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Published byBritney Patterson
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CHAPTER 2 THE BUSINESS OF TITLE INSURANCE
© 2008 Dearborn Real Estate Education KEY TERMS Look at the Key Terms Check off any you do not recognize
© 2008 Dearborn Real Estate Education LEARNING OBJECTIVES Describe Title Assurance vs. Title Insurance Discuss how Title Insurance helps the primary and secondary markets, buyers, sellers and real estate agents
© 2008 Dearborn Real Estate Education LEARNING OBJECTIVES Distinguish a Title Insurer from a Title Agent Distinguish Title Liability from Closing Liability
© 2008 Dearborn Real Estate Education Title Assurance vs. Title Insurance Title Assurance is a broad term including surveys, maps, title opinions, anything having to do with title Title Insurance is a specific contractual obligation
© 2008 Dearborn Real Estate Education Alternative Products to Title Insurance include Casualty insurance products Borrowers credit score “Owner and Encumbrance” reports
© 2008 Dearborn Real Estate Education REINSURANCE Designed for LARGE risks – too big for one insurer to handle Insurer writes policy and “cedes off” a portion of the risk to others for a fee
© 2008 Dearborn Real Estate Education CO-INSURANCE Originally designed for LARGE risks Primary Insurer writes policy and puts risk into a pool Pool insures any loss in equal amounts
© 2008 Dearborn Real Estate Education ILLEGAL USE OF REINSURANCE Some Title Insurers signed Title Agents affiliated with businesses (Lenders, Homebuilders, Real Estate Agents) that could bring in title work.
© 2008 Dearborn Real Estate Education ILLEGAL USE OF REINSURANCE These Title Agents were offered an opportunity to Re-insure the business they brought in, for a fee. Lawsuits determined the Title Insurer in effect was paying the agent for the business.
© 2008 Dearborn Real Estate Education RESPA “No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise... incident to or a part of a real estate settlement service involving a federally related mortgage loan....”
© 2008 Dearborn Real Estate Education Many Sham Title Agencies were Shut Down.
© 2008 Dearborn Real Estate Education Title Agents are a Risk for Insurers Title Agency Owner Missing along with $3 Million from escrow account
© 2008 Dearborn Real Estate Education Affiliated Businesses Are NOT illegal so long as they provide services required under RESPA
© 2008 Dearborn Real Estate Education Title Insurance protects... Lenders, Buyers, Real Estate Agents
© 2008 Dearborn Real Estate Education Lenders Policies Indemnify lenders from loss Standardized forms homogenize complicated state laws for easy review
© 2008 Dearborn Real Estate Education Lenders Policies Make sale of mortgages easier, giving lenders more money to lend More money to lend makes Home ownership easier
© 2008 Dearborn Real Estate Education Financiers on the secondary market require title insurance to protect their investment.
© 2008 Dearborn Real Estate Education The Secondary Market assures a constant source of money for housing
© 2008 Dearborn Real Estate Education Title Insurance Protects Homeowners and their Investment
© 2008 Dearborn Real Estate Education Real estate agents BEWARE NEVER tell your buyer she does not need an owners policy. You put yourself at risk if there is a problem later!
© 2008 Dearborn Real Estate Education Title Companies often “insure over” title problems for lenders by providing “affirmative coverage” LOW RISK
© 2008 Dearborn Real Estate Education Insuring over a title problem is often available for your buyer... Ask for it!
© 2008 Dearborn Real Estate Education Recognize and understand “Notice of Title Defect” It is important information for your buyer.
© 2008 Dearborn Real Estate Education An Owner’s Policy is different from a Lender’s Policy Owner’s Policies are for the full sale price of the property.
© 2008 Dearborn Real Estate Education Lender’s Policies cover the remaining loan balance no buyer’s equity.
© 2008 Dearborn Real Estate Education An Owner Policy is different from Lender Policy Owner’s Policies can last forever, as in corporate ownership or a trust.
© 2008 Dearborn Real Estate Education An Owner’s Policies are different from Lender’s Policies Mortgage policies decrease in value as the loan is paid down and expire when the loan is paid off.
© 2008 Dearborn Real Estate Education A title company is either a Title Insurer (Big guy with $) or a Title Agent (little guy who writes policies) Title agent Title Underwriter
© 2008 Dearborn Real Estate Education Title Insurers take liability under the policy. Title Agents write policies of Title Insurers.
© 2008 Dearborn Real Estate Education Closing liability vs. Title insurance liability SOS
© 2008 Dearborn Real Estate Education Title Policies indemnify only Title issues
© 2008 Dearborn Real Estate Education To Protect the buyers $$$ when closing obtain a “Closing Protection Letter” for the buyer from the Underwriter
© 2008 Dearborn Real Estate Education Closing Protection Letters indemnify against closing errors and theft of funds by a Title Agent.
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