Wayne County Title Insurance Entity Proposal

The proposal is a timely solution by a major governmental unit to longstanding irregularities in the acquisition of property title insurance. In Wayne County, as in all other areas of the State, closing costs are unnecessarily high and going higher. Reasonable competition in the title insurance arena is virtually non-existent. All title companies file the same basic rate which is dramatically disproportionate to the risk assumed.

In addition, a credible threat of redlining title insurance in Wayne County has been made by the president of the Michigan Land Title Association and widely distributed across the state on the front page of the “Detroit News”. This publicly made threat by one who represents the title insurance companies controlling 95% of the business in Michigan must be taken seriously. If implemented, the economic stability of the county real estate market would surely be jeopardized. Prudent safeguards must be in place to thwart off this threat. Our proposal is the beginning of such a safeguard as well as a stimulus to the housing market.

As an example, the average 2007 sale price of a home in Wayne County was $146,000.00. The typical title insurance expense was $1,400.00. The proposed business plan of “Wayne County Consumer’s Title Insurance” calls for insurance to be provided at a rate of $600.00, netting a savings of $800.00 on the Wayne County real estate transaction. If the savings were to apply to all transactions throughout Wayne County, consumers would have kept almost $14,000,000.00.

This drastic reduction in cost is the result of scrupulously avoiding penalties and fines, marketing directly to the consumer and eliminating all the costly incentives and affiliated business agreements that serve to drive up the price to the consumer.

Of equal importance is the plan to link the premium cost to claims experience, a basic tenet of the insurance industry that does not currently exist in the context of title insurance. Indeed, Forbes magazine has documented an increase in title insurance premiums at a time when claims are decreasing.

We stress that we are seeking not an outright grant, but only an enterprise loan of $10,000,000.00, of which $7,800,000.00 will be held as restricted reserves as required by Michigan law. Our business plan forecasts repayment of the enterprise funds within as little as four years, plus a reasonable interest rate. These funds, enhanced by interest, can be recycled into other worthy endeavors once they have seeded the growth of this much-needed enterprise.