Like many homeowners, Immanuel Spira decided to take advantage of record low interest rates by refinancing his Westwood home more than once over the last year.
Spira, 47, an entertainment-industry lawyer, thought he had a sweet deal when he refinanced into a loan under 5% last summer. But he's now doing it again to secure a rate below 4%, which he figures could save him about $600 a month.
Spira's willing to again pay the roughly $1,000 lender fee for a refi, as well as the $500 appraisal fee and the almost $600 escrow fee. What gets him, though, is having to pay more than $1,000 for title insurance — that is, a fee for a record check to ensure that his property is still his.
"It's ridiculous," Spira said. "Public records are readily available, and not much could have changed since the last time I had to pay this fee."
Title insurance fees represent one of the more onerous charges homeowners face when they refinance a loan, especially within a relatively short space of time.
"It's 100% gravy for the title companies," said Steven Maizes, a West Los Angeles mortgage banker who says he's now handling about 25 refis for clients who had previously refinanced their homes within a year. "I wish I had a nickel for every time a client asked why they had to pay the title fee again."
Mortgage rates are at the lowest levels in decades. The average for a 30-year fixed loan has fallen to 4.09%, Freddie Mac said Thursday. That's the lowest since the company started keeping records in 1971. The average 15-year rate has dropped to 3.30%.
Refis now account for about 77% of all mortgage applications, according to the Mortgage Bankers Assn.
Most experts say a refi makes sense when rates drop at least 1 percentage point below what a homeowner is currently paying. That means many people who refinanced last year could be in the market once again for a cheaper loan.
Title insurance is basically a way to assure lenders that you still own your home and that no one's placed a lien on the property. As such, it's a valid financial product.
But it's not a very competitive product. Just four companies — First American, Fidelity National, LandAmerica Financial and Stewart Title — account for about 90% of the California market.
Moreover, each of these companies has had to pay millions of dollars in penalties and refunds in recent years for illegally doling out cash and gifts to real estate agents, banks and builders who steered business their way.
Not that the companies are hurting. Fidelity National, the country's largest title insurer, saw its profit soar 66% last year to $370 million.
The state Department of Insurance says title companies are required to file their rates with regulators. But there are few limits on how much can be charged.
A 2005 study commissioned by the agency concluded that title insurers rake in "excessive profits" and that "a reasonable degree of competition does not exist" in the market.
As a result of these findings, former Insurance Commissioner John Garamendi said California's title insurance market is dysfunctional and in need of reform. His successor, Steve Poizner, said the same. But so far, no significant changes have been made.
"You see all these different fees when you refinance," said Nicole Ifcher, 39, a West L.A. homeowner who has secured lower rates twice in the last year. "Some of them you can almost understand. Having to pay the full title fee again is one that you don't."
Craig Page, executive vice president of the California Land Title Assn., an industry group, countered that even if a new refi occurs just days or weeks after a previous refi, the lender has no idea what could have happened to the property or homeowner during that interval.
"You have to treat each one as a brand-new loan and a brand-new risk," Page said.
To a certain degree, that's true. Title insurance is intended to protect the lender, not the homeowner, and it's understandable that banks would want a full accounting any time you come knocking at their door.
But let's be reasonable. A title company isn't starting from scratch when it examines a property twice in one year. Most if not all its work is already done the second time around.
The fact that some title companies offer discounts of at least 20% for repeated refis indicates that the amount of work required isn't the same as servicing a brand-new loan or taking on a brand-new risk.
So the question really is: What's a fair price for this service? I'd say $1,000 for any title search is probably about $900 too much in the age of high-speed computers. At the very least, you'd think a second title search within a 12-month period would cost just a small fraction of the first go-round.
"We've expressed some of these same frustrations to title insurers," said Bryant Henley, senior staff counsel with the California Department of Insurance.
And so far, regulators have gotten nowhere.
Home buyers and refinancers should shop around when it comes to title insurance. Rates charged by each company can vary by hundreds of dollars. Ask your mortgage broker or real estate professional to review all the options.
Also look online. A website called Entitle Direct, for example, says it can lower title insurance costs 35%.
And don't hesitate to seek lower rates for a refi, especially if you've been down that road before in recent months. Title companies don't always disclose that discounts may be available. Make sure you ask.
This is a business clearly in need of greater transparency and accountability. If regulators lack sufficient tools to bring title insurers to heel, it's up to lawmakers to do something about it.
I can think of millions of homeowners (read: voters) who'd appreciate a little assist.