The Consumer Financial Protection Bureau is the name of the federal agency that has proposed the questionable rule discussed in the last posting to this blog. At best, the proposed rule is misguided in calling Owner’s Title Insurance protection “optional”. Calling an owner’s policy of title insurance optional in a real estate transaction has the real world potential of dissuading buyers from making sure they receive objective evidence of who owns the real estate the buyer is acquiring.
There are other consequences of not obtaining Owner’s Title Insurance at closing.
Here are two examples:
- A buyer would have nothing to inform buyer about any easement that impact or limits the use of the real estate.
- And the buyer would not have any assurance from a regulated title insurance company that any mortgage or other lien will be discharged at or shortly after closing.
Even inexpensive real estate is not inexpensive.
- Not having objective proof of ownership and protection in the form of an owner’s policy of title insurance is like buying an expensive car without a warranty and without having your mechanic check it over before you buy.
- Problems that surface following the closing can be resolved with a claim on the Owner’s Title Insurance.
- The typical additional cost for an owner’s policy issued together with a loan policy is nominal.
Because issuance of the lender’s policy of title insurance is not optional, it makes sense to get the owner’s protection at the time of closing when the cost is low. All institutional lenders require coverage in the form of a lender’s policy of title insurance. It protects the lender, but only the lender.
The purchase of Owner’s Title Insurance at the same time as the purchase of a lender’s policy of title insurance is a bargain.
By telling people that owner’s coverage is “optional”, that may encourage a buyer not to take advantage of a great value and worst of all, the buyer will not be protected. As always, I hope this article, the second of two articles on this subject, has been helpful to you.