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Title Insurance Premiums Rose With Housing Boom
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An average premium is $5.25 per $1,000 on the first $100,000 of a mortgage, then $4 per $1,000 on amounts from $101,000 to $500,000. Title insurance related to a mortgage refinancing is cheaper than for a house purchase.
Because the cost of title insurance is based on house prices, it has risen sharply since 2000, even though the title companies' costs have apparently not risen, according to the GAO.
Advocates of comparison shopping say that although the cost of the insurance itself does not vary, different companies charge different amounts for other services, including the title search and copying and sending documents. So, they argue, a homebuyer or owner can save hundreds of dollars by shopping around.
Several states have acted to curb abuses in title insurance, which, like most insurance, is regulated by the states, rather than the federal government.
In New York, two large title insurance companies recently agreed to reduce rates 15 percent to resolve an investigation of kickbacks allegedly paid to real estate developers.
In Washington state, regulators recently accused the title industry of giving kickbacks to real estate agents and other middlemen, in violation of state law.
My Closing Space advocates a business model used in Florida, where a court ruled that title companies could give rebates to customers, effectively cutting the price of title insurance. Not all states allow such rebates, though.
Iowa has gone even further and runs its own title insurance program, which charges a flat fee of $110 for insurance, plus an estimated $400 in lawyers' fees and other costs related to the title search.
Hunter of the Consumer Federation advocates an Iowa-style plan for the nation. Another alternative he likes would have mortgage lenders buy title insurance and pass along the cost to buyers in the mortgage. The theory is that big lenders, such as banks, would have the leverage to get better deals than individual buyers could ever get.
The U.S. Department Housing and Urban Development proposed such a plan a few years ago, but it was opposed by the title industry and died in Congress.
