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Comment by steveBK123 | Hacker News Reader

I would point out that "400% increase in mortgage credit check fees" sounds probably a lot worse than the actual number - which is like.. $150 at the time you are getting a mortgage. Of all the fees associated with buying your average $400k home, I don't think the $150 credit check fee is the big pain point.

Title insurance is a much bigger scam/cost. The various state & local taxes at closing are orders of magnitude higher. Not to mention brokers fees (which are somewhat being handled as of late).

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Title insurance could be safely eliminated with something called the Torrens title system, it was tried in the US but never took off outside of Guam. The issue comes from the lack of any definitive record of property ownership, raising the possibility that challenges may be raised in court in the future that weren't known to the buyer.

The article mentions that one in ten pulls actually convert into a mortgage, so actually each borrower is paying $1500.

Do you mean 1 in 10 paying $150 use the payment and 9 in 10 throw it away?

> Only one out of every ten prospective customers ends up taking out a mortgage, so higher prices fronted by mortgage bankers add up

I read this as for every ten customers who get to a point where they get their credit pulled, only one of them end up closing on the mortgage (ie buying a house). Could be due to shopping around, negotiations falling through, or the other millions of reasons you could end up wanting to buy a house but not close the transaction.

My experience was that rental companies do the same thing for a lease. I paid for one more than once when leasing a house

It’s an application fee so it applies just for trying to get a mortgage, which is entirely different.

The mortgage companies have to pay it even for applicants that don’t end up actually becoming customers.

Which means they need hand those costs to the people who actually get a mortgage, meaning you’re probably paying closer to 500$ than 150$.

> Title insurance is a much bigger scam/cost.

I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another.

It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)

It could be handled with a government maintained database for orders of magnitude less resources. There should not be giant title insurance buildings in every city.

Ok, so if someone impersonates me and sells my home and runs off with the money this is one scenario that title insurance covers my losses. How does a government database help in this case?

This is a scenario that happens more often than you'd think with empty condos and a foreign owner who isn't around to look after their property.

You'd still need title insurance even though you have a "government maintained database"

That scenario is in fact not covered by title insurance. Title insurance would be for the schmuck who bought your house.

I'm not saying that the function of title insurance companies would go away, but it would largely be obviated by an accurate single source of truth for land titling, and yes some insurance function that the government could provide for a much smaller fee.

It is indeed covered as I've had a personal friend have to use it for that reason. The buyer got to keep the house and the old owner had title insurance pay them for the loss of their home.

I think what parent actually means is that there are better solutions for it than insurance. E.g. a central registry of ownership and liens would probably solve 99% of the cases that you need insurance for. The insurance is a scam in the way that there are technical solutions that would obviate the need for this "service", but that solution is against the interests of the service providers. Very much like tax returns, which are a solved problem in many countries for the majority of the population because the authorities already have all the data they need. Most people should not need to faff around with them. In the US however, the tax return lobby is strong and effectively prevents the government from making it easy...

In those cases where the government handles recording all transfer, there is typically a fund which covers loss due to fraudulent or erroneous transfers. Thus there is still title insurance, it's just hidden from view.

A lot of Americans would rather pay $1000 to a private service than $900 in higher taxes. It's the principle of the matter. Government bad. Privatization, "choice" between the oligopoly businesses, and public-private partnerships good.

> health insurance

The way it's implemented in the US, it absolutely is.

It is a scam for two reasons...

1) The premium to risk cost is astronomical compared to other forms of insurance.

2) The owner's policy really only protects your equity (like if you put down 20%) but costs more or the same as the lender's policy (the other 80%)

Payout rates by insurance type:

title insurance - 1-2%

car insurance - 70-80% (lately close to 100%)

life insurance - 96-98%

homeowners - 60-70%

Amongst the reasons it is a scam are...

1) The premium to risk cost is astronomical compared to other forms of insurance.

2) The owner's policy really only protects your equity (like if you put down 20%) but costs more or the same as the lender's policy (the other 80%)

3) 80% of the costs are paid to the agent as a commission

> Title insurance is a much bigger scam/cost.

Given the horror stories that crop up regularly on HN or Reddit, these insurances actually make sense.

In the US, it's unrealistic to assume there's a canonical federal database which tracks every potential title complication including property tax liens at the local level. In my case, I had a (resolved) issue where the property/house I was buying was a subdivided larger property with an agricultural lien (for an apple orchard) that hadn't been lifted yet.

Titles have a lot of opportunities for complications in many places; there's no simple technology fix.

The insurance is annoying but it's an area that has the potential for really expensive issues.

I'm definitely no expert on the law in every state, but from the states I know of there are central appraisal districts in charge of real estate tax appraisals. They already have to keep track of ownership of properties and their tax assessments, might as well just expand their domain to also include lien registries as well.

I totally get it would be quite a mess and complication and issue with federalism to have the federal government have a single database, but at least having real databases somewhere that can be publicly queried would be a massive step forward towards making title insurance no longer a thing.

I'm not opposed to the idea but someone needs to hold the bag when mistakes are made and then you're essentially back to having title insurance in some form even if it's the general taxpayer that is doing the funding.

A large part of the cost of title insurance is because the current system of tracking such things is such a massive mess. If you massively reduce the likelihood of issues cropping up by having actually good systems in place, you don't need to hire the teams of people to actually look into the properties and find the irregularities and end up still missing things from time to time.

Just query the database. Are there any liens registered? No? It is clear then. Anyone that failed to properly file it in the database is just out of luck.

Insurance on something that constantly sees catastrophe is far more expensive than insurance on something that rarely ever sees problems.

> I'm not opposed to the idea but someone needs to hold the bag when mistakes are made

Well, that's obvious: the local authority in charge of record keeping.

So, no, it's not obvious. Where I live that would be some combination of the county and the the town, given the Registrar of Deeds is a county position and things like property tax and liens are handled at the town level. And the county really just handles some legal matters and doesn't collect any taxes so that sort of means the state.

To quote a previous comment it's all a bit of a mess. "All" you need to do is revamp property record keeping across the US and title insurance would be less of a big deal.

The US has a lot of historical baggage that desperately needs a thorough cleanup. There should not be two (or more) "sources of truth" for things affecting a property or alternatively, notaries, lawyers or whatever y'all use to deal with transferring real estate should be mandated to warn their clients if there is more than one place where records are kept.

Well that’s exactly the point.

There was another recent article here on cartels that suck small amounts of blood from lots of people. Too small for anyone to individually care but collectively a lot!

What’s particularly insulting is that credit scores are commoditized - they are free to go check. Technically it’s vantage score vs FICO but generally the same and definitely not worth $150.

For a while in the early 2000s and 90s they weren't free to read. It was outrageous: companies collecting data on us that can impact our lives but we need to pay THEM to see what they know about us.

Last time I looked at the amortization schedule for a 30 year fixed mortgage the payback was about 250% of the loan amount.

No other figures are consequential. Mortgages are a predatory thing pointed at the financially illiterate and the hopeless right now.

This is a pretty limited view of mortgages. In varies across countries, but in the U.S. a (relatively) low APR fixed rate 30 year mortgage is an amazing way to utilize leverage (only put up ~20% collateral) on an appreciating asset.

Paying $400,000 for a mortgage vs paying $80,000 and 6% over 30 years, but investing the remaining $320,000 in the stock market (returning ~7% after inflation) and your housing payment grows much slower than inflation.

That doesn't mean every mortgage is a good idea, or there aren't circumstances where the borrower ends up losing out, but it's a tool that can be utilized if you learn to understand it.

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