What You Need To Know About Title Insurance When Refinancing


A legal definition of title insurance is “A contractual arrangement entered into to indemnify loss or damage resulting from defects or problems relating to the ownership of real property, or from the enforcement of liens that exist against it.”  That last item about liens is real important into today’s housing market, and why the last thing you should skimp on when buying or refinancing a home.

With many people scooping up bargains in the foreclosure market and paying cash, the temptation to forego title insurance is strong. After all, there’s no mortgage lender insisting on it. But mortgage fraud has exploded in the wake of slipshod foreclosure practices. Title insurance may be the only thing protecting you from big financial loss if a court rules that the property you bought was improperly foreclosed and must revert to the previous owner without any compensation to you.

What Is Title Insurance?

An insurance of title warrants the validity of the title to a piece of real property in any and all events. It’s usually taken out by you the purchaser or by the mortgage lenders in an amount equal to the purchase price. Don’t confuse it with a certificate of title, which offers no protection against any hidden defects in the title that examining public records did not reveal.

Sobering Stats About Mortgage Fraud

The FBI’s website reports that mortgage fraud is a growing crime resulting in annual losses of $4 billion to $6 billion. In 2010 alone, the bureau received 70,533 suspicious activity reports resulting in losses of $3.2 billion. There were 3,020 pending investigations as of February 28 of this year, with nearly 3/4rds involving losses in excess of $1 million. According to the Mortgage Asset Research Institute, the states with the most significant mortgage fraud problems in 2009 (the latest statistics available) were: Rhode Island, Florida, Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado.

One of the most common types of mortgage fraud is faking deeds that are notarized and recorded with a local jurisdiction. With cut backs in local government and increased activity in foreclosures, clerks don’t always conduct the necessary due diligence. If you have title insurance, you’re protected in the event of a title dispute.


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