Good afternoon —
As I've addressed in previous newsletters, the refinance transaction boom during the pandemic has led to heightened consumer awareness of title insurance — and some confusion regarding title insurance premiums. As such, title professionals have been fielding more questions from curious homeowners who wonder why they need to purchase a new title insurance policy when refinancing their mortgage.
Homeowners don't understand why they must purchase a brand-new title policy if there hadn't been any title issues since they initially purchased the home. But, as title agents know all too well, the title policy is tied to the mortgage and not the actual property — a key component lost on many homeowners.
And while the initial title search on a home may be clear, as Sydnie Eardly, a veteran marketer for a title underwriter, points out, the homeowner's life circumstances may have changed.
"Many things could happen from the time a couple buys a house until they refinance," Eardly wrote in an email. "What if there was a divorce, for instance, and the occupying partner refinances the house 'out from under' the partner who owns a half interest, and pockets part of the value of the house? What if, in the interim, the owners were sued and there was a court judgment filed as a lien against the property, giving that lien priority over the new lender? What if the taxes were not paid and the county steps in to repossess the house? The new lender who is refinancing the previous mortgage thinks it has access to the entire value of the house, but a judgment or a repossession by the county could nullify the banks rights to the satisfaction of their lien – the mortgage. Without a title search, these things would not be known."
Thanks to this recent wave of refinance transactions, title insurers are aware of this pain point for consumers and, according to Jim Dufficy, president of American Digital Title Insurance Company, many firms, including his, are working on ways to being able to transfer title search information from the most recent mortgage on a property to the latest refinance, which would not only save consumers money, but also speed up the process.
As mortgage rates drive refi activity to new lows, title insurers have a moment to regroup and reconsider how they deal with refinance transactions. As the industry prepares for a future wave of refinancing, how do you plan on sharing the value of title insurance with other stakeholders? Email me at brooklee@hwmedia.com.
Until next week,
Brooklee Han
Real Estate and Title Industry Reporter
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