I had a recent discussion with my older and wiser brother in the sunshine state about the current state of title insurance in our Country. As all conversations in our family they inevitably turn to title insurance, it is no wonder considering the rapid transition and transformation the government is doing right beneath our very noses.

The point I made, while unpopular and largely dismissed by my brother was that title insurance will be overly regulated, automated, mandated and essentially taken out of business by the Federal government within the next ten years. How many torrenz books have you pulled in the past 5 years? How many did you pull 20 years ago? How many marketable title searches have you done now compared to 20 years ago? How many "products" do you offer? How many did you used to offer?

Current owner search, lien search, last 2 owner search, a search with no taxes. etc etc etc. The point is lenders don't care and homeowners care even less while all compounded by the indemnity letters flowing around from underwriter to underwriter. The who cares attitude of defective title is pretty much standard practice with the largest underwriters as long as they have their magic letter of indemnity to fall back on.

One argument made is the level of claims will force title companies to utilize experienced title examiners to mitigate those claims. My rebuttal is First American's 15 minute search product. When I make 4 billion dollars in revenue and pay out 700 million dollars in claims, I'm operating a successful business and the losses are acceptable. That is the unfortunate truth of the matter.

Title insurance is the least understood aspect of any real estate transaction, so the first reaction to it is skepticism. What is it for? Why do I need that? Why do I have to pay so much if all the information is online? Who cares about something that happened ten years ago to my property? Most of the general public doesn't know and more don't even care. Heck, most people don't even know how to file a claim or who is the actual owner of their mortgage as this class action against MERS shows. http://stopforeclosurefraud.com/2010/07/27/class-action-filed-figueroa-v-law-offices-of-david-j-stern-p-a-and-merscorp-inc/

So when our double dip recession hits, as most economist predict that it will, how else will the government trim the fat? They go to the intellectuals who have always been the whipping boys, the title people. Not the useless realtors, not the car-salesmen brokers; they will focus on title insurance. The government guarantees loans, why not title?

Since fees have been reduced so much by title people over the past tenyears, they have critically reduced the implied importance of the product. "How can it be so important if it's so cheap?" For everyone that cut their fees to stay afloat, to everyone that gave a little bit just for the extra business, you've devauled your work enough to make it irrelevant and made yourself irrelevant too.

My brother said the public doesn't know the complexities of title insurance and how important it is. My simple reply is, the public doesn't care.