Wednesday, June 06, 2007

why "lender pay" title insurance alternatives won't work...

"Now that new National Association of Insurance Commissioners’ (NAIC) rules regarding the development of model laws has interrupted the Title Insurance Issues Working Group’s efforts to revise the Title Agents and Title Insurers Model Acts, the panel of state regulators has turned its attention to possible title insurance “alternatives,” including the “lender pays” paradigm." as reported by The Title Report, a trade periodical. [Sorry, due to copyright concerns I can't share their whole articles. You need to be a paid subscriber to access all material on their site.]

First, money is fungible. A mortgage lender is not going to go in the hole to absorb an extra cost. It's hard enough to make a profit as it is. Saying a mortgage lender will pay for title insurance is a ruse - a shell game. The consumer WILL pay for it in some other way, but and this is really the important BUT, the consumer will receive no benefit.

I have yet to see a "lender pay" title insurance alternative that offers owner coverage.

Anyone who reads this blog or my "old" Radical Title Talk blog knows that I am a defender of the consumer in a real property transaction.

I would really hate to see regulatory reform move forward under the guise of helping the consumer that due to ignorance, actually hurts the consumer.

There are many things wrong with the delivery system for title insurance. I've tried to be part of the solution to that problem and still stand ready to help anybody or anyone who is working towards that end.

In that spirit, I add this caution. The title industry, due to it's failure to adhere to standards of good business conduct, has lost much of its stature as a reliable spokesman. I believe you should be wary of much of what the trade associations like ALTA [American Land Title Association] say, BUT they will be right on some issues. This is one of those issues.

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