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Title insurance: a beacon of stability in an uncertain real estate market

Title insurance is a beacon of stability in an uncertain real estate market

The housing market is facing uncertainties in 2023, with prices consecutively declining for the first time in nearly four years, according to the Case-Shiller National Home Price Index. As an uncertain real estate market and consumers prepare for what’s to come, it is crucial to acknowledge the products and systems that have carried us through other cycles of economic downturn.

The title insurance industry has a proven record of protecting homeowners’ rights to property. As we know, title insurance protects property buyers from threats to their property rights, including recording errors, unpaid liens, forged signatures on deeds, and fraudulent activity. The title industry has played a critical role in keeping homeowners safe and the real estate market healthy for over a century.

While the industry has evolved greatly with title professionals embracing artificial intelligence and automation, our mission has never wavered: making the American dream of homeownership possible and protected for all. In fact, title insurance is the key to unlocking wealth in America, as it provides the capacity and security necessary for transactions.

Recently, certain attorney opinion letters (AOLs) have been promoted as alternatives to title insurance policies, claiming to reduce costs. However, these products shift risk to lenders and consumers, who will ultimately have less recourse and greater costs should their property rights be challenged. These title insurance alternatives only cover title defects that can be found by a public records search, while title insurance protects against known and unknown risks not found in a search.

Title insurance is rigorously regulated at the state and federal level, with statutory reserving and rate transparency requirements intended to ensure robust consumer protections. In contrast, emerging products lack a similarly comprehensive regulatory regime, raising questions about how they will be regulated and who will provide oversight.

Title insurance is essential, providing a one-time fee paid at closing that protects a consumer’s property rights for as long as they own the property. The benefits and cost of title insurance compared to other products are unrivaled, with rates varying from state to state. At five years, the daily cost of coverage for a $400,000 home is about 77 cents per day, dropping to 38 cents a day at 10 years, and just 13 cents a day by the time a 30-year mortgage is paid off.

As we navigate 2023’s uncertain real estate market, the title industry will continue to advocate for the protection of American consumers and the safety and soundness of the real estate ecosystem. Our industry will continue to educate, advocate, and innovate to minimize risks to both consumers and lenders.

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