Think an old dog can’t learn new tricks? Some say that the nearly 150-year-old title industry has a difficult time adapting and evolving. However, the title industry has proven these critics wrong over the past decade, and importantly, it has done so without leaving homeowners vulnerable to unnecessary risks.
Title companies have embraced digitization, automation and artificial intelligence to better meet their customers’ needs, reduce costs and increase efficiency. These innovations have helped — not hindered — title professionals offering the same, robust coverage and protection that homeowners have depended on for over a century.
Not all innovations are created equal.
Some vendors push alternative title insurance products that are marketed as cheaper options. In reality, these may offer far less protection and lack regulatory oversight.
Recently, Fannie Mae updated its selling guide and aligned industry policy with Freddie Mac. The updates allow the use of unregulated title insurance alternatives in lieu of title insurance policies in limited circumstances. Because of this move, various new iterations of attorney opinion letters have entered the market. They claim to offer the same or a similar level of protection as title insurance.
But in fact, these products — which claim to be a cheaper, more innovative version of title insurance — are a relic of the past. Attorney opinion letters were the status quo before title insurance hit the scene in the late 19th century. Attorneys would search property records and state their written opinion that the property records were clear of any title defects. As the realities of the risks associated with only a static examination of the title records became clear, title insurance policies replaced attorney opinion letters.
Title professionals conduct a search of public records for liens, debts and other issues that could threaten a homeowner’s property rights. It also provides coverage for undisclosed title defects like fraud or forgery that might result in a claim at a later date. In contrast, title insurance alternatives do not provide coverage for these “hidden” or “unknown” risks. Alternative products lack oversight and regulation. There are title insurance regulations in all 50 states and federally.
Innovation should be encouraged across the real estate industry. However, any new products that appear too good to be true deserve a high level of scrutiny. There are other, proven ways the industry is embracing innovation to cut costs and make homeownership more accessible.
Efficiencies and cost-cutting measures
For example, title companies are now automating their businesses to improve efficiency and reduce costs. The cost of title insurance has decreased 7% since 2004 thanks to industry investments in machine learning and artificial intelligence (AI).
Many companies are now using AI and machine learning to search traditional and non-traditional property data sources — reducing the time required for a manual title search. Some companies are also using AI to automatically route mortgage payoffs. There are platforms available that extract the necessary information from documents and route them to the correct file without manual interaction.
Strides in technology have also made closings more accessible. With remote online notarization (RON) technology, homeowners in more than 40 states can execute important documents — including closing documents — without needing to visit a notary in person. This technology is especially critical for active-duty members of the military, those with disabilities and those in underserved and underbanked communities.
The best innovations in the insurance improve the home-buying experience. They make homeownership more accessible without sacrificing the quality of coverage. Protection is — and should remain — a top priority for all participants in the housing finance system.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
Diane Tomb is the CEO of the American Land and Title Association
To contact the editor responsible for this story: Sarah Wheeler at [email protected].
