Title insurance. Your bank will buy itself a policy, when you close, to protect its investment. While buying a policy for yourself is up to you, most times it’ll show up on your HUD settlement statement, without you even asking for it.

There is a good reason to have a title insurance policy. It protects you against claims of ownership. Seeing as Boston was incorporated back in 1630, there’s probably been many owners of the place you’re about to buy. The bank’s insurance policy covers only the amount of any mortgage loans you take out, not the full purchase price, which means your down payment is at risk.

The issue is, should the policies cost as much as they do.

They shouldn’t. The vast majority of the money paid for a title insurance policy goes to the insurance agent, and/or your attorney.

New York state is on it:

An assistant New York attorney general urged the state to step up regulation of the title insurance industry yesterday, arguing that insurance agents were receiving what amount to illegal kickbacks and that New York home buyers were overpaying.

In many cases, only 3 cents of the average dollar paid for title insurance is ever returned to policy holders in claims, Ms. Flamenbaum said, while an estimated 75 cents are kept by agents who serve as intermediaries between home buyers and underwriters.

This is something that Massachusetts law-makers should look into, as well.

Source: New York Urged to Tighten Regulations on Title Insurance – By Charles Duhigg, The New York Times

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