For decades, America’s economic rules have been rigged to the benefit of homeowners. There’s the 30-year fixed-rate mortgage, which drives down monthly payments. There are four government-backed agencies, including Fannie Mae and Freddie Mac, working to reduce banks’ risk so they’ll lend more money to a wider pool of homebuyers. There’s the tax deduction for interest paid on mortgages up to $750,000. Taken together, these efforts have played a pivotal role in creating America’s middle class.
But sitting in front of this golden, taxpayer-backed bridge to financial security is a private tollbooth. It’s run by an obscure industry that’s pretty much permitted to charge you whatever it wants for a product you’ll probably never need. It’s dominated by four big companies whose profits have surged during the decade-long housing and refinancing boom. And it bilks homebuyers out of a staggering $20 billion a year.
The product is title insurance. In the simplest terms, a title-insurance policy guarantees the seller of a home actually owns the property free and clear. If it turns out they don’t — if someone shows up claiming to be a long-lost heir, say, or wielding an undiscovered lien — the title-insurance company will step in and either resolve the problem or pay the bill.
In practice, these hiccups almost never happen. More than half of
