Buyer Beware: Know Your Title Insurance Regulations

New York, NYLow interest rates in the past few years have induced many home owners to refinance their home. Did you know that, when a consumer refinances their home in most states, they are entitled to get discounts on certain fees associated with their mortgage?

For example, when a home is refinanced in Pennsylvania, title insurers may only charge a specific, regulated rate for title insurance. In other words, when the consumer refinances their home in that state, the rate is supposed to be discounted. But many title insurance companies are not discounting their rate, therefore causing the consumer to be overcharged on title fees. This is a violation of the Pennsylvania Law.

Real estate scams abound and the land title industry is one of them.

Unfortunately, not all title agents are created equal. Some lack the professional skills and ethics to act in the best interest of consumers and lenders. Although licensing standards and title insurance is regulated, it still leaves room for fraud.

Chicago Title Insurance Company is alleged to overcharge title insurance, thereby violating state laws. A recent lawsuit claims that Chicago Title is supposed to give a 10-30% discount to people refinancing their home, but charges their full basic rate. The plaintiff is seeking a refund of the amount overcharged by Chicago Title.

Chicago Title is not the only company guilty of overcharging for title insurance. In September 2006, the Lorenzo family of Mill Creek and Catherine Blaylock and Jill Maccinnes of Bellevue filed suit in King County Superior Court against First American Title Insurance Co. and Pacific Northwest Title Co. of Washington.

The suit was filed two days after state Insurance Commissioner Mike Kreidler issued a report that said insurers regularly broke a state cap on inducements to real estate middlemen who could steer buyers their way, driving up policy costs.

(In October, Kreidler reported companies spending thousands of dollars courting real estate agents with food and drinks, tickets to sporting events and trips for golf, skiing and shopping. He said he decided not to seek penalties because of the pervasiveness of the problems and lack of resources in his office. Federal regulations ban title insurance companies from giving anything of value to reward referrals and bar real estate agents and others from receiving anything of value in return for referrals.)

In November 22, 2006, other lawsuits were filed against Commonwealth Land Title Insurance Co. and Chicago Title Insurance Co. and Transnation Title Insurance Co., alleging that the companies violated federal law.

What is Title Insurance?

The purpose of the land title registry is the following:
• To expertly examine titles and provide curative remedies for title issues
• To disclose all material facts (in writing) to interested parties.
• To actively promote fraud prevention in real estate transactions

Basically, title insurance provides protection against any problems that may arise from a property you purchase. Think of title insurance as the opposite of life insurance: it protects against things that have already happened, whereas life insurance protects you against something in the future.

Title Search

This is the process of examining all relevant records to confirm that the seller is in fact the legal owner of the property and that there are no liens or other claims outstanding out of the property. A search should discover any liens attached to the property such as taxes owed, unpaid construction costs and even missing heirs that could lay claim to the house. A search can also turn up easements that allow access to the property by utilities companies, such as power or water. And some searches will go back 50 years.

Usually title insurance is paid by the homeowner's association if you buy a condominium or apartment or co-op.

There are two types of title insurance:

1. Policies for lenders: protects the lender and is usually issued through a bank and required by any lender before issuing a loan.
   
   
2. Policies for owners: this policy protects the owner's investment.

If you have recently refinanced your home and title insurance was included as part of your loan, you may have been overcharged for title insurance.