As I wrote about in my last post, "Debate over New York title insurance public option seems to miss the point", a group of New York state legislators have proposed legislation to create a "public option" for title insurance. These legislators have pointed to Iowa's Title Guaranty Program, a system of public land title insurance established by Iowa state law.
Unfortunately, there seems to be some confusion on the part of the New York legislators as to the nature of Iowa's land title laws. In short, it appears that they have leaned too heavily on the vast online encyclopedia Wikipedia in their research of the issue.
In a white paper on the issue, the New York legislators' research says this:
After careful review and consultation with a broad range of interested parties, we have concluded that speedy, fundamental reform of the current system is a practical and politically possible outcome that will preserve the legal and social benefits of guaranteed title while saving New Yorkers literally hundreds of millions of dollars annually.
That reform can use an enhanced regulatory model, or a fundamental market reform. While the enhanced regulatory model is easier to conceptualize and perhaps easier to enact, it will inevitably be slower and bring with it the less desirable consequences of a command-and-control system. We believe, however that fundamental market-based reform would create a swifter, more competitive, cheaper and more efficient system. We propose the creation of a “public option”, a state entity charged with guaranteeing title and reducing costs.
That system is based on a modification of the theoretical basis for guaranteeing title. In the mid-19th century Australia, using a concept known as “Torrens Title”, replaced the old English land law, which was based on medieval concepts and made the transfer of real property cumbersome, time consuming and expensive (i.e., the title insurance system). That alternative system is now widely used in many parts of the world, and in Iowa. In Iowa the title or ownership right to the property is actually created by the very act of recording the transaction in a central, state-run register, which is legally conclusive. This is also called “title by registration”, and no document is effective to pass title or an interest in a property unless and until it is recorded at the centralized registry. In 1947, after a series of title company bankruptcies, Iowa adopted this system, and it exists today in the form of the Iowa Title Guaranty Program. While estimates of the savings to the citizens of Iowa vary, a conservative estimate is that Iowans pay about one-half of what citizens of other states are paying for similar title guarantees. While there are no intrastate title insurance companies in Iowa, constitutional protection for interstate commerce requires that out-of-state title companies be able to compete in Iowa and they now provide insurance for about 10% of real property transactions.
All fine and good, except that Iowa is not on the Torrens title system. In fact, apparently Iowa legislators considered it and rejected it. According to the Iowa Land Title Association, there was a significant public battle over Torrens title that lasted in some degree for the first half of the 20th century. But ultimately, the Torrens system of land titles was not adopted.
Where did the New York legislators get their faulty information?
All signs point to Wikipedia. Until very recently, Wikipedia's entry for "Torrens title" had an error in it. If a researcher had read the Wikipedia entry for Torrens title a few months ago, they would have read this:
In the United States, only Iowa has all its land under the Torrens system; other states with a limited implementation include Minnesota, Massachusetts, Colorado, Georgia, Hawaii, New York, North Carolina, Ohio, and Washington.
This reference to Iowa having its land titles on the Torrens title system was corrected in August, and the passage now reads like this:
In the United States, states with a limited implementation include Minnesota, Massachusetts, Colorado, Georgia, Hawaii, New York, North Carolina, Ohio, and Washington.
Wikipedia is a great resource, no doubt about it. When I was seeking out information for my last blog post, Wikipedia was the first place I went. And I did this even though I know from experience that Wikipedia is far from error-free. I guess the difference between myself and the New York legislature is that I'm not basing billion-dollar legislation solely on what I read on Wikipedia.