Things aren't looking so good for Big Title these days.  A Bloomberg News article said recently that First American Corporation stock has dropped 27% in the last year.  Another story in the Wall Street Journal says shares for Fidelity National and LandAmerica were off by 40% and 57%, respectively.  Average daily title orders for First American were down 6% in July 2007 from the previous month, while Fidelity National Financial slowed almost 8% for the period from April to June of '07.  First American also had a 52% spike in claims for Q2 2007 compared to the same period the previous year, according to the Journal.

The WSJ story examines how title insurance industry activity can be a more accurate barometer of the housing market than other indicators.  That's because title insurance policies are normally issued right around the time that a deal closes, so they tend to be a pretty good indicator of sales activity.  According to one insurance industry analyst, "if you want to know what's going on in mortgage activity, you look at title orders."

Another reason is that title claims tend to rise in times when the housing market is slow.  The rising rate of foreclosures resulting from defaults on subprime mortgages has been followed by a surge in the number of title insurance claims.  From my own perspective, I've been seeing more title problems turning up lately in some of the foreclosure searches I've been doing.  I believe there are several reasons for this.

Back during the refi boom, lenders and title agents were scrambling to try and close as many deals as they could as quickly and as cheaply as possible, giving rise to an influx of unqualified individuals doing searches, policies being issued on what are known as "short searches" and more and more reliance on the offshoring of title searches to overseas "thin" title plants.  Of course, the latter is a practice that has cut into my business, which I'm admittedly not very happy about, but more than that, I'm concerned that in the end, the consumer may or may not be getting the type of protection and peace of mind that he thinks he's paying for.

The American Land Title Association (ALTA) has been focusing its marketing efforts on promoting the advantages of title insurance directly to the consumer.  In fact, there's a page in the Consumer Information section of their website devoted to answering consumer questions about why they need title insurance.  Now, I firmly agree that title insurance is something that no homeowner should ever be without; personally, I won't buy a piece of real estate without also purchasing an owner's policy that protects my interest.  What jumped out at me, however, was the section on fraud and forgery, which recounts the story of a couple who purchased a home from a seller who had recorded a forged deed.  I noticed that the article is careful to mention that the forger "spent time at the local courthouse in advance, searching the public record to find a property with out-of-town owners", but then there's this:

"Fraud and forgery are examples of hidden title hazards that can remain undetected until after a closing despite the most careful precautions. Although emphasizing risk elimination, an owner's title insurance policy protects financially through negotiation by the insurer with third parties, payment for defending against an attack on the title as insured, and payment of valid claims."

I suppose that's OK as far as it goes, but my question to ALTA is, how can you claim to emphasize risk elimination when you advocate the online publication of public records, a practice which has been proven to facilitate the very types of fraud you warn consumers to look out for?

The real estate fraud that Big Title is warning us about is at an all-time high, thanks in no small measure to the ready availability of online public records.  I think we're only seeing the tip of the iceberg when it comes to rising title insurance claims and continued losses to the industry could prove devastating.  The title insurance industry had better wake up to the reality that having "boots on the ground" and keeping the records within the four walls of our courthouses is the only proven way to reduce their risk, protect their consumers and ensure the integrity of the land records systems in this country.