Local Title Insurers Stop Insuring Foreclosure Sales

• July 8th 2011

by UrbanTurf Staff

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In May, a measure was implemented in the District that required lenders to enter into mediation with homeowners facing foreclosure prior to foreclosing on these individuals homes. The Washington Post is now reporting that due to this law two of the area’s largest title insurers have stopped insuring foreclosure sales because the validity of the foreclosure is too easily disputed, which in turn makes the holder of the title also subject to dispute. Without title insurance, lenders won’t provide mortgages to would-be buyers of the foreclosed properties.

The article notes that one of the main issues with the regulation is that it does not explicitly spell out how a foreclosure sale would be certified by DC, putting a good deal of the liability for the validity of the sale on the title companies rather than the city.

From The Post:

First American Title Insurance and Fidelity National Title Group argue that the new regulations make it more likely that someone could challenge the validity of a foreclosure sale, forcing them to pay or defend claims in court. First American and Fidelity have 50 percent and 28 percent of the D.C. market respectively, according to data from American Land Title Association.

While both the title insurance companies and the DC government agree that changes to the bill are needed, it is unclear how or when they will reach a compromise. In the article, Frank Donnelly of the Mortgage Bankers Association of Metropolitan Washington warns that if the regulation is not changed, many of the area’s other title insurers will follow suit, which could effectively halt the sale of foreclosures in the District.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/local_title_insurers_stop_insuring_foreclosure_sales/3776.