this American Land Title Association make it clear that it will not Consumer Financial Protection Bureau Making significant changes to title insurance without first hearing what trade groups think about the issue.
In a 15-page letter sent to CFPB Director Rohit Chopra on Aug. 2, the trade group emphasized the importance of title insurance.
“When Americans buy a home, they deserve to know that they truly own it and are not at risk of losing what is often the largest and most important investment they will ever make. Title insurance gives you peace of mind.
The letter is in response to a request from the CFPB in late May for information on residential mortgage loan fees. The request comes in addition to the CFPB’s consideration of banning mortgage banks from charging home buyers for lenders’ title insurance policies.
While ALTA says it shares the CFPB’s goals of promoting greater housing opportunity and affordability, it worries that calling title insurance a “junk fee” will encourage consumers to forego the protections title insurance provides.
The letter states: “Legitimate, open and regulated services cannot become ‘junk fees’.”
ALTA believes that consumers actually have a good idea of the price of closing costs because, under the CFPB’s TILA-RESPA Comprehensive Disclosure (TRID) rule, the costs of title insurance and related services are disclosed to consumers at the beginning of the loan underwriting process and before closing.
“According to the Agency’s study of TRID disclosures, “Evidence available for evaluation suggests that TRID rules improve consumers’ ability to find key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs between different disclosures. cost capability.
In addition, the letter also emphasized that title insurance premiums and settlement fees are “the two cheapest costs, equivalent to only 0.7% of the total cost of the borrower’s loan period.”
To justify the price of title insurance, ALTA points to all the curative work required to clear the title before closing, as well as the fact that title insurance provides the policyholder with a legal defense should their title be challenged.
“This defense cost is valuable because a large portion of claims can be won in court, ensuring that property owners are not displaced. Paying and defending title claims can be very expensive,” the letter states. “A recent analysis by an actuarial firm Milliman The average cost of providing legal defense was found to be over $8,000. Even if the claim is ultimately found to be without merit, the money will be spent. Ordinary Americans simply cannot afford such defense expenses, as the Federal Reserve recently showed in its 2023 Household Survey that 37% of Americans would not be able to pay even a hypothetical $400 emergency expense in cash or cash equivalents.
ALTA ends the letter by emphasizing that it’s not just lenders that benefit from lenders’ title policies, but also consumers and even the federal government.
“Consumers benefit from a title insurance loan policy because it provides insurance to lenders, investors, e.g. Fannie Mae, Freddie Macand Ginnie Mae) and ultimately submitted to the federal government,” the letter states.
The comment period for the information request ended on August 2, 2024.
