State Will Investigate Costs of Title Insurance

State Insurance Commissioner John Garamendi has ordered an investigation into allegations by the Consumers Union that the five largest sellers of title insurance in California are charging too much, particularly to those refinancing their homes.

“Having just financed my own home, I am keenly aware of the concern over the high cost of title insurance and will investigate the rates being charged by title insurers,” Garamendi said Wednesday.

Critics claim that the new automated search procedures through the Internet have reduced the cost of obtaining records used to determine whether a property has liens that may cloud a property’s title, but that those savings have not been passed on to the public.

In a March 26 letter to the commissioner, Norma P. Garcia, senior attorney for the Consumers Union, alleged that the five largest sellers are overcharging. Garcia wrote that although the sellers are quoting prices of about $750 on a $250,000 loan, the insurance should actually be offered for only half as much.

Far lower prices have sometimes been advertised in refinancings, and an unlicensed outside company, Radian Guaranty, has been peddling the equivalent of a title policy for less than half as much as the big sellers. The Department of Insurance recently ordered Radian to stop doing business, however, because its sales were not authorized by the state.

Mark Bogatich, a spokesman for the California Land Title Assn., an industry group, said Wednesday that the regular insurance sellers incur about 90% of their costs from searching the records and that their claims payments are accordingly often quite low, as the critics say. But, he said, despite the Internet, record-searching remains complicated.

Bogatich also challenged the average prices cited by the Consumers Union, saying that for the most part the title insurers make most of their sales through lenders, not directly to customers, and that discounts are often given for volume business.