Why Misguided Calls to Scrap Title Insurance Would Make Homeownership More Costly and Threaten the Economy

Over the past several months, a growing number of federal regulators and officials have signaled a desire to eliminate title insurance as part of a push to lower the cost of purchasing a home. The Consumer Financial Protection Bureau, for example, recently suggested that title insurance amounted to a “junk fee.”

Making homes more affordable for Americans is a worthy goal, but targeting title insurance – a one-time premium that is far lower than many other closing costs – would have the opposite effect. That's because title insurers play a foundational but largely misunderstood role in the real estate industry: enabling the reliable transfer of property ownership.

Accuracy of Property Records is Maintained by the Title Insurance Industry

Put simply, when you buy a home, you need some way to know the seller actually owns the property, has the right to sell it, and that there aren't any competing claims, long-lost cousins, court judgments, or simple paperwork errors that could lead to someone showing up on your doorstep with a piece of paper that says your new house isn't really yours. The catch – no single government entity actually keeps track of all of those things.

Instead, the work of collecting and maintaining the property records that underpin the reliability of every real estate transaction in the country falls to the private sector, specifically the title insurance industry. To get an idea of how big a job this is, start with the fact that there are more than 3,500 jurisdictions in the U.S. that record deeds, all using their own systems and recording practices. And the deed to a property only gives you part of the story.

Between October 2022 and October 2023, various entities filed 1.9 million court judgments or orders, 1 million financing statements, almost 900,000 local, city, utility, and other government-related liens, 600,000 state and federal tax liens for unpaid taxes, over 200,000 HOA foreclosures, and 150,000 mechanics liens, each with the potential to threaten a transaction.

Title insurers are the ones who spend the time and money to find, review, synthesize, validate, and correct those records where necessary – and critically, they do this work proactively, on an ongoing basis. This means when you get ready to close on your new house, your title insurer will review the relevant documents, identify errors in the public record or other potential problems, and help to resolve them so the title can be traded without incident. If an unforeseen problem arises later, the title insurer will step in and fund your legal defense for covered issues. Title insurers continue to protect the ownership rights of policy holders, while striving for greater efficiency and cost savings. In fact, the average premium per dollar of insurance is down by more than a third since 2018, a result of the technological advances of the title industry.

Ownership and Family Wealth is at Risk

For individuals and families, the benefits of avoiding costly legal disputes are clear. At the national level, the positive impact of accurate and reliable public ownership records may be even greater. The economic activity associated with residential real estate accounted for nearly one sixth of U.S. GDP in 2023(opens in a new tab/window).

Multiplying the average consumer's cost of addressing a challenge to their ownership rights by the historically observed title risk exposure, we can estimate that the title industry protects consumers, lenders, and other parties from $600 to $900 billion of risk exposure every year.

If we couldn't establish who owned a property, or if the public record couldn't be trusted as a source of information necessary to convey property rights, real estate transactions would be mired in legal challenges. Many American families would lose access to their single greatest source of wealth as well as the collateral they need to borrow capital to start a business or send a child to college. Lenders would lose confidence and pull back on providing mortgage loans – or charge significantly more to protect themselves from potential, unknown title disputes.

In a very real sense, title insurance – and the work done by the industry to maintain accurate property records – is the linchpin of the real estate sector. To upend it would be an unnecessary risk that could threaten the broader economy and make homeownership even more expensive for American families.