Title insurance is a product that brokers are encountering more and more as it is increasingly adopted by lenders and packagers alike. Yet despite the fact that it has been available in the UK for over 10 years, it is still a product that is at best vaguely understood and at worse perceived as a threat to income.
However, rather than a complicated offering created by lawyers for lawyers, it is actually a simple product and represents what should be music to an intermediary’s ears – a reliable way of speeding up the property transaction process resulting in faster completions and benefiting all parties from lender to broker to borrower.
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Benefits
In simple terms, title insurance protects the lender and/or borrower against losses arising from disputes over the ownership of legal title to a property, and eliminates the need for a solicitor to carry out various aspects of the conveyancing process.
Its major benefit is in the dramatic reduction in time to completion that it brings to a property transaction. The benefit of a speedier turnaround for the borrower is clear – but for the broker, it results in improved efficiency and profitability by reducing acquisition costs due to a lower rate of abortive cases; increased earnings as mortgages are advanced faster; and increased client satisfaction.
Given that the Law Society estimates that one in five UK properties have some sort of problem relating to title, it is also a product that adds real value to a property transaction. The problems that can occur are many and varied, and include issues such as:
- Undocumented rights of access to a property.
- Breaches of restrictive covenants.
- Buildings constructed without the appropriate planning consent.
- Failure to obtain necessary building regulation approvals.
- Transfers of property at under value.
- HM Land Registry errors.
The process
So let’s look a little more closely at what title insurance does – particularly when combined with a panel management solution.
Remortgages, for example, typically take between six and eight weeks to process due to the need for all searches to be completed, legal titles to be fully investigated, defects identified and subsequently resolved. Title insurance can drastically improve the offer to completion time, as evidenced below (new practices in italics)
1. Receive instructions
1. Receive instructions
2. Request title deeds from seller’s solicitor or lender and wait for response – sometimes days, sometimes weeks
2. Obtain title number and check ownership with Land Registry Direct online
3. Carry out local searches etc – takes between two and five weeks and costs around £200
3. No local drainage and mining searches required
4. Check title deeds to confirm ownership and that the title is defect free – potentially causing a delay of anything up to 12 weeks if a defect is detected and a resolution is required, resulting in additional costs for the borrower
4. Carry out underwriting criteria
5. Carry out pre-completion searches
5. Carry out pre-completion searches
6. Complete
6. Complete
The process is equally applicable to purchases and in an increasingly competitve marketplace, the speed and efficiency of service provided by a lender can prove a key differentiator to time-starved brokers and their clients. This is where title insurance really makes a difference to them, making a positive impact on their bottom line and improving their customer experience.
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Title insured remortgages processed using a panel managment offering have been proven to reduce the application to completion to less than 20 days. For brokers this delivers improvements in conversion rates and the reduction in hours of wasted work results in lower client acquisition costs. Accessing proactively managed legal panels provides more scope for managing the margins and the conveyancing costs. Not only that, the faster the completion is achieved, the faster the procuration fee is earned. Equally important, the faster the completion process, the happier the customer, and happy customers lead to repeat business and referrals. Speedier turnaround, improved margins, repeat business, and customer referrals all add up to increased revenue generation for the broker.
It is clear that title insurance is here to stay and will only increase its role in the mortgage industry. It should not be regarded as a threat by advisers but rather as a positive contribution to their bottom line. So when presented with the option on the application form in the future, weigh up the benefits it brings to all parties in the value chain, and don’t be afraid to tick the box.
