Back in February,Business Insider published the article "Title Insurance is a Scam that is Built into Every Single Mortgage." The article essentially argued title insurance is, well, a scam, and the added expense of title insurance drives up costs for homebuyers. And Business Insider isn't the only outlet with strong thoughts. An article inForbes called the title industry a "racket" and an article inCurbed deemed it a "cartel."
Now, I completely understand the need for a bank to guarantee it actually owns the investment it's making, especially if it hopes to sell the loan on the secondary market. But one of the things I was most interested to learn when I began covering the title insurance beat is that homeowners must get a new title insurance policy for a refinance transaction. I, like a lot of the non-title industry people with whom I've spoken, thought the existing title policy would transfer to the new loan, as having to get a whole new policy on a home you may have owned for more than a decade feels a bit excessive.
A few weeks after the Business Insider article was published, Fannie Mae added fuel to the fire by announcing it would accept attorney opinion letters in lieu of a title insurance policy in "limited circumstances." While there were a variety of opinions on this decision, there is no doubt that, at least to a certain extent, it brought into question the necessity of a traditional title policy. (In response to this, the American Land Title Associationstated: "We strongly believe that title insurance is, and always will be, essential.")
But what are your thoughts? Do you believe there's a need for a new title policy on a refinance transaction? What are your counter arguments to people who think the industry is a scam? Email me at brooklee@hwmedia.com.
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