In 2005 five companies controlled about 92 percent of the national market for title insurance. Ten years later, only four title insurers now control 86.9 percent of the title insurance business. In all but five states, only five companies account for 80 percent of more of premiums paid.
Despite the introduction of online insurerers a federal policies encouraging consumers to shop around, the $12 billion a year title industry looks pretty much the same as it did decades ago.
Will TRID centralize control of the title industry even more or will it initiate a disruption of the status quo?
A stinging 2007 study by the General Accountability Office led to an effort to encourage real shopping by consumers, but failed miserably. Beginning in 2010, lenders were required to provide applicants estimates for all closing services costs, including title, when each loan application was received. They were called Good Faith Estimates because lenders are required by law to be “within range” of the final settlement fees.
The idea was to give consumers time to shop for themselves to see if they could find a title company who do as well for less than the one the lender proposed. Consumers got interested when a widely publicized February 2011 survey commissioned by Federal Title & Escrow Co. in Washington, D.C., showed homebuyers could save as much as $1,180 by shopping for title services.
Save 35 percent
About the same time, a new breed of title insurance company entered the market, promising discounts on a type of policy many home buyers don’t even realize they need: title insurance. When it launched its web platform for closing services in 2008, Entitle Direct took a page from the Geico model and offered savings of 35 percent by selling title insurance directly to the consumer and cutting out the commission-based title agent. Other direct insurers include OneTitle is a New-York based company that offers savings of 10% on title insurance and Title Forward, a new entrant from Redfin.
“Many consumers are unaware that they have the right to shop around for a lower insurance premium rate and choose their title insurance company,” said Timothy O’Dwyer, CEO of Entitle Direct at the time. “The Internet provides a good starting point for shopping. Search for title insurance or go to one of the sites designed to help with the process.”
Yet seven years later, Entitle ranks only 14th among the industry’s 27 independent companies who collectively did only 12 percent as much business as the four “families” of companies that dominate the business—Fidelity, First American, Old Republic and Stewart.
After five years, GRE’s seemed to make little difference to the industry or consumers. Why didn’t consumers shop for title services?
“I think it was simply too intimidating for consumers,” said Holden Lewis, assistant managing editor/mortgage analyst at Bankrate. He tells the story of his wife doing the research to find a title insurer. “She actually called the title company and got a quote. But you know, she was in the dark in just making that call and knowing who to ask for. It’s hard. She got it done but it wasn’t easy. It was an intimidating process, so I think that just knowing how to shop is the main roadblock. The consumer is going to say ‘the lender already did this for and whom I to think I can do any better. I don’t know who to call anyway.”
Four days to shop
TRID changes the process. It provides consumers with forms that are easier to understand and an accounting how their closing dollars were actually spent, but it also speeds up the timeline for consumers to act.
Good Faith Estimates remain intact and are mailed three days after applications are received. According to the CFPB’s timeline, the borrower or his agent selects the vendor and orders the title search within four business days following receipt of the lender’s estimates. The buyer doesn’t see the final cost of the title compared to the original estimate no later than three business days before closing. Bottom line: consumers who want to shop probably have less time to shop under TRID than the GFE system.
However, Entitle Direct President Lee Baskey isn’t concerned. His company is going to do their best to get on lenders’ approved lists even if they are just listed as an option to give borrowers choice as they are reviewing their forms and looking for options for services that they can buy. But they don’t plan to stop with lenders. “We are also going to be continuing to educate consumers about what title insurance is, why it’s important and the benefit it gives them after closing.”
“Is there anything you can do to help?”
“We believe TRID is going to give consumers the opportunity to look at choices, to understand what they are buying and to shop for what they need,” Baskey said.
Baskey thinks TRID might actually get consumers to pay attention to title earlier in the process than the GFEs did. “We get calls from people who are getting closer and closer to their closing, they are drilling into the detail of their closing costs and starting to ask questions. Many times they are doing that so close to closing that it is difficult at that point to make a change. They may be too close to the closing to make a switch and actually meet that closing date.”
Baskey said they even get calls from consumers the day before closing who say “’I was looking at my estimate. It’s a big number and I went out and I found you guys. Is there anything you can do to help?’ Sometimes there is and it just depends on how much time we have.”
The combination of publishing forms in plain English that help people better understand what they are looking for and getting their attention earlier in the process will help turn more consumers into shoppers, and hopefully, customers, Baskey said.