Title-Insurer Fees Draw Scrutiny

James Hagerty:

The U.S. title-insurance industry faces increasing pressure from regulators to justify the fees charged to consumers for ensuring they have clear ownership of their homes.

For most people, title insurance is just another mysterious fee they must pay when they buy a home or refinance a mortgage. Unlike some of those fees, though, title charges aren't negligible. They range from several hundred to several thousand dollars--and last year totaled more than $10 billion for the title industry. Lenders insist on the insurance to protect them against the possibility that a taxing authority, another creditor or a disgruntled heir may have a claim to the property, among other risks.

As falling home prices tempt more people back into the housing market in some parts of the country, politicians and regulators are raising questions about whether they may be paying too much for this protection. "There's no transparency," Delores Kelley , a state senator in Maryland, said in an interview. She introduced legislation that created a commission to study the title-insurance industry in Maryland. That panel is due to make recommendations about possible regulatory changes by December.

In Pennsylvania, Attorney General Tom Corbett earlier this year successfully campaigned against a push by the title industry for increases in regulated rates. New Mexico's legislature this year enacted a law that will allow price competition among title insurers, previously required to charge standard prices set by the state insurance regulator. That kind of fixed-price regime continues in Texas.