Seguros a los títulos hipotecarios pueden volverse escasos debido a la crisis de ejecuciones hipotecarias

Foreclosure sales may stall if title insurance becomes scarce


10/09/2010 © South Florida Sun-Sentinel

Sales of foreclosed properties, already stalled by mounting evidence of widespread
flawed documentation practices by lenders and attorneys, may hit another roadblock: New
buyers might not be able to get the title insurance required for a mortgage.
New House Title, owned by a large Tampa foreclosure law firm under state
investigation, this week denied coverage for a 2009 Deerfield Beach condo foreclosure that its
own attorneys had handled, citing potentially defective court filings.
The New York Times last week also claimed Old Republic National Title, the fourth
largest title insurer in the country, had sent a memo to its agents in some states saying the
company would not cover homes foreclosed on by JPMorgan Chase until "objectionable issues
have been resolved." Earlier, the company had taken the same stand on homes foreclosed by
GMAC Mortgage, now owned by Ally Bank.
Louis Spagnuolo, vice president of mortgage banking at WCS Lending in Boca Raton,
said title insurers are becoming very selective about they'll cover as the foreclosure crisis
deepens. He predicted major underwriters soon will put a moritorium on policies for
foreclosures by troubled lenders.
Lee Huszajh, executive secretary treasurer of the Florida Land Title Association, said he has
not heard insurers stopping coverage on all foreclosures handled by specific lenders or law firms.
But title examiners "are double checking everything now," he said. "It's a lot more work."
Old Republic, in the Friday issue of The Title Report, said its notices had been
"misconstrued" to apply to foreclosure sales in general. The company "continues to insure
properties of all kinds" according to its usual guidelines "and will continue to evaluate those
risks based on relevant facts," according to its statement in the trade publication.
Old Republic declined to comment to the Sun Sentinel. Florida Default Law Group, which owns New House Title, is one of four foreclosure firms being investigated by the Florida Attorney General for allegedly fabricating documents.
New House sent a notice this week to the Boca Raton attorney handling the Deerfield Beach
foreclosure sale, saying it could not proceed because of "potential defects" in affidavits
submitted by JPMorgan Chase.
Spokeswoman Lisa Nason said New House had no blanket policy freezing titles on
foreclosures, and made coverage decisions on a case by case basis.
PNC Financial Services Group Inc. on Friday became the fourth major lender to
temporarily stop or more closely review foreclosures, evictions or sales amid reports their
employees or attorneys improperly signed documents or never reviewed them. Some experts
have speculated the overarching crisis could eventually require hundreds of thousands of
foreclosures be reviewed.
Title insurers "need to limit their liablity going forward, there is so much uncertainty,"
Spagnuolo said.
Future foreclosure sales will stall or completely shut down if prospective buyers can't
get title insurance, Spagnuolo said. Lenders require it for a mortgage, as the policies protect
them against financial loss from unknown liens, errors or fraud that occurred prior to the
closing. Buyers usually pay for the lender policies, and can purchase coverage for themselves as well.
The courts probably would need to determine exactly what the title insurer would be
responsible for if paperwork errors or forgeries were uncovered on foreclosures, Spagnuolo
said. "Nobody really knows how it will play out," he added.
Those who already have purchased foreclosed properties from lenders using "robo-signers" – employees who signed as many as 10,000 documents a month that they never verified – could file against their title policies. Shari Olefson, a Fort Lauderdale real estate attorney and author of Foreclosure Nation, thinks underwriters will be inundated with claims and some could go out of business.
The American Land Title Association, however, said the emerging foreclosure problems
should have little impact on new owners or on claims. If the courts did set aside a foreclosure
due to mistakes, it would be the lender, not the insurance underwriter, that would be
responsible for reimbursing the new property owner, the association said.
Association spokesman Jeremy Yohe said the title insurers are working with lenders to
obtain warranties, guaranteeing the proper foreclosure documents had been verified and were
accurate.

The Palm Beach Post contributed material to this report.
Diane Lade can be reached at 954-356-4295 or dlade@sunsentinel.com.