Opinion: Regulation of title fee rates is already rigorous4 min read
When the COVID-19 pandemic shut the country down in 2020, title and settlement professionals were deemed essential and continued to help consumers purchase homes and refinance mortgages. Protecting homeowners is always at the center of the title insurance industry’s core values: to lead, deliver and protect.
This includes being transparent and fair in the title and settlement fees charged to consumers when buying a home or refinancing.
Initiatives to increase housing affordability have policymakers and regulators, among other stakeholders, seeking opportunities to help consumers with affordability challenges. We share these goals.
Recently there have been misleading claims regarding the lack of conformity in title fees. As I’ll explain, there is rigorous regulation of our industry and federal disclosure requirements for all fees associated with obtaining a mortgage.
Title insurance is much different than other insurance products. For a one-time fee, title professionals provide reassurance that property rights are protected by identifying and fixing title issues that occurred in the past. Because of this up-front service provided to consumers and lenders, the title industry has far fewer claims compared to other insurance lines.
Fee disclosure is robust
At the federal level, the TILA-RESPA Integrated Disclosures (TRID) rule sets strict guidelines for the way title and settlement fees are disclosed to consumers, the timing of those disclosures and when changed circumstances allow for alterations to the disclosures.
The American Land Title Association (ALTA) and its members worked closely with the Consumer Financial Protection Bureau (CFPB) to help develop regulations for TRID, which went into effect in 2015. Under TRID, all fees charged by title and settlement companies must be disclosed to the consumer on both the Loan Estimate and Closing Disclosure.
In addition to TRID, ALTA developed best practices that title and settlement companies follow to help ensure that customers are charged the correct title insurance premium and other rates for services provided. These best practices help ensure correct fees are being charged for title insurance policy premiums, state-specific fees and endorsements.
Companies also should ensure discounted rates are calculated and charged when appropriate, including refinance or reissue rates. The best practices also encourage companies to quality check files after settlement to help ensure consumers were charged the company’s established rates and to provide timely refunds when an overpayment is found.
Rate regulation is rigorous
The title insurance industry is comprehensively and systematically regulated by state departments of insurance, the CFPB through RESPA, and where applicable, the state bar/Supreme Court rules.
State departments of insurance oversee the industry’s practices and rates to ensure they are not excessive, inadequate and unfairly discriminatory. State regulators capture annual revenue and expense data from title insurance agents and underwriters for the purpose of measuring the profitability, competitiveness and reasonableness of title rates and charges.
Consumer shopping and education is vital
Research released in 2020 by the CFPB showed TRID has helped consumers better understand their costs when closing on a home. The bureau reported the major benefits and costs savings of TRID included enabling consumers to compare competing offers, giving consumers more time to ask questions and providing more efficient closings.
It’s important to note that the cost for title insurance may include other services provided by the title company, such as conducting the title search or the closing. When comparing one rate to another, homebuyers should get detailed information on what is included in that rate to compare rates equally.
Many consumers rely on their real estate agent or mortgage lender for a recommendation for a title company, however, it is important that all homebuyers remember that they have the right to shop for title insurance and to choose their own title company or settlement services provider.
ALTA has a consumer website dedicated to helping homebuyers understand the closing process and the benefits of title insurance. The website includes a host of resources to help consumers shop for title insurance and companies to handle their closing, understand the steps in a closing, and a glossary of common terms and fees.
All these steps, in conjunction with the role of federal and state regulation, have increased consumer access to information about the industry, its services and fees, and enhanced their ability to compare and shop for title insurance and settlement services.
The title and settlement industry is primarily made up of small businesses that serve their local communities and operate in every county in the United States. The more than 140,000 professionals working in this industry work diligently to simplify the closing process for consumers and ensure they have all the information they need to make good decisions when purchasing a home.
These professionals have always cared deeply about their communities and give back through charitable organizations like the ALTA Good Deeds Foundation. Their customers are considered their neighbors and friends. Title professionals continue to protect property rights and safeguard the equity and wealth families accrue during their homeownership journey.
Diane Tomb is chief executive officer of the American Land Title Association, the national trade association representing the land title insurance industry.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the author of this story:
Diane Tomb at [email protected]
To contact the editor responsible for this story:
Sarah Wheeler at [email protected]