Foreclosures and Title Companies
Home foreclosures concern the title insurance industryAccording to the National Foreclosure Report approximately 549,000 homes in the United States were in some stage of foreclosure in 2014. How is this mess affecting homeowners and homebuyers and how will it concern the Title Insurance Industry? Any home buyer especially those purchasing homes through a foreclosure or a short sale, need a policy that covers legal fees if someone challenges the validity of their title. The fact is that the underlying mortgages have been sold so many times that the original documents are rarely found. This matter gets to the real heart of the financial meltdown.
How home foreclosures concern homeownersIt’s not only that there will be thousands of homeowners who will fight for the reversal of their recent losses due to recent foreclosures, the issue of other potential lien holders not getting the proper notice which would eliminate their lien interest is also a massive problem. Title Companies are left with the burden of not only making sure they can insure the new deed from the bank or foreclosing creditor, but also that the foreclosure eliminated any and all past liens of title. We will all undoubtedly hear stories of homeowners who lost their home due to foreclosure who were able to take their home back. This is exactly why Title Insurance for home buyers is more important than ever. If and when a dispute arises the purchaser’s policy would kick in and the legal costs to cover the dispute would be taken care of. This mess is not going away anytime soon. The mortgages were pooled so fast and so furiously that some homes are even being foreclosed on by separate investors at different times, each believing they have the right to the security interest that the mortgage protects. Some Title Underwriters are even going as far as not insuring certain foreclosures via certain lending institutions. The Risks for Title Companies just keeps adding up and as foreclosures continue to mount the degree of the dilemma just worsens.
Some Suggestions to Home Buyers:
- Obtain a copy of the Title Report prior to closing
- Ask for a “Marked Up Title” and “Short Form Policy” if available at the time of closing. Verify that there are no exceptions to title that are lien related. Verify that all mortgages, judgments and liens have been paid or satisfied.
- When in doubt, hire and seek counsel. Each state has different laws and it is important that you protect your investment. After all, a home is typically the single largest investment any of us will ever make.