Realtors and lenders are just as ignorant as the general public about what title insurance is and the value it provides to the homebuying process, according to the American Land Title Association.
And with the sweeping changes that the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures (TRID) rule will bring to the closing process later this year, more educational efforts and outreach are critically important, ALTA stressed at its 2015 Business Strategies conference last week.
Title insurance protects buyers from problems that could arise with a title they have purchased that were not uncovered in the title search process. Those problems could include errors with the deed or mistakes in the record — or even forgery or undisclosed heirs. When a homeowner purchases title insurance, then the title company will help pay any valid claims or defend the homeowners’ claim in a lawsuit.
The TRID rule, which takes effect Aug. 1, is widely considered to be the most significant change to the closing process in four decades. The 1,888-page rule and its accompanying 400-plus regulatory citation changes will impact how closings are conducted and the time frame in which they occur, as well as business processes, technology, policies and procedures — and, as highlighted at ALTA’s conference, the relationships among various vendors.
“Collaboration begins now,” said ALTA President Diane Evans as she kicked off the annual conference, attended by more than 500 title insurance and settlement professionals March 18-20 at the Sheraton Hotel in downtown Philadelphia. “We’ve been slow to engage, and now the time is critical that we start talking about the importance of the work we do. You will leave here with the tools to talk to Realtors and lenders to engage in critical conversations that need to occur sooner than later, and to collaborate with them as they prepare for Aug. 1.”
Evans, who is also vice president of Land Title Guaranty Co. in Denver, said during ALTA’s research for its consumer messaging campaign last year, Realtors and lenders who participated in focus groups showed “confusion” about the value of title insurance.
“Few recognized that we have two types of policies,” Evans said. “We learned they lacked a clear understanding of what we do, what we insure, how we price our products.”
The real estate professionals said title insurance professionals need to sell their own product — “It’s not up to them,” Evans said.
“It is up to us to take the reins and communicate directly to consumers earlier in the homebuying process to ensure they will have the peace of mind that their investment is protected after they get the keys to their home,” she said.
Part of the confusion stems from the CFPB’s decision to label an owner’s title policies as “optional,” she said.
“A consumer’s largest investment — their home, the very product that provides the most secure financial coverage for that home — and it’s optional,” she said. “Does that bother you? Are you concerned? I am. We now are tasked with making sure that consumers are educated early on in the process when they are buying their home. We have an obligation to make sure they understand the loan process, but we’ll have the opportunity to talk to them early on, and that part of the loan process includes protecting that investment. Why, for the one-time fee that we charge, it may be the single most important safeguard they purchase. We get to sell that to them and help them understand why it’s important.”
But because the CFPB will require lenders to assume responsibility for all of its closing table partners, it “will become critical to have leadership conversations” with Realtors, lenders and other vendors, Evans said. She urged title insurance and settlement professionals to educate their partners about the work they do to minimize claims and the risk homebuyers may have on their investment.
“We want to make sure they understand that the one-time premium gives them that peace of mind,” she said.
Evans urged attendees to take the lead and start “setting the expectations and having conversations with lenders” and other partners on how they will collaborate to exchange information on the new TRID disclosure forms.
“Every one of you in this room is going to become leaders in your community, in your market. You will help define and set the expectations in managing the next new paradigm shift in real estate closings,” she said.
Acknowledging the challenges that lay ahead in the next five months as everyone prepares for implementation, Evans said she expects everyone involved in the real estate, mortgage and settlement service industries to “morph, change and adapt to make practical applications and solutions for real-world problems.”
“I think we’ve got a lot of challenges ahead of us,” she conceded. “I think after Aug. 1, after we’ve experienced many of those pressure points, we will absolutely find a way to accommodate those changes.”
ALTA is co-hosting several TRID forums along with the Mortgage Bankers Association and National Association of Realtors to train members on the changes to come. Two forums remain, but are sold out: March 26 in Chicago and April 16 in Washington, D.C.
Editor’s note: This story has been edited to include more details about how title insurance protects consumers.