The company, Old Republic National Title Insurance, told its agents Friday that it would not write policies on foreclosed Chase properties until "the objectionable issues have been resolved," according to a memorandum sent out by the firm's underwriting department.
Chase isn't the only company having issues with title. GMAC and Bank of America are delaying foreclosures until they see if they can straighten the title issues.
Here's a good article to get up to speed on the issue. In a nutshell, most banks that are foreclosing on homes probably don't have the legal authority to do so. Shortcuts were done in the transfer of titles during the securitization of the mortgages in order to save time and money. Now many banks are creating fraudulent affidavits and creating and back-dating documents that they had previously intentionally destroyed. It's one big mess that the banks created.
If other title companies follow suit or write policies with exemptions for these issues, the sale of foreclosures could come to a standstill.
One proper way of clearing this all up is to disassemble the mortgage backed securities and have the originating banks buy them all back. Then the originating bank will have a valid title again and will then be in an legal position to foreclose on the home. The banks will fight tooth and nail not to let this happen because it will mean that they will be the ones eating the losses from the foreclosures and not the investors of the mortgage backed securities. This will probably bankrupt most of the major banks who were the source of these mortgages.
But this would be the right thing to do and it would place the losses where they belong, on the banks who originated these loans and on the buyers who took out these loans. The system would be cleansed and the banks that weren't involved would be in a position to grow and prosper and rebuild the banking system.
Alan Grayson, a Congressman in Florida, did a nice video covering the issues with the faulty titles. He's pretty much all talk and no action and is doing a little political grandstanding in order to try to get re-elected next month. But at least it's a start.