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The Title Insurance Industry
Like many other industries, title insurance was born of necessity — in this case, the need to protect owners of real estate from challenges to their property titles. During the first century of our nation’s history, Americans became all too familiar with land title troubles. In real estate transactions, the name of the game was caveat emptor — “let the buyer beware.” The ultimate
responsibility for verifying the validity of a land title was the burden of the buyer. As a result, many lost their investments.
It wasn’t until 1868 that the problem drew public attention in the Pennsylvania Supreme court case of Watson v. Muirhead. After losing his investment at a sheriff’s sale as a result of an outstanding prior lien, Muirhead sued his conveyancer.The conveyancer had uncovered the lien, but represented the title as clear after an attorney advised that the lien was not valid.
The court eventually ruled that conveyancers and attorneys could not be held liable for erroneous opinions based on professional standards of evaluation, and Muirhead lost his investment. As a result of the case, it became clear that something was needed to protect innocent investors from similar hazards and to encourage land development and American growth.
From its beginning in 1876 until the 1920’s title insurance was more or less local in nature, in that title companies confined their insurance activities to insuring properties in the county in which the company was located and in some cases in contiguous counties. The examination of title was made by employees of the company and usually from a title plant operated by the company.
Title Insurance Protection
Here are some hidden risks that title insurace protects against:
- Invalid Transfer Deeds
- Forged Deeds
- Unrecorded Easements
- Signed Deed by Person of Unsound Mind
- False Impersonation
- Undisclosed Heirs
An expansion in the title insurance industry took place virtually throughout the country from the 1920’s to the late 1940’s with the title work being done by local attorneys, or by agency companies which were in the abstract business.
Four companies emerged from the World War II era doing a restricted “National” business. It would be more accurate to say that these companies were doing regional business in the late 1940’s. They were Lawyer Title Insurance Company, Louisville Title Insurance Company, Kansas City Title Insurance Company and the Title Insurance Company of Minnesota
(Old Republic National Title Insurance Company).
In the years subsequent to World War II, a large number of companies which had restricted their operations to local or state-wide insurance began attempting to spread their operations by qualifying first in adjoining states where business opportunities seemed to be the greatest. By 1957, there were approximately 150 companies writing title insurance, 31 of which were licensed in two or more states.
There are laws in every state except Iowa which permit licensing of title insurers upon compliance with applicable state statutes. In most states, title insurance is under the supervision of the State Department of Insurance. Forms of policies are required to be filed in some states and the coverage afforded thereby approved. Title insurance rates and other charges are regulated by some states, in the state of Texas, the insurance Department, rather than the companies, promulgates rates and policy forms, and prescribes underwriting practices in considerable detail.
Investing In Foreclosures
The emergence of organizations such as F. N. M. A. (Federal National Mortgage Association) served to both stimulate business and to standardize the basic forms of coverage in most states. The American Land Title Association worked closely with lender counsel groups to develop the most popular policy form - the ALTA Loan Policy. In many states, it is common practice to insure the lender but not the owner or purchaser.
The majority of states now limit title insurance companies to a “single line” and do not permit them to issue other types of insurance (property, casualty, life, health, surety, bonds, mortgage guaranty, etc.) In the 1930’s, many title insurers which were also guaranteeing the payment of mortgage loans became insolvent as a result of claims under the guarantees and state legislatures passed these “single line” requirements to prevent a reoccurrence. All states now prohibit the transaction of title insurance without a license.
Some states have prohibited rebates or discounts for more than 30 years. Others prohibit title companies from the practice of law and/or conveyancing. The competition in the title insurance industry has been fierce over the past 20 years. Consolidation of a number of title agencies into national title insurance companies, affiliated business arrangements, joint ventures and
the expansion of new players into the vendor management arena has created an industry in the United States with title insurance premium revenues over 12 billion dollars.
Title Insurance and Escrow Jobs
Bank Owned Properties
Through direct operations and independent title agencies, the title insurance industry customers today include:
· Residential and Commercial real estate buyers and sellers
· Real estate brokers and agents
· Mortgage brokers and bankers
· Relocation management companies
· Pension funds and investment managers
· FNMA (Federal National Mortgage Assn – “Fannie Mae”)
· FHLMC (Federal Home Loan Mortgage Corp – “Freddie Mac”)
· HUD (Housing and Urban Development)
· FHA/VA (Federal Housing Administration)/(Veterans Administration)
· GNMA (Government National Mortgage Association)
Who knows where title insurance industry will be in the next 20 years?
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