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Title Insurance Essay

2586 words - 11 pages

Title Insurance, an Industry UnshakenThe typical American dream is to own a home but who guarantees that my home is "my home". This is where the business model of a $30 billion industry known as Title Insurance begins. Insuring a title to a mortgage is performed with a litany of people: underwriters, title agents, abstractors, attorneys, real estate professional and appraisers. Currently, 92% of this industry is dominated by 4 Title Insurance companies: Chicago Title Insurance, Old Republic Title Insurance, Stewart Title Insurance and First American Title Insurance (see figure 1). In other words, the Title Insurance industry is an oligarchy of 4 companies protected against competition by the ...view middle of the document...

This marks an emphasis to maximize profit by increasing the volume of issued title policies.Title Insurance fundamentalsTitle insurance is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Title insurance is principally a product developed and sold in the United States as a result of an alleged comparative deficiency of the U.S. land records laws. It is meant to protect an owner's or a lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.-wikipediaFor most real estate purchase or refinance transactions, Title insurance costs represent approximately 1% of the total price of the mortgage and are usually the most expensive item on the settlement sheet. The rates for title insurance vary as a percentage of the mortgage and the ceiling rates are state regulated. In a traditional transaction a title agent will originate the transaction from a network of referral sources with lenders, home builders and real estate agents. The title agent will then work with an underwriter, at a title insurance company, to complete the process of guaranteeing that the property is clear of liens and encumbrances. If the property is clear then the title agent will continue to work with the title insurance company for the closing process. In the closing a process, an attorney's role is to issue the title policy. Once the closing process is complete the title agent and title insurance split the proceeds for the title insurance portion with a ratio of 70-80% for the Title Agent and 20-30% for the title insurance company. Title polices may cost as much as $3,000 on large mortgages. From the Title insurance company prospective, an individual title policy returns a very low margin of profit after various fees have been deducted. It is with a high volume of transactions along with a low loss ratio that their profit is realized.Rocking the Title Insurance boatIn the last few years the Title Insurance industry has had radical change in mindset due to a Stamford based company named Entitle Direct led by CEO Tim Dwyer. Entitle Direct purchased an Ohio based Guardian Title Insurance and challenged the incumbent Title Insurance companies with a "Direct to Consumer Model". The Direct to consumer model implements the following changes to the traditional Title Insurance business model:Avoids Title agent costs by marketing and driving consumers to its website ( . In effect cutting out the Title Agent from the transaction.Facilitates with the closing process by providing their own experts, underwriters, attorneys etcUses the internet marketing and social media to combat...

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