Issue Summary

New Mexico families seeking to become homeowners face the eighth highest closing costs in the nation, even though our state ranks forty-third in median income.

One of the largest elements of closing costs is title insurance. Title insurance is intended to provide a guarantee to buyers that the seller is giving them good title to the property - in other words, that the seller is truly the owner of the property, and that there are no other claims against the property such as mortgages, liens, building restrictions, or other encumbrances. Most banks require a buyer to have title insurance before they will approve a mortgage or refinancing on the property.

New Mexico's title insurance costs are excessive because in 1985, the title insurance industry drafted and won passage of a state law that requires the state Superintendent of Insurance to promulgate a single rate schedule for all title insurers in New Mexico. In other words, it is pointless for homebuyers to shop around for low-cost title insurance in New Mexico because, by law, all the title insurers charge the exact same price.

In addition, a 1999 amendment to New Mexico's title insurance law prevents homebuyers from recovering damages from title insurers if they negligently fail to find or disclose problems with the title. This amendment unfairly forces homebuyers to pay the price if their insurer misses a glaring and costly title defect.

New Mexico's lopsided title insurance law helps explain why the loss ratio (i.e., the percentage of each premium dollar that insurers pay out to cover claims) is only 5.1% for title insurance in New Mexico, while it is generally 80% and above for health and property/casualty insurance. It also helps explain why the five largest national title insurance underwriters, who control 93% of the market, enjoy profit margins approaching 50% in New Mexico, according to the Public Regulation Commission.

Think New Mexico proposes to make title insurance more affordable for New Mexico families by repealing the law that requires the Superintendent of Insurance to fix prices for New Mexico's title insurance businesses and protects title insurers from their own negligence. Instead, we would enact a law that regulates title insurance like all other types of insurance.

In addition, to prevent title insurers from engaging in cartel-like practices to keep their prices high (which has occurred in many other states), Think New Mexico will seek to leverage lenders' knowledge and buying power by having banks and mortgage brokers, rather than homebuyers, purchase the policies. While the lenders will pass the costs along to the homebuyer, they are in a much better position to comparison shop and buy policies in bulk to keep the prices down.

Think New Mexico will be advocating for legislation enacting these reforms during the 2009 legislative session. Sign up for our email alerts to stay informed and get involved on this issue.

Get Involved

Think New Mexico's legislative successes have been brought about in large part thanks to the grassroots advocacy of our supporters. During the 2007 legislative session, Think New Mexico supporters sent hundreds of messages to their legislators and the governor urging them to support our lottery reform legislation, which ultimately passed by wide, bipartisan margins. If you would like to assist Think New Mexico in our efforts to reform title insurance, please call or write your state legislators and urge them to support legislation that allows the free market to set title insurance prices, encourages lenders to purchase policies, and ends title insurers' immunity from negligence liability. Click here to contact your legislators about title insurance reform.