Consumer Groups Applaud President Biden's Announcement of Steps to Address Homebuying Closing Costs and Excessive Title Insurance Charges

WASHINGTON, March 7 (TNSres) -- The Consumer Federation of America issued the following news release:

The Consumer Federation of America (CFA) and Center for Economic Justice (CEJ), the nation's leading experts on consumer insurance issues, praised a plan announced by the White House today to address the high cost of title insurance faced by consumers buying or selling a home or refinancing a mortgage. In every state other than Iowa, lenders require that buyers or sellers of property or homeowners refinancing a mortgage purchase title insurance to protect the lender. Extraordinarily high title insurance premiums - premiums that grow as home prices and mortgage loan amounts increase -- have long been the subject of criticism because conflicts of interest and kickbacks that inflate title insurance premiums. While called insurance, claim payments account for only about 4 percent of title insurance premiums with the remainder going to title agents, title insurers, and a variety of other entities involved in real estate transactions - homebuilders, real estate agents, attorneys and others - often through so-called "affiliated business arrangements." Title insurance is the classic example of a market characterized by reverse competition - competition that drives up the cost of the product as title insurers compete for the business of the entities who serve as gatekeepers for the consumers who actually pay for the premium.

The nonprofit, nonpartisan consumer organizations issued the following statements:

Birny Birnbaum, Executive Director of the Center for Economic Justice, said:

"Reforming the title insurance industry is an essential component of addressing home buying and homeownership affordability. Iowa is the only state that has created a low-cost alternative to title insurance. While a few states have made some efforts to address the anti-competitive practices in title insurance, state insurance regulators have failed to rein in excessive title insurance premiums. We're hopeful that these new federal initiatives will jump start action at both the federal and state level."

Douglas Heller, Director of Insurance for Consumer Federation of America said:

"The title insurance market has been broken for decades, and homeowners and new homebuyers have paid the price. At the moment when consumers are finalizing a consequential financial decisions - buying or refinancing a home - they are forced to purchase title insurance to protect the lender in a market built on kickbacks to the agents who direct consumers toward an overpriced title insurance policy. The insurance industry and the agents who steer consumers to these insurance companies have lobbied relentlessly to block reforms that would create substantial savings for consumers, so we are very encouraged that the President is shining a light on this broken system."

Sharon Cornelissen, CFA's Director of Housing said:

"It is encouraging to see the White House look at potential reforms of the title insurance industry. Unnecessarily expensive title insurance has added to the upfront costs of buying a home, creating barriers for first-time homebuyers. Excessive costs like this have no place in a housing market that is facing its worst affordability crisis in decades."

As a background on problems in the title insurance market, the consumer groups highlight CFA's 2013 testimony to the New York Department of Financial Services (https://consumerfed.org/pdfs/NY_title_insurance_testimony_final.pdf) and Birny Birnbaum's 2005 Analysis of Competition in the California Title Insurance and Escrow Industry (https://consumerfed.org/wp-content/uploads/2024/03/competition-report-redacted-final.pdf).

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Original text here: https://consumerfed.org/press_release/consumer-groups-applaud-president-bidens-announcement-of-steps-to-address-homebuying-closing-costs-and-excessive-title-insurance-charges/