Attorney Opinion Letters vs Title Insurance
In the simplest terms, a title insurance policy provides assurance that the seller of a property is the rightful owner without any encumbrances. If any issues arise, the title insurance company will intervene to resolve the problem or cover the costs involved.
Fortunately, such situations rarely occur in practice. In fact, claims paid out by title insurance companies accounted for less than 3% of the total last year. Despite the low claim rate, insurance costs have skyrocketed — doubling over the past 15 years and creating a disparity between risk and premiums.
An attorney opinion letter (also known as a title opinion or opinion of title) is a legal document provided by a qualified real estate attorney that analyzes a property’s title records, identifies any potential issues or defects, and concludes whether the title is clear and marketable.
The primary difference between the two is not in the risk profile but in the cost structure. An attorney opinion letter can save a homeowner hundreds or thousands of dollars at the closing table, whereas title insurance remains a burdensome cost that appears consistently from one transaction to the next, regardless of the risk being underwritten.
Title issues have been substantially reduced over the past two decades, with approximately 75% of title searches revealing clean title. However, the cost of title insurance has remained steady and, in many jurisdictions, is no longer commensurate with the risk. Similarly, with access to better data and more robust technology products, the savings being realized by title agents should be passed on to the consumer. AOLPro is intended to do just that.
What sets AOLPro apart is that each attorney opinion letter is backed by insurance issued by an A.M. Best A-rated insurance carrier and provides protection for the full amount of the loan for the life of the loan. AOLPro coverage also includes borrower fraud protection, gap coverage, a closing protection letter, and secondary market. Buyback coverage is exclusive to AOLPro and not included with title insurance.
AOLPro was built to integrate with existing title and settlement processes. All data is ingested into the AOLPro platform and a Preliminary AOLPro is generated. Like a title commitment, once the requirements in the Preliminary AOLPro are met, the Final AOLPro is generated and sent to the attorney for review and approval. When the loan is closed, the Final AOLPro is issued. Although the coverage extends through the recording (providing “gap coverage”), there is no need to wait for recording to issue the Final AOLPro. The AOLPro platform tracks every user action and documents every AOLPro, creating an auditable transaction record and eliminating the need for “replacement policies” in the future.
AOLPro is available for use in purchase and refinance transactions in all 50 states. Currently available on loans up to $1M, AOLPro provides coverage for the lender, borrower, and investor, including secondary market buyers. In fact, Fannie Mae has already accepted more than 10,000 loans with an attorney opinion letter instead of title insurance and none have been repurchased for title-related issues.
Yes. AOLPro provides both lenders’ and owners’ coverage. Instead of requiring the homebuyer to purchase two separate policies as they do with title insurance, the coverage is combined into one AOLPro. The AOLPro coverage follows the loan into the secondary market and extends for the life of the loan. It is important to note that not all attorney opinion letters on the market offer owners’ coverage. In instances where owners’ coverage is not provided, it is unlikely that a borrower will obtain an owners’ policy, exposing them to increased risk.
No. Each attorney who issues an attorney opinion letter is licensed and governed by the state bar of the state in which the attorney practices, meeting all professional ethics guidelines, while the insurers backing the AOLPro are licensed and regulated by the state departments of insurance, meeting all reserve and reinsurance requirements.
Yes. An AOLPro is produced using the same search, examination, and curative processes as title insurance. The input is the same, and the output comes in the form of an attorney opinion letter instead of a title insurance policy. If there is an error or defect in any part of the process, from order intake to recording, it is fully covered.
Yes. AOLPro provides full coverage from order intake to recording, leaving no gap in coverage.
Yes. AOLPro protects against borrower fraud and comes with a CPL to protect against fraud in the settlement process. In fact, the CPL coverage provided with the AOLPro extends for two years, compared to only one year of coverage provided with traditional title insurance.
Yes. AOLPro undergoes the same rigorous procedures as title insurance, utilizing identical data, examination, and curative processes. Consequently, the outcomes are identical as well. Should any oversight occur, it is comprehensively covered.
AOLPro provides a straightforward, efficient claims process. The insurers behind the AOLPro coverage are A.M. Best A-rated carriers that have been providing coverage and paying claims for decades. They are experienced in prompt claim settlements and fulfillment of the duty to defend. This eliminates the disincentives and inefficiencies created by the title insurance agency model.
AOLPro comes with a simple and reliable claims process. In the event of a claim during the loan’s lifespan, the lender or its successor will file a claim directly with the insurer. All the necessary claim information will be accessible through the AOLPro. Once the required documentation is submitted, claims are promptly processed and typically paid within 3-4 months.