All Forum Posts by: Shafi Noss
Shafi Noss has started 96 posts and replied 543 times.
Post: Owner’s title insurance - to get or not?
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Quote from @Carlos Ptriawan:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:
@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.
Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans.
"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers.
Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."
...
"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."
https://singlefamily.fanniemae.com/media/37606/display
So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so.
I also think it's ironic that title insurance was developed to address short comings in AOLs. I guess what's old is new again.
Different products for different use cases, each has it's pros and cons. Hopefully they can co-exist and serve consumers well by providing more options.
Hi Shafi/Peter:
Thanks for both your expert commentary. Reading from Shafi comment is intriguing for me.
I have question though. I like to digging property record/deed/title ; so my question would be, is there any difference of the output from what I can find out personally via internet search , and from title search that we pay ?? is there differences ?
For example, I could find a record of code issue in building I'm chasing , but the title company can't find out that. Are you guys literally only checking from the county or there's something else that I don't know ?
I think @Peter Walther would know this best, would be interested to hear his answer too.
Post: Owner’s title insurance - to get or not?
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@Peter Walther Yeah this one?
https://www.cnn.com/2023/11/05/homes/nar-verdict-real-estate...
Seems like it could be a big deal.
Post: Owner’s title insurance - to get or not?
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- Posts 558
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Quote from @Peter Walther:
Quote from @Shafi Noss:
@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.
Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans.
"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers.
Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."
...
"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."
https://singlefamily.fanniemae.com/media/37606/display
So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so.
I also think it's ironic that title insurance was developed to address short comings in AOLs. I guess what's old is new again.
Different products for different use cases, each has it's pros and cons. Hopefully they can co-exist and serve consumers well by providing more options.
Post: Owner’s title insurance - to get or not?
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Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Shafi Noss:
@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical.
I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly.
FNMA itself agrees:
"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."
https://singlefamily.fanniemae.com/media/37606/display
Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it.
I think gas prices are higher than they need to be.
You are implying that what people think prices should be doesn't matter because free market forces will determine the correct price. The difference is it's super easy to compare gas prices with no education whereas much more difficult for non-professionals who buy a complex policy maybe a couple times in their life, and often have no education in finance, to compare title policies.
We don't live in a free market economy we live in a mixed economy where gov'ts step in and create regulations when it's not reasonable to expect consumers to be well educated enough to evaluate their options correctly on their own. Case it point, mortgage regulations, professional licenses like doctor's licenses, blue sky laws, accredited investor restrictions, etc. Why not just let people choose their own investment providers? They could, until a lot of normal folks got severely hurt by investment fraud. That's when the regulations were put in place.
And many states do regulate title insurance prices, by providing a spectrum of regulations. But regulations do not update in real time the way market demand does, so regulations lag behind the markets and create price inefficiencies.
Post: Owner’s title insurance - to get or not?
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Quote from @Shafi Noss:
@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical.
I also suspect title insurance is costlier than it needs to be. Because electronic records have made checking title easier and less risky, but prices have not adjusted accordingly.
FNMA itself agrees:
"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers."
https://singlefamily.fanniemae.com/media/37606/display
Let's say title insurance is 10% more expensive than it needs to be. Does that mean nobody should buy it? No. It means rather than it being necessary for 95% of people, it may only be necessary for 90% of people, but 95% of people are still buying it. This is not even close to claiming nobody should ever buy title insurance. I would ask that you try to represent my position fairly before criticizing it.
Post: Owner’s title insurance - to get or not?
- Investor
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- Posts 558
- Votes 304
@Peter Walther This is simply not what I'm saying. Feel free to look at my previous posts to verify for yourself. Carlos asked me to make a specific claim and my claim was "It is not always correct to buy title insurance". And that absolute statements like that make no sense. Saying you should never buy title insurance is equally nonsensical.
Post: Owner’s title insurance - to get or not?
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@Carlos Ptriawan self-insuring is when you don't buy insurance
Post: Owner’s title insurance - to get or not?
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Quote from @Peter Walther:
Quote from @Shafi Noss:
Quote from @Peter Walther:
Quote from @Shafi Noss:
Well first Jay I know you are extremely experienced and I suspect Carlos is as well so let me start by saying you both have my respect.
