cost is ABSOLUTELY BURDENSOME.
3. Reform and greater oversight are absolutely required.
Having worked outside the US in real estate, the author must address the comparative costs of home acquisition in the US compared to other countries. Though a consumer is charged for title insurance benefiting both the lender and purchaser at the time of closing; the long term cost of money in the form of interest rate is lower as a result of credit enhancements, such as title insurance, widely available in the United States that allow money to be available at a lower cost to consumer.
Lenders that cannot access credit enhancements at a low cost to the consumer, price the title risk into their loans. So, as an example, instead of a loan being available at 6% for 15 years; lenders will add a quarter point to the loan for title risk and make the funds available at 6.25% for 15 years. To have a truly meaningful review of the title insurance industry, there must be a discussion of the long-term cost of additional interest consumers avoid by paying a one-time premium.
Maybe one of the key reforms that should be undertaken is to significantly reduce the cost of title premium paid at the time of a refinance. This is one of the most objectionable practices I see daily in the title industry.
The author mistakenly argues that title agents retain too much of the title premium when issuing a title policy, especially when compared to property and casualty insurers. Such a sweeping statement cannot be maintained when comparing states and the wide disparity between percentages retained by agent and amounts remitted to underwriters. There are many states in which the agent ultimately takes the risk of writing the policy and justifies the agent keeping more of the premium.
If an agent makes a mistake in searching the property that causes a loss, by contract the underwriter will settle the loss with the insured. However, if the agent's negligence is the cause of the loss, the agent will have to pay the underwriter back for actual loss and expenses associated with the claim pursuant to their agency contract. This fact alone makes meaningful comparison to property and casualty insurers impossible. To quote loss figures of $.47/$10.00 as evidence of overcharging laughable and misguided.
I am confident that figure is close to accurate for underwriters, but is net of the underwriter's salvage from agents and those individuals who actually are responsible for paying the loss. To accurately gauge the claim ratio, the author must look to the amounts paid by agents as loss to gain a clearer picture of how much goes out in the form of loss and loss adjustment expenses paid by the industry to claimants.
Again the author shows why his lack of any meaningful experience in the industry is a glowing weakness in his book. Texas, cannot be used so widely to condemn the industry in the other 49 states.
There are many other instances to point out the author's lack of understanding of the function title agent's play...but that is the topic for another book.
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The American Title Insurance Industry: How a Cartel Fleeces the American ConsumerAfter World War II, banks and other mortgage lenders began requiring insurance to protect them against flawed or defective real estate titles. Over the past sixty years, the title insurance industry has grown steadily in size, power, and secrecy: policies are available for both lenders and property owners and many title insurers offer an array of other real estate services, such as escrow and appraisal. Yet details about the industry's operational procedures remain closely guarded from public exposure.
In The American Title Insurance Industry, Joseph and David Eaton present evidence that improvements in recordkeeping over the last sixty years—particularly the advent of computers—have reduced the likelihood of a defective title going unnoticed in a property transaction. But the industry's flaws run deeper than mere obsolescence: in most states, title insurers are allowed to engage in anticompetitive business practices, including price-fixing. Among the findings in this meticulously researched study are instances of insurers charging premiums well above the amount necessary to compensate them for assuming the risk of defect and identical policies with identical risk that vary in price by hundreds of percentage points for different geographic locations.
The authors also examine the widely ignored role that the federal and most state governments play in perpetuating the title insurance industry's unfair practices. Whereas most private industries prefer as little government intervention as possible, title insurers welcome it. Federal statue exempts title insurers from anti-trust liability, opening the door for price-fixing and destroying any semblance of free-market competition or market power for consumers.
A landmark study for elected officials, and all those involved in the insurance, real estate, and brokerage industries, The American Title Insurance Industry brings to light a long-neglected problem—and offers suggestions for how it might be remedied.
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