Iowa Title Guaranty (ITG) operates as a state-run, not-for-profit title system, offering Iowa homebuyers a more affordable option for settlement services compared to the private insurer-dominated landscape in other states. This unique system, which bans commercial title insurance in the state, has saved homeowners substantial amounts on closing costs, although it has also faced resistance from the national title insurance industry.
A Pioneer in Title Insurance
Iowa’s departure from the standard title insurance model began in the mid-20th century. Following a series of title claim failures and the subsequent abandonment of homeowners and lenders by private insurers, the state legislature took action. Dillon Malone, director of Iowa Title Guaranty, explained, “Historically speaking, we had title insurance companies in Iowa until the 1940s. A couple of those domestic insurers went under or went out of business, leaving owners and lenders with significant losses. The legislature got wind of this and, in 1947, passed a bill that effectively wiped out title insurance in Iowa.”
After the ban on private title insurance, Iowa relied on attorney opinion letters (AOLs) until the establishment of ITG in the 1980s. Today, ITG provides a cost-effective alternative by ensuring title opinions are backed by state oversight. Last year, ITG facilitated services on $15.4 billion in residential real estate transactions and $764 million in commercial real estate deals. It also issued over 23,000 closing protection letters and filed 373 mortgage releases.
Significant Cost Savings for Homebuyers
One of the key advantages of the Iowa system is the significant cost savings it offers homebuyers. “For a residential transaction under $750,000, our policy is $175, and that covers both the owner and lender,” Malone stated. “For purchase transactions, we charge $175 for the lender, and the owner gets free coverage if the home price is under $750,000.” Conversely, traditional title insurance in other states often costs thousands of dollars. Malone shared a personal anecdote: “I just bought my house two years ago, and they initially quoted me private title insurance rates. It was significantly higher — in the $1,500 to $2,000 range — compared to what we offer. There’s definitely sticker shock when people move here and realize how much they’re saving.”
Besides the state-backed title insurance cost, Iowa homeowners still pay for abstracting (a title opinion from an attorney) and closing fees. However, the combined cost remains significantly less expensive compared to private title insurance in other states. Furthermore, ITG reinvests its excess revenue into homeownership programs to further reduce costs for homebuyers. Malone highlighted, “All of our excess revenue goes to support homeownership for first-time and low-income buyers.” In 2024, these efforts included $1.2 million for down payment assistance programs, a part of the $73.3 million allocated since the program’s inception.
Attorney Opinions vs. Title Insurance
Unlike private insurance models heavily reliant on automated or digital title searches, ITG demands an attorney’s title opinion based on a 40-year abstract prior to issuing a policy. According to Malone, “We vet all attorneys to ensure they have real estate experience or a mentor in the field. This is different from what’s being proposed nationally, where vendors allow any licensed attorney to provide an opinion without requiring deep real estate experience.”
While national entities, such as Fannie Mae and Freddie Mac, have considered using AOLs to reduce costs, ITG remains cautious. “We recognize the value in the American Land Title Association (ALTA) policy form,” Malone said. “It provides far better coverage for lenders and owners than just a title opinion alone. A title opinion is great, but coupling it with an ALTA policy is even better.”
Industry Pushback and Interest from Other States
The title insurance industry has long regarded Iowa’s system as an anomaly, triggering multiple attempts to alter the state’s approach. Malone shared: “Back in 1977, Chicago Title Insurance challenged the ban on title insurance and took it to the Iowa Supreme Court. The court upheld the law as a legitimate exercise of legislative power. Chicago Title then petitioned the U.S. Supreme Court, which declined to hear the case.”
Despite industry resistance, other states have shown interest in replicating aspects of Iowa’s model. “Almost every year, we get inquiries from state legislative offices about setting up a similar system,” stated Malone. “Last year, New York had two bills proposing something similar. The year before, Connecticut had one. A state senator in California frequently reaches out with questions. While these inquiries don’t usually go anywhere, there’s consistent interest.”
The Future of Title Reform
With national discussions underway concerning housing affordability, the title insurance industry has come under scrutiny over its role in the rising costs of homeownership. Regarding potential reforms, Malone believes that while change is necessary, outright title insurance waivers might not be the best strategy. “People assume Iowa would support the title waiver pilot proposed by the previous administration, but we don’t. We recognize the value in traditional title insurance policies, and we don’t believe title opinions alone provide sufficient protection.”
Malone advocates for responsible industry-wide reforms that lower costs while maintaining consumer protection. He said, “The title industry could do more to communicate its value. Yes, our claims loss ratio is low, but that’s because so much of our work is done before closing. We prevent issues before they become claims.”
As the housing market undergoes constant evolution, ITG’s success may provide a model if more states are willing to adopt it. “The only similar model (to Iowa) I can think of is the National Flood Insurance Program, and maybe what’s been done in Florida with their state solution for homeowners (insurance),” Malone mentioned. “But we’re the only state-run title guaranty program, and we’re very happy to continue being here to provide those services.”
