Why title insurance is essential to secure, affordable homeownership

The Federal Reserve’s decision this month to cut its benchmark interest rate by 25 basis points was encouraging news for Americans eager to become homeowners. Although mortgage rates aren’t set by the Fed, they are impacted by its policy changes. Indeed, prior to — and in anticipation of — the Fed’s announcement, mortgage rates fell to their lowest level since October 2024, with the 30-year fixed rate dropping to 6.39% — spurring a 29% spike in mortgage loan applications. 

While high mortgage rates are contributing to the housing affordability crisis, lack of housing supply and regulatory barriers to development continue to be the main drivers of our nation’s housing market challenges. The Trump administration is already exploring measures to address the lack of housing supply, including potentially opening up federal land for residential use, and there are reports that additional affordability measures are also being considered. 

In Congress, Reps. Mark Alford (R-Mo.), Tracey Mann (R-Kan.), Lou Correa (D-Calif.), and Brittany Pettersen (D-Colo.) earlier this month introduced the Saving the American Dream Act, which would establish an interagency task force to plan and initiate a whole-of-government approach to the housing affordability crisis. The bill calls for federal agencies to develop policy solutions on several fronts, including increasing housing supply, reducing local barriers to development, and strengthening disaster recovery, among several other approaches. The American Land Title Association (ALTA) is proud to support this legislation. 

ALTA shares the goal of making homeownership more accessible, especially for first-time borrowers. For that to be done effectively, there needs to be greater understanding about the critical role that title insurance plays for homebuyers and the health of the U.S. economy. 

Title insurance plays a dual role in real estate transactions, protecting the financial interests of the homeowner and the lender while also providing stability and security to the broader real estate market. 

For lenders, title insurance is a way to protect their investment should any issues arise that could impact the ability to collect on the funds disbursed to the homebuyer. By protecting the lender’s financial interests, title insurance mitigates the risk they are taking in extending a mortgage loan that might otherwise appear too risky — giving assurances that their investment is safe and promoting a stable, secure lending environment. 

While buying a home is a monumental life event, it’s also a significant financial investment, and homebuyers want to know they won’t have ownership issues years later. Title insurance offers assurances that their investment is secure, giving them the peace of mind to proceed with the transaction. This adds a safeguard to the real estate transaction that provides critical confidence to the broader real estate environment. 

With title insurance, homebuyers are protected against undiscoverable defects not found during the title search — like fraud, forgery, and unrecorded liens — for as long as they own their homes. Should a dispute arise, title insurance ensures the homeowner isn’t on the hook for the fees incurred during a legal fight over their property rights. 

The nuts and bolts of title insurance are often misunderstood. It’s not just a document or records check. It’s a one-time investment, rather than a recurring premium, that supports perhaps the most important purchase a person will ever make. Title professionals spend an average of 22 hours resolving issues like unpaid liens, boundary disputes, and recording errors — issues that, if left unaddressed, could take the certainty and sustainability out of homeownership.

The work done every day by the industry’s 155,000 title professionals — 90% of whom are small businesses on main streets across America — doesn’t end at the closing table. The title industry remains in homeowners’ corners to help resolve and cover challenges to their property rights. In fact, the title industry has paid nearly $2.9 billion in claims over the past five years. The average cost for a title company to defend a claim can range from over $26,000 for common claims to over $143,000 for more complex issues like fraud and forgery, which are rising in prevalence.

Finally, when it comes to costs, the industry is not standing still — it’s innovating. Thanks to technology and process improvements, the average cost of title insurance coverage has decreased by 5% in recent years, based on ALTA’s analysis of annual financial statements submitted to the National Association of Insurance Commissioners (NAIC). 

Fees for title insurance and settlement services are well below other costs charged to borrowers over the life of the mortgage loan, with most of what is paid supporting the skilled professionals, systems, and services that ensure secure and efficient closings.

We recognize that affordability challenges are real, and we are committed to being part of thoughtful discussions on how to address these challenges without sacrificing protections for homebuyers or increasing risk in the real estate market. 

To that end, we are hopeful the Federal Reserve’s decision is a step toward a series of smart, balanced policies that make homeownership more affordable and accessible for all homebuyers.

Chris Morton is the Chief Executive Officer for the American Land Title Association (ALTA).
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.