The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853.
Title insurance is available in many other countries, such as Canada, Australia, the United Kingdom, Mexico, New Zealand, Japan, China, South Korea, and throughout Europe.
[2] Plaintiff Watson had lost his investment in a real estate transaction as the result of a prior lien on the property.
As a result, in 1874, the Pennsylvania legislature passed an act allowing for the incorporation of title insurance companies.
Joshua Morris, a conveyancer in Philadelphia, and several colleagues met on March 28, 1876, to incorporate the first title insurance company.
The government indexes the instrument by the names of the grantor (transferor) and the grantee (transferee) and photographs it so any member of the public can find and examine it.
[7] The U.S. title insurance industry has successfully opposed land registration systems by saying that they are vulnerable to fraud (a severe problem in most land registration jurisdictions) and by contending that an inherently contingent property system more effectively protects property rights.
[citation needed] A 2007 book attacking the American title insurance "cartel" acknowledged that "[m]ore extensive use of Torrens certification would require setting up a special judicially supervised bureaucracy.
Although these are the basic coverages, expanded forms of residential owner's policies exist that cover additional items of loss.
That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation as well as private institutions.
The American Land Title Association (ALTA) forms are almost universally used in the country though they have been modified in some states.
NAILTA is a national trade association that serves thousands of independent title and real estate professionals across the United States who collectively comprise over 60% of the national title insurance market,[13] and identify themselves as independent settlement service providers.
Title insurance companies also have the ability to discharge ancient mortgages under the Real Property Actions and Proceedings Law (RPAPL) in New York.
Title plants are sometimes maintained to index the public records geographically, with the goal of increasing searching efficiency and reducing claims.
In some states title plants are required to index the real-property records geographically and also maintain a name file for judgments, probates and other general matters.
There is significant social utility in this approach as the result conforms with the expectations of most property purchasers and mortgage lenders.
There are several matters that can affect the title to land that are not disclosed by the recording system but that are covered by the policies.
A more significant percentage of losses paid by the insurers are the result of errors and omissions in the title examining process itself.
[19] A federal law called the Real Estate Settlement Procedures Act (RESPA) entitles an individual homeowner to choose a title insurance company when purchasing or refinancing residential property.
RESPA makes it unlawful for any bank, broker, or attorney to mandate that a particular title insurance company be used.
Section 9 of RESPA prohibits a seller from requiring the buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.
The new Loan Estimate form (LE)[20] is the latest step taken by Department of Housing and Urban Development (HUD) to protect and assist consumers.
Note that the LE provides more protections for consumers than a "worksheet" or "scenario" because lenders must by law adhere to its costs and indicate how long that rate and fee will be in effect.
Organizations such as the National Association of Independent Land Title Agents seek to restore transparency and credibility to the land title process and to preserve an objective and impartial role at the closing table to improve the consumer experience, by addressing the proliferation of controlled business arrangements and eliminating conflicts of interest between title agents and their referral sources, as well as between all real estate settlement service providers and their sources of business.
The remaining 20 percent covers the insurance policy, a significant portion of which is put into reserves for claims that could occur 10 or 20 years in the future.
According to a 2006 survey by ALTA,[24] title problems that required curative action were found in 36 percent of all residential real estate transactions in 2005.
As the surge in real estate transactions drove up title insurance revenue—along with a greater incidence of claims—the economic downturn that started in 2007 pared back revenue significantly for several years.
As a result, timing differences occur in the reporting of losses and loss-adjustment expenses for title insurance when compared to other lines.
[27] In addition, title insurance, unlike most other property/casualty exposures, has no termination date and no time limitation on filing claims.