In a recent episode of “Ten Minute Talks,” HousingWire President Diego Sanchez and Alita Group President Stacy Mestayer discussed an alternative option to title insurance.
Mestayer started her career in corporate law before founding the Alita Group, which began as a technology company and eventually created the attorney opinion letter (AOL) product that acts as an alternative to traditional title insurance.
Sanchez addresses the current version of title insurance and why an alternative is needed. Mestayer explores the 150-year history of title insurance and a relative lack of change during that time, which she said is now benefiting title agents but not consumers.
The current processes and datasets used by title agents and insurers are more robust, she said, but the consumer still suffers from a “broken“ business model in which insurers are incentivized to ignore claims to preserve traditional commission structures and maintain the status quo.
“I think that there’s really a general disincentive to become more efficient because there’s really not a reason to,” Mestayer said. “It hasn’t changed and it hasn’t gotten better because no one’s forced it to do that.”
That lack of change is the driving force behind the AOL product. Before title insurance arrived on the scene, attorney opinion letters were the sole means of managing the risks associated with title issues during land conveyance.
The group offers insured attorney opinion letters, protected by transaction liability policies, that function similarly to title insurance in terms of process and coverage. Mestayer explained that the Alita Group provides an insured AOL product rather than title insurance. She also addresses a few common misconceptions about insured attorney opinion letters.
Some spectators, she said, believe that there isn’t a viable “duty to defend“ that justifies using an attorney opinion letter. Mestayer asserts that there is a duty to defend under Alita’s policy since the borrower, lender and future investors receive coverage. Others believe you must prove negligence to have a claim paid using an attorney opinion letter. Mestayer debunks that claim too.
“Because [an attorney opinion letter] is transactional, if there is a loss and that loss is documented, that loss is paid,” she says. “There’s no need to prove any negligence on the part of anyone involved in the process.”
She notes that coverage continues for the life of the loan even if the attorney or title company goes out of business. Additionally, attorneys and AOL insurers are properly licensed and regulated.
To end the conversation, Mestayer explores how attorney opinion letters can return to prominence as an alternative to title insurance. Insured AOLs aren’t well represented online — and Mestayer is determined to change that.
“It’s rare in your career to come up with something that you think meaningfully changes people’s lives, and I feel like that’s what this is,” she said.
Alita Group also seeks to free refinance borrowers from the burden of paying title insurance, an effort supported by the federal government.
