The title insurance industry mitigates more than $600 billion in estimated risk exposure annually for home buyers, according to a report from First American.
The data-driven analysis finds that the role of title professionals in maintaining reliable and accurate property ownership records dramatically reduces estimated risk exposure in real estate transactions.
The curative work conducted by the U.S. title insurance industry, which includes aggregating and organizing disparate sources of data affecting real property, identifying and remediating risks, and helping resolve errors in the public record, is necessary to clearly and reliably trade property rights and ownership in a real estate transaction, the firm concludes in a new white paper, “What is the Risk of Not Curating Property Ownership Records?”
This curative work helps reduce risk exposure not only for home buyers, but mortgage lenders and other participants in these transactions.
“The U.S. residential real estate market accounts for a significant share of the total economy, but it relies on a public good – reliable, accurate real property records – that the title insurance industry plays a critical, but largely misunderstood, role in maintaining,” says Mark Fleming, chief economist for First American. “It is the industry’s efforts to mitigate title risk exposure that maintains the reliability and accuracy of property ownership records underpinning the real estate economy. When the price of maintaining a smooth-functioning real estate economy is just pennies on the risk-dollar, do we really want to jeopardize that and risk diminishing the economic benefits it provides?”
The white paper reveals that, annually, prior to the pandemic, the title industry’s estimated pre-curative risk exposure ranged from $600 to $900 billion a year.
The firm’s research shows that the boom in sales and mortgage refinancing that came during the pandemic boosted the total estimated industry risk exposure to more than $1 trillion a year.
The white paper also shows how degradation over time of the public records, if not curated, will cause the marketability of title to become less clear and increase the burden of defending property rights in court.