MBA NewsLink Q&A: A Lender’s Guide to Title Insurance

MBA NewsLink recently interviewed Chris Porto, director of title and closing operations with SingleSource Property Solutions, Canonsburg, Pa.

MBA NewsLink: From a lender’s perspective, is all title insurance the same?

Chris Porto: In terms of policy forms and coverage, standard title insurance policies do not vary from one company to the next. Coverage for unknown liens, recording errors, and ownership defects are covered across underwriters. An enhanced policy may cover additional items such as building permit issues, zoning violations and encroachment and boundary line disputes.

Title insurance premiums are either promulgated rates that are set by the state department of insurance or are state-approved filed rates by each underwriter. In either case the title insurance premiums are either the same or very close amongst title insurance agents. From a lender’s standpoint, the real difference is not in the insurance coverage provided but instead on the quality of service, communication during the process and turnaround times throughout the loan process.

MBA NewsLink: What should lenders advise consumers to look for in a title agent?

Chris Porto: Consumers should seek out experienced title companies that work regularly with regional and national lenders and have a solid reputation, strong communication skills, robust security measures to safeguard against wire fraud and financial strength of their underwriters.

MBA NewsLink: Who selects the title insurance agent?

Chris Porto: On home purchase transactions in most states, the buyer pays for the owner’s policy, so they chose the title agent. In certain states, like Florida, the home seller pays for the policy and chooses the title company.

For refinances, the consumer can choose their own title agent, however, in most cases the lender typically refers the borrower to an agent they trust based on prior performance.

MBA NewsLink: What are the biggest fallacies that lenders need to help consumers overcome?

Chris Porto: The biggest misconception is that title insurance is too expensive. When a buyer is purchasing a home with a mortgage loan, the owner’s title insurance policy is based on the difference between loan amount and the sales prices. As a result, the cost of the owner’s title insurance policy is often around $300.

The one-time premium for an owner’s title insurance policy provides lasting protection and peace of mind for the entire duration of the ownership; furthermore, this coverage extends to heirs of the original insured buyer should they inherit the property.

MBA NewsLink: How do consumers benefit from title insurance?

Chris Porto: Homeowners benefit from title insurance by having a national title insurance underwriter standing behind the biggest purchase they will ever make. If title to the property is ever challenged, the owner’s title insurance policy includes a duty to defend the insured. The insurance company is responsible for paying attorney fees and costs of defending the insured over the insured matter.

MBA NewsLink: Where do lenders struggle with title insurance?

Chris Porto: In my experience, sometimes lenders will quote incorrect title premiums or recording fees or taxes that will lead to closing disclosure discrepancies and borrower dissatisfaction.  

MBA NewsLink: Are there times when a title policy is unnecessary?

Chris Porto: It might make sense for lenders that originate home equity loans to consider skipping a title insurance policy and instead utilize a limited title search. A limited title report or Property Report will still provide the ownership vesting for the property and disclose open mortgages, judgments, liens and provide the legal description needed for recording the HELOC mortgage into the county records.

MBA NewsLink: Are there common delays that are related to title insurance?

Chris Porto: One of the biggest delays in working in the state of Pennsylvania is obtaining tax certificates and municipal lien letters from the local taxing authorities. These certificates often take 2-3 weeks to receive back. We will often have our title commitment issued within 3-4 days and are forced to wait for the tax certificates before we can clear a file for closing.

Another common delay is working in an abstract state like Oklahoma. To issue title insurance in Oklahoma, the original title abstract must be updated by a licensed abstractor from a certified abstract plant. The abstract is basically a copy of every document ever recorded against a property. The expected turnaround time for an updated abstract is usually 2-3 weeks, but it can be longer in rural counties. Once the updated abstract is received an attorney opinion letter is required before a title commitment can be issued.

MBA NewsLink: Do all title searches take this much time?

Chris Porto: No. In many of the states where we do not need to rely on an abstract of title, we can complete the title search in two to three days and have a commitment completed and issued to the lender, buyer and seller in three to five days. At SingleSource, we also have access to underwriting platforms that expedite the process, and in some cases, we can deliver clear-to-close commitments within hours instead of days.

MBA NewsLink: How can a lender cut down on the time frame?

Chris Porto: One thing that lenders can do to help cut down on the title time frame is to obtain a copy of the borrower’s prior owner’s title insurance policy at the time of application. Having the owner’s policy at the time the title order is received will reduce the amount of time required to complete the title search. As a result, the title commitment will be issued faster, and we will be clear to close faster.

We encourage lenders to work closely with their title companies and their underwriters to expedite the process.

MBA NewsLink: What was the most interesting title-related experience you’ve had with a lender?

Chris Porto: The first title insurance claim I worked on involved a Pennsylvania home seller who was divorcing his wife and selling the property without her knowledge. He obtained a photo of his wife’s driver’s license and his girlfriend’s driver’s license, then transposed his girlfriend’s photo over his wife’s photo. He showed up to closing with his girlfriend and kept the sale proceeds. Six months later, his wife discovered the scheme and filed a title claim, which was paid. The title insurer then pursued the husband. The case highlighted why title insurance plays a critical role in protecting innocent parties, even when bad actors exploit the system.

Chris Porto is the director of title and closing operations at SingleSource Property Solutions LLC, where he is responsible for title product delivery and title and closing services. Chris has more than 30 years of experience in the title industry, including over 25 years at SingleSource and roles at Nationwide Appraisal Services LLC and Lender’s Service Inc. He is licensed as a title insurance agent in 34 states.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)