Tuesday, June 24, 2008

query via e-mail - alternatives to title insurance and other stuff

Ms. Cipa,

My name is Patrick Framel; I am a summer intern with the Texas Department of Insurance. I am working on a report for the Texas Legislature, regarding solutions to affordable housing issues. I have already been helped by some of your past blog entries, and was wondering if you had any insight on this report.

I'm wondering if there are any viable products currently being used in any states as alternatives to title insurance? In particular, are there any products that may be appropriate for smaller dollar amount transactions? (The title insurance industry here has been very reluctant to insure lower valued properties) Or, are there any title products currently available in other states that are used for contracts for deed or installment contracts?

I wasn't sure how to post a question to your blog, but if this is the method, feel free to post it.

Thank you very much for all your help,

Patrick Framel
Government Relations
Texas Department of Insurance
(512) 322-4149

Thanks, Patrick. Though I have never done it, I believe you can get title insurance which insures an equity position in real estate. In the case of an installment land contract, the document would be recorded and insurance covering that interest subject to the interests of others.

Mortgage lenders can be served by lien protection insurance if the state allows it. It's an umbrella type policy that covers their lien priority - not the same as title insurance, but a reasonable alternative. Lien protection does nothing for the owner, though. I have seen no viable alternatives for property owners. They are best served by getting owner coverage.

As for the lower values, in PA we have promulgated rates and anything $30,000 and under has the same premium. Though I am aware that some agents pass on the lower end of the business, most will service it. We have a large volume of business at $30,000 and under. Perhaps the legislature might consider making participation on that segment of the market mandatory in exchange for the issuance of license to insure at all.

Best wishes. It's a swinging time to watch the title biz. ;)


Follow up question:

What do you mean by "title insurance which insures an equity position in real estate?" Isn't that precisely what ordinary title insurance does?

Well, normal title insurance insures a vested ownership which is more than an equity position. For instance, if you have hand money down on a property under contract, you have an equity position but you are not vested in title.

I would be very happy if anyone out there has additional ideas or suggestions. Please comment.

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