Private title insurers are hopping mad over a new program at Norwest Mortgage Inc. that assumes title risk internally.

The American Land Title Association alleges that Norwest's new program, Title Option Plus, deceives consumers and offers scant coverage. And the trade group says that the program, launched last month, provides solid protection for Norwest.

Norwest executives maintain that Title Option Plus offers strong price benefits to borrowers. They say it also provides coverage equal to that offered by private underwriters.

Borrowers buy mandatory title insurance for about $350 to guard against unknown liens on their property. The American Land Title Association says that 90% of all loans have title insurance.

Title Option Plus, the product offered by ATI Title Co., a subsidiary of the Des Moines lender, assumes the risk that borrowers face from prior liens for about $100 less than do private insurers.

A spokeswoman at the Federal Home Loan Mortgage Corp., which buys loans for securitization on the secondary market, said details of its arrangement with Norwest to buy these loans would not be made public.

Norwest officials emphasize that Title Option Plus is not title insurance. Title Option Plus "only tells the lender who is in title, according to real estate records, and what liens are of record," according to Norwest Mortgage. "There is no insurance involved since we are managing our own title risks."

And that is only part of the problem for James R. Maher, executive vice president of American Land Title Association.

"There is more likelihood of loss than Norwest is saying," Mr. Maher said, noting that it is customers of Title Option Plus who are suffering most. "Consumers are being led by an influential party to purchase an alternative product that only safeguards the lender," he said.

Market Share vs. Consumer Protection

Michael J. Keller, Norwest's executive vice president, disagreed. He emphasized that Norwest explains its program fully to consumers. He said American Land Title Association members are worried about losing market share - not about consumer protection.

"We understand that this does hurt the title insurers, but this program is not evil, that's for sure," he said.

Even Mr. Maher acknowledges that title insurance underwriters are ticked off about Norwest's program in part for "self-interest reasons."

Mr. Keller of Norwest said the program would be more attractive to homeowners refinancing loans. Eventually, he hopes 20% to 30% of all Norwest borrowers choose Title Option Plus. But "it is going to be a slow start this year, he said.

Title insurance has been a growing business since the 1970s. In the last two years, title insurers have ridden the wave of the home loan refinance boom to record profits.

The association says industry revenues were about $5.6 billion in 1993 and profits were in the $300 million range.

Mr. Maher said 9% of all title insurance dollars are paid out for claims. Mr. Keller put that figure at less than 2%.

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