First American Financial Corporation (NYSE: FAF), a premier provider of title, settlement and risk solutions for real estate transactions and the leader in the digital transformation of its industry, today published a data-driven analysis of the vital role that the title insurance industry plays in protecting the smooth functioning of the real estate economy in the United States.
The new white paper by First American Chief Economist Mark Fleming, “What is the Risk of Not Curating Property Ownership Records?”, estimates that the title insurance industry’s work to maintain accurate and reliable property records mitigates $600 to $900 billion in risk exposure to home buyers, lenders and other participants 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 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. 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,” said Fleming. “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?”
Click here to view and download the full white paper.
Whitepaper Conclusions:
- Annually, prior to the pandemic, the title industry’s estimated pre-curative risk exposure ranged from $600 to $900 billion a year.
- During the boom in sales and mortgage refinancing in the pandemic total estimated industry risk exposure surpassed $1 trillion a year.
- The 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.
- The price for curating the public record and insuring ownership rights relative to the total estimated risk exposure is small.
Additional Title Insurance Industry Commentary and Research:
- Why Misguided Calls to Scrap Title Insurance Would Make Homeownership More Costly and Threaten the Economy: The work done by the title insurance industry to maintain accurate property records is the linchpin of the real estate sector. Upending it would unnecessarily threaten the broader economy and make homeownership even more expensive for American families.
- Missing the Forest for the Fees – An Analysis of the Regressivity and Closing Cost Significance of Title and Settlement Fees: Research points out the inaccurate conclusion drawn from Fannie Mae’s 2021 study of borrower life-of-loan costs and details the more accurate differences in various costs over the life of a mortgage from Fannie Mae’s own updated research in 2022. Title and settlement fees are less than 1 percent of the borrower’s total life-of-loan costs.
Disclaimer
Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2024 by First American. Information from this page may be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a premier provider of title, settlement and risk solutions for real estate transactions. With its combination of financial strength and stability built over more than 135 years, innovative proprietary technologies, and unmatched data assets, the company is leading the digital transformation of its industry. First American also provides data products to the title industry and other third parties; valuation products and services; mortgage subservicing; home warranty products; banking, trust and wealth management services; and other related products and services. With total revenue of $6.0 billion in 2023, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2024, First American was named one of the 100 Best Companies to Work For by Great Place to Work® and Fortune Magazine for the ninth consecutive year, and named one of the 100 Best Workplaces for Innovators by Fast Company for the second consecutive year. More information about the company can be found at www.firstam.com.
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