Iowa is currently the ONLY state in the United States that does not allow the sale of title insurance.

Who is being fleeced? Iowa Consumers

About Title Insurance in Iowa: (For additional information go to Title Insurance Facts and/or Title Insurance Brochure )

These points are based upon the IAR's joint title insurance proposal with other real estate-related organizations.

• Title insurance would be an option! The legislation does not do away with the abstract and opinion system, but instead will provide the consumer with a choice of title protection.
• Iowa is the only state in the United States where the sale of title insurance is prohibited. Although it cannot be purchased in Iowa , there is title insurance being purchased daily from out of state companies for consumers and property in Iowa.
• It will not cost the consumer more! The Iowa Association of REALTORS® and the Iowa Bankers Association have compared HUD-1 statements from Iowa transactions and compared them to neighboring states, and title insurance is cheaper.
• Many Iowa consumers are already paying for title insurance because their lenders are purchasing it to sell the loans on the secondary market, but because of our system they are paying for an abstract and opinion, too.
• Iowa 's system is not superior to title insurance. If our system was superior, we would see an influx of business from other states trying to get "our product", but instead we are seeing tens of thousands of title insurance policies being purchased from other states on Iowa properties. Millions of dollars are now being sent out of Iowa into neighboring states where their agents are benefiting from Iowa ’s anti-business, anti-consumer and protectionist laws.
• Currently, the sale of title insurance in Iowa is illegal, but the purchase of title insurance from other states is perfectly legal and happens every day. The reason this happens is because title insurance is a better, cheaper, faster product, and the market has taken it's toll on our archaic system. We will continue to see more and more business flow out of Iowa in order to make the real estate transaction as a whole more competitive.
• Title insurance is not more expensive than our current system, and in most cases it is cheaper than our current system. With abstracting and opinions, the seller will pay between $200-300 for an abstract. Then, the buyer will pay another $200-300 for the abstract to be continued and then another $150 - 300 for a title opinion. The total cost is $550-900! This is assuming that everything goes well in the transaction - to say nothing of those times that they cannot find the abstract, that past mortgages have not been released, that there needs to be an affidavit of identity signed by someone who has moved out of state, and the list goes on and on for potential additional charges. In neighboring states, title insurance costs an average of $2-4 per thousand, and an additional buyers policy will cost approximately $25-$100. Also, in many title insurance states, that cost will be divided by the buyer and seller - making it even less expensive for the consumers.
• The idea that Iowa 's titles are "clean" is a fallacy. There are all kinds of human error that can occur when an attorney is doing a title opinion - who will cover the buyer in these cases? Also, there are no standards that attorneys follow when writing a title opinion. A certain defect in title may need to be cleared by one attorney, and another attorney may waive that same defect. Also, attorneys limit their liability by writing their opinions to exclude certain potential title risks.
• Title insurance does not "insure over" defects in title. Title insurance agents (title insurance agents are typically the local attorneys and abstractors in other states) get to keep approximately 80% of a title insurance premium because they are doing the preliminary title work necessary to ensure that the title policy issued will not have any future claims.
• The reason that title insurance pays fewer claims than other types of insurance is stated in the previous point - they try to eliminate their risk by having their agent’s clear defects in advance.
• Title insurance would not take money out of state if it were legal to sell it in Iowa . As stated before, 80% of the title insurance premium would stay with local title insurance agents in their local Iowa communities. It is true that some of the title insurance companies that Iowa consumers would use may be based out of another state, but isn't that true with many of our services and products we use now? We are living in a global economy that is fiercely competitive, and right now we are being shut out of that competition by an archaic system. Is it too far fetched to imagine that an Iowa insurance company might want to start a title insurance division?
• The revenue that the Title Guaranty division creates for affordable housing in Iowa is disappointing at best. The revenues should be double what they are, but because much of the title protection is being purchased from out-of state title insurance companies the number has been, and will continue to decrease. The legalization of the sale of title insurance could bring affordable housing revenue in the form of premium taxes and perhaps a title insurance affordable housing fee, but this is a policy decision that should be handled by the legislature.
• Several states maintain an active and successful dual system – offering consumers a choice between purchasing commercial title insurance and abstracting/title opinions. The Iowa Association of REALTORS®, Iowa Land Title Association, Iowa Bankers Association and Iowa Credit Union League support this choice. In the instances where there is a consumer advantage for purchasing title insurance (typically in residential real estate loans sold into the secondary market), Iowa consumers should be able to benefit from this choice.
• Out of state lenders, Internet lenders, and now a substantial number of financial institutions in Iowa are purchasing commercial title insurance out of state in order to compete for Iowa mortgage business. There is an avalanche of Iowa based financial institutions making the switch to title insurance – with the benefits falling to out of state title agencies and companies. Iowa lenders using the current Iowa title system are at a significant disadvantage when competing against these firms. This disadvantage often costs Iowa consumers money in higher interest rates and higher up-front fees.
• Loans with commercial title insurance can be delivered into the secondary market much quicker than loans using the current Iowa system of abstracting/title opinions/title guaranty. This typically will save Iowa consumers between 1/8%-1/4% on their interest rate for the typical 30-year mortgage. This can save consumers thousands of dollars over the life of the loan.
• The associations listed below are supporting the legalization of the sale of title insurance because we are continuously put at a competitive disadvantage because of our current system of abstracts and opinions. Our associations represent every facet of a real estate transaction except the attorneys, and there is no direct financial gain for our coalition to support the passage of title insurance. However, we will do what is necessary to stay competitive in our respective professions, and that means purchasing title insurance from other states.

