Title Insurance Vital To Reduce Risk On Refinances

Mortgage refinance demand is 111% higher than last year, a surge fueled by declining mortgage rates and renewed interest from homeowners looking to improve their financial position. Refinancing can certainly be a smart move—a way to lower monthly payments, consolidate debt, or tap into home equity.

But this sense of routine can mask the very real risks involved. Many assume a refinance is simply a streamlined, less complicated process compared to purchasing a home. Yet recent industry data and the rise in real estate scams tell a different story, underscoring why title insurance and the work of title professionals remain essential safeguards during a refinance.

The latest Analysis of Claims and Claims-Related Losses in the Land Title Insurance Industry, conducted by global consulting and actuarial firm Milliman Inc. for the American Land Title Association (ALTA), shows that refinance transactions carry meaningful risk exposure. The study, which examined a decade of title insurance claims, found that fraud and forgery tied specifically to refinances have risen sharply. Today, they represent 40 percent of all title losses and expenses. Even more striking, these refinance-related fraud and forgery claims are nearly seven times more expensive than other claim types, with the average loss exceeding $207,000 per case.

This escalation is occurring alongside increasing sophistication among criminals. Advances in artificial intelligence (AI) and digital spoofing tools allow cybercriminals to impersonate real estate agents, title professionals, or lenders with alarming ease. They may send fraudulent wiring instructions, create forged documents, or attempt to transfer property without the true owner’s knowledge. Because such schemes are often designed to evade detection, many of the resulting title defects cannot be uncovered through routine public-records searches.

In this environment, title insurance remains the first line of defense for both homeowners and lenders. Unlike attorney opinion letters (AOLs) or other unregulated alternatives, title insurance provides protection against fraud, forgery, and a wide range of unforeseeable issues that can impair ownership or threaten the validity of a mortgage. Strong underwriting protects lenders and consumers alike—and title insurance provides a key part of the due diligence to reduce risk.

When refinancing, a homeowner’s original owner’s policy remains in effect, but the new loan requires a new lender’s title insurance policy. Lenders need confirmation that the property they are accepting as collateral is free of defects, liens, or competing claims—and title insurance is the most reliable and cost-effective way to provide that reassurance. The Milliman study also makes clear that the most common and most costly claims on lender’s title insurance policies stem from fraud, forgery, and lien-priority disputes, all of which can directly threaten the validity of a refinance loan.

The Milliman study reinforces a key point: a clean title at the time of purchase does not guarantee a clean title at refinance. In the years between transactions, new judgments, liens, or encumbrances may have been filed—sometimes without the homeowner’s knowledge. A mechanic’s lien from an unpaid contractor, overdue property taxes, homeowner association assessments, child-support obligations, bankruptcy filings, and other legal actions can all cloud title. These risks accumulate quietly and can threaten a lender’s ability to rely on the property as secure collateral.

Title insurance professionals are the ones who identify and resolve these issues before a refinance closes. They draw on specialized training, advanced technology, and deep knowledge of local land records to verify ownership, clear defects, and ensure that each transaction proceeds with certainty. Their work provides stability at a time when the real estate market continues to face economic and cybersecurity pressures, and ultimately, every aspect of this risk-mitigation process is backed by a comprehensive title insurance policy that protects both lenders and homeowners.

Refinancing is ultimately about strengthening a homeowner’s financial foundation. Title insurance and the professionals who stand behind it ensure that foundation remains solid. Far more than a box to check, they help protect homeowners, support lenders, and contribute to the overall health and confidence of the real estate market.

Chris Morton is the CEO of ALTA.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.