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Is Owner’s Title Insurance Optional?

By Howard C. Stross
October 26, 2012


There’s a new rule that is brewing in Washington D. C.

While agencies are simply people trying to do right for the consumer, this rule has a dark side. If the proposed rule is approved, it will have unintended, negative consequences.

The proposed rule would require lenders to describe to prospective borrowers that an owner’s policy of title insurance (“Owner’s Title Insurance”) is “optional”. The optional language would appear on the loan estimate. The loan estimate must be provided to the buyer by lender if the buyer will pay the premium for the Owner’s Title Insurance.

Moreover, it gets even sillier.

Even when the Seller is the party that pays the premium for the Owner’s Title Insurance, it is still shown as “optional”. The cost of the premium for the Owner’s Title Insurance is stated on the loan estimate as a buyer’s expense, even when the purchase agreement states that it is a seller’s expense.

The party that actually pays for the title insurance premium (which in our area of the world is usually the seller) would be “adjusted” on the settlement statement (a/k/a the closing statement or HUD) so that the seller ends up paying the premium for the transaction when the purchase contract states that the seller pays the owner’s policy title insurance premium.

There is more to the dark side of the proposed rule.

In the next blog, I’ll conclude my remarks about this topic. Please stay tuned. As always, I hope this article helps you stay informed.

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