  Title Insurance Coalition Members:

  Iowa Association of REALTORS®
  Iowa Bankers Association
  Iowa Land Title Association
  Iowa Credit Union League
  Iowa Independent Bankers Association
  Iowa Mortgage Association

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Title Insurance Facts

• Iowa is the only state in the United States where the sale of title insurance is prohibited. Although it cannot be purchased in Iowa, there is title insurance being purchased daily from out of state companies for properties in Iowa.
• The average borrower paid cost of abstracting/title opinion/title guaranty certificate for a $100,000 mortgage in Iowa is approximately $500.00.
• The average cost of a lenders title insurance policy in Nebraska and Illinois is approximately $250-400.00.
• Loans with commercial title insurance can be delivered into the secondary market much quicker than loans using the current Iowa system of abstracting/title opinions/title guaranty. This typically will save Iowa consumers between 1/8%-1/4% on their interest rate for the typical 30-year mortgage. This can save consumers thousands of dollars over the life of the loan.
• Out of state lenders, internet lenders, and now a substantial number of financial institutions in Iowa are purchasing commercial title insurance out of state in order to compete for Iowa mortgage business. There is an avalanche of Iowa based financial institutions making the switch to title insurance – with the benefits falling to out of state title agencies and companies. Iowa lenders using the current Iowa title system are at a significant disadvantage when competing against these firms. This disadvantage often costs Iowa consumers money in higher interest rates and higher up-front fees.
• 70%-90% of title insurance premiums are often retained by title insurance agents, which are typically abstractors and attorneys in the other 49 states where title insurance is sold. Millions of dollars are now being sent out of Iowa into neighboring states where their agents are benefiting from Iowa’s anti-business, anti-consumer and protectionist laws.
• Several states maintain an active and successful dual system – offering consumers a choice between purchasing commercial title insurance and abstracting/title opinions. This choice is supported by the Iowa Association of REALTORS®, Iowa Land Title Association, Iowa Bankers Association and Iowa Credit Union League. In the instances where there is a consumer advantage for purchasing title insurance (typically in residential real estate loans sold into the secondary market), Iowa consumers should be able to benefit from this choice.
• Title insurance companies use local abstractors and their local agents to search for title objections in order to prevent problems, as opposed to a pure “casualty” insurance process where there is risk assumption without preliminary risk prevention. This is supported by a low incidence of claims.
• As the Iowa State Bar Association assails this low claim to premium ratio – you must ask yourself: If consumers in states contiguous to Iowa can get this coverage cheaper and with a lower interest rate than with our current system, who is being harmed?

For more information, see the Title Insurance Brochure and the Legal Department's Title Insurance Review.

Let the Iowa Legislature know how important this issue is to REALTORS®. Send a message using the Iowa Legislative Action Center.

See also - Legal Commentary Regarding Title Insurance in Iowa

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