How do title companies issue title insurance?

The title company researches property ownership, liens and encumbrances, property taxes, chain of title, unreleased deeds of trust, association fees (if applicable) and water utility bills as required by the District. In the case of single family homes, the title company will also order property survey showing property lines and boundaries, encroachments, etc. The title company issues title insurance guaranteed by an underwriter and provides evidence of ownership to the new owner. This title will be designated as ‘Marketable’ or ‘Insurable.’ Marketable title is the most common designation. Typically referred to as ‘clean title,’ it shows the property is free of outstanding liens, issues or encumbrances. ‘Insurable title’ means there may be a ‘cloud’ on title due to an unreleased deed or deed issue, lien unpaid fees or fines, etc. Buyers purchasing foreclosures and REOs are most likely to receive ‘insurable’ title. The tile company and its underwriter assess the related risk and it is their choice whether or not to assume it. It is also the buyer’s choice as to whether or not they wish to accept ‘insurable’ title as this could lead to issues when reselling or refinancing the property. The longer issues are left unresolved, the more difficult they are to clear.

BANKRATE ON TITLE INSURANCE

Is DC Title Insurance Pricing Regulated? How Is It Disclosed?

Until 2011, DC title insurance premiums and settlement fees were negotiable. Title underwriting companies published rates and title agents negotiated with consumers. The revised laws that took effect in 2011 regulated and licensed title insurance underwriters, agents, rates and affected continuing education requirements. Large real estate brokerage firms with affiliated business arrangements with title companies benefitted from the change, which–no surprise–resulted in increased costs to home buyers. These arrangements typically exist between real estate brokers, mortgage lenders and/or title insurance companies. Read the Washington Post article

The TRID Improvement Act of 2017-18, H.R. 3978, sought to amend the manner in which title insurance premiums are disclosed under the TILA/RESPA Integrated Disclosure (TRID) rule, providing that the disclosed charges for any title insurance premium be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by either state regulation or the title company rate filings, but the bill died in the Senate and was never enacted.

In 2020, CFPB issued the Factsheet: TRID Title Insurance Disclosures

What's A ReIssue Rate, And Who Benefits From It?

A reissue rate is a title policy discount afforded to buyers of properties owned by the seller for less than ten years and that seller purchased a title policy during that time. Reissue rates can vary according to the underwriter. Buyer agents may include a provision in the purchase contract requiring the seller to cooperate with the title company in obtaining the current title information in order to effect a reissue rate.

More on resissue rates

What Does A Title Policy Cover?

• A title insurance policy should cover claims arising out of title “clouds” that could have been discovered in the public records and “non-record defects” not discovered in records after a complete search
• The policy should protect the insured for as long as they, their heirs and devisees, hold title to the property
• Title policies offer protection available against latent defects of title which do not appear of record such as forgery, impersonation, capacity of parties, faulty acknowledgments and mechanic’s and mechanics liens.

Preliminary Title Reports

Your title company will issue a Preliminary Title Report, which is a disclosure of title conditions and property information used to secure your title insurance policy through its underwriter. Included will be the vesting (way in which title is held) and identity of the current owners, liens and judgments of record, details of the property, including its legal description, along with easements and encroachments and other exceptions, if any exist. Home buyers should make sure the legal description of the property matches that of the MRIS listing information and the information contained in the purchase contract. The legal description consists of the Lot (land parcel), Block, Square and, depending on the property type and location, subdivision, and/or condominium unit number CC&Rs (Covenants, Conditions and Restrictions), common area interests and conveyances. For single family homes and vacant land, the description will also include the property’s boundaries, tract, historic district and/or property designation and restrictions, if any, and a survey map detailing the lot boundaries and dimensions. You can look up the property’s square and lot on the D.C. Office of Tax and Revenue’s Real Property Tax Database by searching its address. Additional information in the database includes current owner, assessed value, and physical description. An alternative is to search the D.C. Atlas from the Office of Planning. Your Preliminary Title Report will also address property taxes, which are listed as liens. Property taxes must be current at or prior to transfer, so any outstanding property taxes are prorated and paid through title at settlement. Other primary liens are mortgages, current and prior (unreleased) deeds of trust. Your title company should obtain releases for all unreleased DOTs rather than simply providing exceptions. This will assure you of a clean chain of title.