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This past week Old Republic, one of the largest (I believe #3 or #4) title insurers in the country, 
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14 Comments on Title Insurers To Stop Writing Policies On Foreclosure Homes - The Next BIG Thing?
Hello Jeff:
An interesting conundrum to say the least. I have suggested.
Attorneys could not have their clients foreclosures overturned if the banks had followed the law. Period. The banks caused this problem by their greed and seem to be continuing to cause problems. Fraud in foreclosure should result in jail time for those who falsify documents and signatures.
Steve/Carol - just think about the ramifications for innocent folks down the chain of title... Even if lenders are made to pay for their failures, what collateral damage will occur downstream from these issues?
In some states (I believe NC is one of them) those seeking to avoid foreclosure are NOT allowed to question the bank's right to sue for foreclosure.
Thanks for this interesting review and the links. I'm "suggesting" this post!
Jeff - I have heard about this. I used to explain the purpose of Title Insurance in lay-men's terms to my clients in this way, "It's ensuring that once you buy your home, that Joe Smoe down the street can't legitly coming knocking on your door claiming any type of ownership interest."
The problem now is that foreclosures are at such a volume that the servicers and/or banks doing their diligence in foreclosing on them aren't necessarily doing things by the book. Take a few lawyers who know the drill and all of a sudden Title Companies get ill with caution in pulling the trigger on home sales involving foreclosures. In their minds, who the heck knows if someone can pull a loophole and claim legit ownership and the buyer can turn around and sue the Title Company.
Kind of sad, actually.
I understand where Title Companies are coming from but this whole deal could leave unnecessary stock (Homes) on the market when they could be sold. A sold and occupied home beats a vacant one any day of the week in my book. Seems to me that while there may be no simple answer, I hope to high hell we learn from all of this.
My answer, off the cuff, is I don't quite know.
Can you even imagine what this will do to home prices if people stop buying foreclosures if they are worried about having it taken back from them because the previous bank took back fraudulently.
Can you even imagine what it would do to the housing market if this policy spread across the title insurance companies? As if things aren't bad enough now.
Jeff it is absolutely amazing how much lenders have botched this thing up! Just another road block in the road to recovery!
Jason, thanks for the excellent response. You've added a bit to the discussion!
Margaret, that's exactly what I don't want to imagine! It would be a "CYA" festival out there and the consumer would get badly beat up.
JaneAnne - now that thing in NC scares me a bit too, after having personally witnessed Bank of America botch up a foreclosure I was trying to sell for the homeowners before it was too late. I think that wronged parties need the right to sue for damages. How to police that so frivolous claims aren't given credence is another question...
Bill/Todd - it's a potential powder keg issue if other title insurers start groupthinking about this.
Jeff - This issue affected me today. My buyers love a foreclosure and want to buy it, but they must move in by the beginning of January and between the foreclosure moratorium and the possibility that title insurance companies might not insure the property, they are rethinking their plans to purchase.
The decision to pursue short sales rather than REOs was validated yet again in the past week, with the one two punch of the moratorium on Trustee Sales (no new inventory) coupled with the freeze on closing REO transactions that were already in contract with a Buyer (no closing, no revenue). It can't be a pretty picture for large REO teams with a large fixed overhead - and who knows when things will start moving again?