Title Insurance: Why an Owner's Policy is Important

In the wake of new Consumer Financial Protection Bureau (CFPB) requirements and changing mortgage disclosures it is more important than ever for real estate agents and consumers to understand why it is important to purchase Owner's Policy Title Insurance. On August 1, 2015 the days of the Good Faith Estimate and HUD-1 Settlement Statement for closed-end transactions securing a mortgage will be no more. Instead, these transactions will now require new TILA-RESPA Integrated Closing Disclosure forms: The Loan Estimate and Closing Disclosure.

The major goal of the CFPB is to create transparency for consumers so they know what they're signing, what fees they're paying, and what their options are to compare and shop certain services. But that's just the problem, the word "optional."

Page two of both the new Loan Estimate and Closing Disclosure forms include a breakdown of loan costs and other costs associated with the transaction. Page two of the Loan Estimate includes and "Other Costs" section where the cost of the Owner's Title Insurance policy and now must include the word "optional" in parenthesis next to the fee description.

Industry representatives are worried that the word optional will dissuade consumer's from purchasing the same protection that lenders receive from a title insurance policy. So how do you convince your clients of the need for protection against what may arguably the largest investment they'll make in their lifetime?

The answer is in the QUESTION! According to a Wall Street Journal Article , The American Land Title Association (ALTA) has reported that 1/3 of all title searches reveal a problem. Considering the fact that title issues can arise any time during the duration of home ownership (even after the mortgage is paid off), an Owner's policy just makes sense!

Read more about the importance of an Owner's Policy and possible title issue scenarios here.

For examples of new closing disclosure forms visit the CFPB website