Homebuyers would be smart to shop for title insurance

Alegal settlement between the federal government and a title insurance agency is drawing attention to one of the least understood and costly items you get charged for in a real-estate closing: title insurance.

You are hardly alone if you didn’t shop for the lowest price and best coverage when you closed on your home loan. Most people go along with the recommendation of their real-estate agent or lender, and they don’t often know the specifics of what they pay for.

Though the title insurance charge often comes to $1,500 or more, the insurance underwriter — the company that actually insures against title problems — may get just 10 to 20 percent of that.

People also often overlook the side deals between the brokerage firm and title agency.

It can get rather incestuous, which is why federal law requires settlement service providers to disclose when they have financial arrangements with other parties involved in your transaction. The disclosure often comes as part of the paper blitz that makes your eyes glaze over during home closings.

The legal settlement from the federal Consumer Financial Protection Bureau shows that such disclosures don’t always happen. The bureau charged that Meridian Title Corp., a title and settlement agency in South Bend, Indiana, failed to disclose its ownership interests in the title underwriter — Arsenal Insurance — to which it routinely sent business.

The bureau found that three of Meridian’s executives were part-owners in Arsenal, but during a three-year period, more than 7,000 consumers weren’t told that. The company agreed to pay up to $1.25 million in redress to those customers.

Meridian denied any wrongdoing, but CFPB director Richard Cordray had a starkly different take: “Meridian Title illegally steered consumers into purchasing a product from an affiliated company to add to its bottom line.”