One of the biggest rackets is this country is property title insurance. It’s especially pricey in New York, along with everything else, but one state, Iowa, has taken matters into its own hands by offering a unique solution: they clear the title before the property is closed on, obviating the need for the insurance. There is no title insurance industry in the state.
The need for title insurance has always been a bit of a laugher. There are fears conjured up by the prospect of “missing heirs,” rights of way, like maybe the Babylon Line staking a claim to install a track through your kitchen, and various “unsatisfied” issues that might suddenly appear out of nowhere.
Actually, they’re nowhere to begin with, and the actual filing of a claim for a residential piece of property is extremely rare.
In fact, it’s usually the title recording company itself that screws up and creates the “cloud on title” scenario that comes up from time to time. Once investigated, there is no need for a new owner to pay for a whole new policy on a piece of land. No doe-eyed orphans will show up at your door, and every time the property changes hands, there is yet another “title search” performed, as if the last 20 had turned up anything.
You might think this is an obscure issue, but in terms of the cost to New Yorkers, we are talking serious money here. The cost of title insurance is generally keyed off the mortgage amount and around here that’s no small thing. So paying around $4000 at closing is not out of line for something that will never be used. This is in addition to the state and county’s extortionate fee structure, and the fact that only this state makes the process of a transfer of property as elaborate as a bar mitzvah. It’s the ultimate in a rent-seeking business.
But the real issue comes when it’s time to refinance. Most people roll the closing costs into the mortgage, and a new title policy is issued again, meaning the borrower is financing the costs of another useless policy for years to come, on a property that’s already been investigated, quite literally, within an inch of its life. Over the years, I would imagine New York homeowners have had billions relieved from them in interest costs for this preposterous vehicle.
But taking a page from the Kathleen Rice playbook, I figure this a great angle for some aspiring state “Legislator.” Let’s say one of the 150 (blush!) assemblymen from somewhere upstate submits a bill to abolish the title insurance racket as Iowa did.
Immediately, dozens of assemblymen and senators express their outrage, noting how many title insurance company owners stormed the beaches of Normandy, raised the flag at Iwo Jima, gave to the Girl Scouts, supported our troops, and joined the fight against diphtheria. We can’t treat them like that. It’s un-American. And in days, all of the objecting “representatives” are getting massive checks from various title insurance companies, the New York State Association of Title Insurance Companies (I don’t know if one exists, I’m simply presuming one does) and perhaps dozens more from any of the other 48 states that keep their citizens lashed to this farcical construct.
It’s a great way to get your political career funded at the expense of your constituents. And after all:
Isn’t that what “public service” is all about?