Rising of Home Values Predicted and Abuses in Title Insurance Industry

The sharp rise in home prices will continue at least into next year, according to Douglas Duncan, chief economist for the Mortgage Bankers Association. "We're forecasting that 2006 will be a trend growth year for the economy with an increase of about 3.5 percent in the GDP," he said. "Home ownership will further expand over the next two years and the number of home sold next year will set a record for the fifth consecutive year." Helping drive this trend is the baby-boom generation, only 70 percent of which currently owns homes, he noted.

Last month, this newsletter reported on the title insurance industry - noting the recent rash of title insurance-related abuses that have surfaced. These abuses are allegedly costing home buyers substantial amounts of unwarranted expenses in home sale transaction closing costs, according to regulators. I reported that there was only one state in this country that does not allow title insurance company offices with their borders - Iowa. This state established a Title Guaranty Division to provide needed title protection that is more effective and less costly than the more familiar title insurance, according to reports from Iowa. In response to that to that report, I received an interesting letter from James Carney, an Iowa lawyer who represents the Iowa State Bar Association. He provided new insights on the current situation. Here, in part, is what he said: "One of the issues I have worked on during my entire career is the opposition of legalizing title insurance in Iowa. To say the recent surge of investigations nationwide is a vindication would be an understatement," Carney said. "We've been telling people for years about the illegal activities, scams, rebates, kickbacks, inflated premium, large commissions paid, and on and on. This industry collected $15.6 billion dollars in premiums from U.S. citizens last year. They paid out about $600 million in claims. There is no other insurance product like it in the United States. Thank God it's illegal in Iowa, and if there's one thing I'm proud of in my legal career it's that we have successfully fought the legalization of title insurance for thirty years." Carney enclosed a 14-page booklet produced by the State Bar Association titled "Title Insurance: A Fleecing of America." It quotes Senator Phil Gramm, (R) Texas, as saying: "I know how we can cut the initial, up-front cost of buying a house by between a quarter and a third. The way to do it is to do something about title insurance. We could probably do more to promote home ownership by fixing this problem than by any increase in appropriations for housing," Senator Gramm said.