Sunday, March 25, 2007

query: title insurance policy issue within 6 months

In Pennsylvania, a title insurance commitment is only good for six months so if the insurer has not converted the commitment into a policy, the title must be re-examined and another title commitment issued.

Now, why might the issuance of a policy be delayed?

Well, you can purposefully delay the issuance of a policy.

I've had consumers purchase land with cash, obtain a title commitment and delay the issuance of their owner policy until they obtain construction financing. The owner policy could be issued at the same time as the loan policy. In Pennsylvania our title premium includes both policies so in some cases, the consumer may save money. Two important points in this kind of transaction. First, by closing two transactions separately, you are incurring some double fees; and by delaying the issuance of the owner policy, you would have no coverage or protection until the policy is issued.

The issuance of a title policy may also be delayed by the negligence of a title agent. Be a diligent consumer. Monitor the receipt of your title policy. If you have not received a policy within 60 days of closing, contact your title agent for an explanation. If you are getting no reasonable explanation and haven't resolved the policy issue within 90 days, I suggest you contact your state insurance department. Most, if not all states, have a consumer complaint portal on their web site. It's an easy way to communicate and file a complaint.

Remember, a title commitment is not a policy and there is no insurance protection in place until the policy is issued. In a previous post, "mortgage loans not paid off", you can see how a bad attorney/title agent not only stole the mortgage payoff money and also failed to issue the title policies, further compounding the damage by theft.

It's a shame consumers have to help police their title transaction. The title insurance companies could so easily police agents themselves, but for some crazy reason, some don't.

Title insurance companies audit their agents. When they find an agent who habitually refuses or simply can't reconcile their escrow account and/or habitually refuses to issue policies in a timely fashion, you would think they would rescind their license or at least put them on some kind of remedial probation until they get their act together. It seems to me this would be of paramount importance to protect the public and the title company itself. Doesn't it seem logical to you? Well, some title insurance underwriters are using pretzel logic and they refuse to police their own actions, let alone the actions of their agents.

I have yet to hear any good reason for such systemic negligence. I can only account for it by presuming some are so hungry for volume that they forego responsible management in favor of the "let's not get caught" philosophy.

The good news is that regulators are starting to understand what is really happening and many states are re-writing their title insurance laws and regulations to raise the standards. If you are concerned, please drop a note to your legislator.

I'm here to help you. Title insurance is a valuable and necessary product. There are honest title agents and title company underwriters out there ready to help you.

When you are shopping, make sure you get a quote in writing and ask them when and how you will receive a title insurance commitment for review prior to closing. If you get any flack over either of these two issues, MOVE ON, and find a reputable title agent.


Anonymous said...

Funny!! I closed on a property 5 months ago still no policy! I am starting to get pissed they say it in review! what B.S, I am going to contact the insurance commish soon if I don't get something within 10 days

Diane Cipa said...

Call the insurance department now. Do us all a favor. ;) Taking five months to issue a title insurance policy is extreme neglect. What else is this title agent neglecting to do? Delay of issuance is often a red flag of malfeasance. The title agent must pay a portion of your premium to the title company when they issue the policy. They might not have that money. Maybe they are using their premium dollars to cover operating expenses. Maybe they are also using the escrow account to cover operating expenses. This company deserves a good "look see" from their regulator. ;)