Here is the nuance I am trying to distinguish: yes of course when you refi or sell a lender or buyer will want title insurance (unless Iowa).
But what about the 6 weeks that I own the property before the sale or refi? Should I buy a full-price policy to protect myself during those 6 weeks? It has the same cost as a policy that would be in place for 6 years. I do not think the answer is 'always yes'.
That's another weird thing about title insurance. Most insurance is paid monthly, title insurance is the same cost no matter how long you hold, the price is not fully tethered to the amount of risk protection the owner receives.
Yes, title insurance is a one-time premium, generally that's considered a selling point, not a weird thing. Perhaps you're not aware that title coverage continues so long as you hold an interest in the property or have potential liability for warranties given in the deed of conveyance.
Let's say you sell the property and take back a PMM. You don't need to buy a new lender's policy because the existing one continues in full force and effect.
Or let's say you sell, conveying by WD. Five years later you're sued by your grantee's grantee alleging there an easement for a gas line predating your ownership thereby breaching your warranties. Subject to the terms and conditions of your policy, there should be coverage and the insurer will probably provide a defense.
It's because of that continuing liability that I think you can't fairly say that you only had insurance for six weeks.
All that written, if you want to self-insure, have at it.
You're right of course that some protection extends past the 6 weeks of ownership, and I was clumsy or mistaken describing it otherwise.
Nevertheless that anecdote shows risk is nonzero, but nothing further. The risks are lower than if I continued to own the property myself. The rational thing to do is to compare the risk and risk premium and make a decision to self-insure or not based on my risk tolerance, it's an obligation of rationality. I do not think you are disagreeing with that.
Here is what confuses me about the one-time premium. If I have a 30yr mortgage the lender does not require title insurance updated every 5 years. But if I rate/term refi with the same lender after 5 years, title insurance is required to be paid again. Why? I get the old loan is paid off and the insurance goes with it but why can't it just be transferred to the new nearly-identical loan. It doesn't make sense to me.
It has to do with lien priority. Once recorded a mortgage has priority over any subsequent lien so there's no need for updates. If you refinance, the new lien will have priority as of its recording date and therefore and new search is needed and hence a new policy. If you elect to do a modification of the existing loan instead of a refi there will still need to be a new search and an endorsement to the existing policy date through the recording date of the mod. It won't be free.
I suspect if you do the refi with the same lender you will still be charged new points, origination fee, underwriting fee etc. Why would you expect title insurance to be different? Every year it seems my car and HO premium goes up; I complain about it, but I understand and expect it to be so.
Sorry I missed this. Yes if the reissue rate is low enough that explanation makes sense, thanks for clarifying.
Post: Owner’s title insurance - to get or not?
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Are you saying there there's a lower cost because there's less work? If so, that should be done as much as possible so owners are not paying an extra 1k every transaction for needless work.
Post: Owner’s title insurance - to get or not?
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- Posts 558
- Votes 304
Quote from @Tom Gimer:
Quote from @Shafi Noss:
@Jay Hinrichs Maybe so. I'm happy to drop that theory if the numbers aren't behind it.
Still Fannie Mae itself approves "Attorney Opinion Letters" as an alternative to title insurance to pair with their loans.
"In recent years, widespread digitization of real estate records and technological advances have improved the process of confirming marketable title, but that has not translated to lower costs for borrowers.
Fannie Mae research shows that low-income and first-time homebuyers pay disproportionally more in closing costs. Since beginning to accept AOLs under the Selling Guide in April 2022, savings to borrowers have been significant. On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy. For purchase transactions, average borrower savings have been >$500, even when the borrower has elected to obtain an owner’s title policy."
...
"Fannie Mae has also purchased more than 10,000 loans with AOLs since 2009 and has not experienced losses from title claims on these loans."
https://singlefamily.fanniemae.com/media/37606/display
So is it always correct for everyone to get title insurance? FNMA doesn't seem to think so.
We've had that discussion before on BP.
Guess how much any title attorney with a brain will be charging for an opinion letter. Yes, the same amount as a title policy because the work involved in issuing the letter and the potential liability are the same.
FNMA doesn't seem to agree. To wit,
"On average, homebuyers have saved more than $1,000 when an AOL was used instead of a traditional lender’s title insurance policy."