Title insurance is confusing. Most homebuyers pay for two policies, and unwittingly give most of the money to the lawyers that sell the insurance. And regulators are not watching:
Early this year, Peter Ott and his partner sat at a table in their lawyer’s office, signing a thick stack of papers to buy their first home. Like most people, they agreed to a slew of closing costs.
“The vast majority of that premium that you pay is actually going back to your real estate attorney,” Ott said. Yet homebuyers have no way of knowing that, and lawyers don’t have to tell them. Ott wound up feeling misled about his lawyer’s total fees and her advice on buying the optional policy. “They are definitely, on the face of it, double-dipping or triple-dipping,” he said.The Wellesley-based firm he’d hired was Sonja Selami Law Offices, on the recommendation of his real estate agent. Selami declined to be interviewed by WBUR.
“They get so much of what I call a kickback,” Marks said. “You can call it a fee. But I believe it's a kickback.” The federal Consumer Financial Protection Bureau removed the explicit disclosure of title fees when it overhauled mortgage forms in the wake of the financial crisis. While the goal was to make the process more understandable for consumers, omitting the title agent fees may have been an unintended consequence.
She said title insurance is important because it covers a homeowner’s litigation costs if a problem crops up with a title after a home sale closes. A seller may have construction liens or unpaid taxes on a property. A prior owner could have died and an heir could contest the will, making some claim of ownership. A neighbor can insist that five feet of a new owner’s yard is really his.
These many years later, across the country, title contracts between insurers and lawyers or agents are either never or rarely reviewed by most state insurance regulators, according to a 2019 survey by the insurance commissioners association. Nationally, the largest companies in the title insurance business saw windfalls during the home-buying and refinancing boom of the past several years. Fidelity National Financial Inc., a Fortune 500 company based in Jacksonville, Fla., that owns several title insurers, reported a 49% surge in revenue in 2021, to a record $15.3 billion. First American Financial Corp. of Santa Ana, Calif., saw a 30% climb, to a record $9.2 billion.
“They formed what they called the Boston Book of Possessions,” to record property and transfers, Ryan said in an interview at the registry. He pulled an old volume from the rows of shelves and scanned the pages to look up Paul Revere. The famous American revolutionary had 15 property entries in the area from the late 1700s.
“It is one of the most lucrative insurance businesses. Not only in Massachusetts, throughout the country,” Cabral said. “At least the Division of Insurance should have the information, and that information should be available to consumers,” Cabral said. Officials from the Insurance Division declined requests for an interview.
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