Title Insurance

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The Federal Reserve’s Open Market Committee meets this week, and a cut to overnight rates, and the Discount Rate, is virtually assured. Mortgage rates have crept down, and we are seeing many potential homebuyers “get off the fence” and renew their search for a home and for financing. With the purchase of a home comes things like homeowner’s insurance, and title insurance. In general, insurance is important because it provides financial protection against unexpected events, helping to cover costs related to health care, legal matters, property damage, or loss of income.

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Orion’s brokers are often asked by their clients, “Why do I need title insurance?” Every buyer and seller in a real estate transaction sees charges for a title insurance policy, but few know what the purpose of the policy is, other that something gets insured. Is it necessary? Like all insurance, only if your client needs they will be very glad to have it, like auto or homeowner's insurance.

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Mortgage Policies

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Simply put, brokers will inform clients that title policies “ensure that things are what they seem and are supposed to be. ”If a client is buying a home the title policy is insuring that they are the rightful owner, that no one can come later and claim ownership of the property.

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For lenders like Orion that make a loan secured by real property, the title policy ensures that the lender’s lien has a certain priority on title and that the only liens against title are documented and disclosed. Title insurance covers any title issues that occur up to the date deeds are recorded the policy is in effect, it does not cover any issues that occur after the transaction; those are covered by the next policy when your client sells or refinances.

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Fortunately, title policy claims are rare because of the loss prevention that is performed by the title company during the escrow or settlement period to investigate the property, seller, liens against title and other factors that may lead to a claim down the road. It is critical to have a title officer who is experienced and knowledgeable.

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Brokers know that if the transaction involves a federally regulated loan and 1-4 units, it's the buyer's choice under federal RESPA regulations. RESPA states that the seller shall not directly or indirectly require the buyer to obtain title insurance from a particular title insurance company.

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Financing a home can be a complicated process, but a broker specializes in helping answer questions. Your clients should ask!

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