Did you pay 50 percent too much for title insurance the last time you refinanced? Should someone--the title company, the loan officer, the escrow agency--have told you that you qualified for a deeply-discounted "reissue" or refinance title policy?

Eight class action lawsuits filed in New York argue that title companies are required to inform refinancers that they are entitled to lower premiums. Three thousand miles away on the West Coast, a new survey by Consumers Union found that refinancers in California may be paying two to three times more for title insurance policies than the lowest-priced reissue rate coverage available in the market.

The average title quote on a $250,000 refi in Consumers Union’s survey of the six largest title insurers in California came to $750. Yet title industry officials confirm that cut-rate title policies for refinancings are available for as low as $275 for that size loan, according to Consumers Union.

All of which prompts a most timely question in the midst of a refi boom nationwide: Are Americans overpaying for title insurance because no one has told them the magic words--reissue rate or refinance rate?

The title industry’s top official, James R. Maher, executive vice president of the American Land Title Association, concedes that "it’s a problem." Many homeowners aren’t aware of the existence of deeply-discounted refi title policies, and Maher agrees that in some cases title agencies and settlement attorneys are not disclosing their availability.

Reissue rates, averaging 50 to 60 percent and higher, are available in most states to homeowners refinancing a home loan within a specified time period--say 10 years. The rationale for the discount pricing is straightforward: If you refinanced and paid for a full-price title search and insurance policy in 2001, a title search for your latest refi in 2003 need only focus on a short period of time. Moreover, the likelihood of title-related claims airisng from that short time period is remote.

Therefore, a discount rate is appropriate. In the New York class action suits, homeowners have sued the eight largest title insurers active in the state, charging them with intentionally overcharging thousands of borrowers on their refinancings. New York state law, the suits maintain, requres title companies to provide substantial discounts on certain refinancings of loans under 10 years old. In a suit against Fidelity National Title Insurance Co. of New York, plaintiffs Scott and Susan Williams say they were overcharged by 30 percent on the title policy for their recent $296,000 refinancing.

Under New York law, according to the Williams’ complaint, title companies must provide discounts of 50 percent on refinancings of $250,000 or less, and 30 percent on loans above $250,000, when:

• the loan being refinanced is less than 10 years old, and
• legal title to the property has not changed during the life of the loan being refinanced.

Fidelity National Title Insurance Co denied the Williams’ allegations and interpretation of the law. The Fidelity class action suit and seven others are now pending before the state Supreme Court.

How can you make sure you got the lowet-rate title insurance policy availalbe on your next refi? Number one, don’t be shy. Ask for a reissue rate or refinance rate--those are the key words. Ask the loan officer or the title company or settlement attorney bluntly: Are you quoting me the the lowest-cost policy that is available to me?

Confronted with the possibility of a fraud suit for lying to you, most title or settlement agents will give you the discount rate if you are eligible. But remember: In most states, it’s you who have to ask because no one is required by law to disclose.

Published: April 14, 2003

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.