the problem is that if the borrower gets a judgment, takes out bankruptcy, gets a tax lien, 2nd mortgage, deeds the property to someone else, etc., the refi lender won't know about it hence the need for a new policy, it would be foolish for them to not be in 1st lien position.

Now what should happen is that the refi policies should be discounted waaayyy more than they are since the title company has already done the research on the property up to the point where the original loan being refinanced was taken out. It's literally a 30 minute update process.