In a move to make the state’s Title Guaranty program more competitive with title insurance offered by out-of-state title insurers, the Iowa Finance Authority will reduce its premiums under the program.

Effective Jan. 1, the one-time premium for a lender’s coverage policy purchased through Title Guaranty will be reduced to a flat $110 on all home sales up to $500,000. Currently, home buyers who use the program pay $1 per $1,000 of value. Above $500,000, the rate will be $110 plus $1 per each 1,000 of value above $500,000.

It’s the first time the rate has been adjusted in the program’s 20-year life, said Lloyd Ogle, director of the IFA’s Title Guaranty Division. The coverage may also be required by a lender when homeowners refinance or take out a second mortgage.

“We looked at what was happening in the market,” Ogle said. “While under our old rates we were cheaper (than title insurance) on most transactions, on some transactions we found that some title insurance companies were ‘cherry picking,’ charging a lower rate on some transactions above an average sale price of $180,000, but at a rate that was more expensive than Title Guaranty below that amount.”

Over the past 20 years the program has collected more than $32 million more in premiums than was needed to pay claims. Those excess funds are transferred to the IFA for use in its low-income housing programs.

The Title Guaranty program was created by the Legislature in 1985 to provide additional assurance of marketability of property titles. Approximately 2,000 Iowa attorneys participate in the program, providing title opinions based on abstracts prepared by participating abstracters. Iowa is the only state in the nation to prohibit the sale of title insurance by in-state companies, though it can be purchased from out-of-state companies.

In fiscal year 2005, which ended June 30, the program issued 43,120 certificates, a 29 percent decrease from the all-time high of 62,133 issued in fiscal 2004. The number of certificates issued annually varies depending on the housing market, Ogle said.

The Iowa Association of Realtors has for years advocated allowing the sale of title insurance, saying it is less expensive, faster and more effective than the Title Guaranty program. It estimates total closing costs incurred by using Title Guaranty are nearly double that of using title insurance, when the costs of updating the abstract and obtaining the title opinion are considered.

However, the Title Guaranty program’s review process results in “clean” titles with very few claims resulting from title defects, officials say.