Posted on Tuesday, November 2, 2010
Title insurers are voicing their confidence in mortgage servicers’ ability to correct foreclosure paperwork problems. They’ve decided not to require banks to consent
to agreements vouching for the validity of foreclosure documentation, after talks between the two industry groups reportedly fell through this week surrounding large-scale indemnity arrangements to cover insurers in the event of title claims.
Last week, Fidelity National Financial said it would begin requiring lenders to provide the company with an indemnity agreement that guarantees the accuracy of their foreclosure documentation before insuring the title of a repossessed home.
The move was prompted by recent discoveries of widespread problems throughout the servicing industry of improper legal paperwork for foreclosure cases – problems
that could potentially muddle property ownership and allow previous homeowners to contest a transfer of title after foreclosure.
Fidelity had drafted a blanket indemnity agreement to cover itself against improper, or invalid, “robo-signed” foreclosure paperwork. The company said it was making the document available “for use by all title insurers,” and other insurers were expected to follow the market leader’s course of action and adopt the same sort of protection.
But the company has rescinded this requirement because of what it called servicers’ “heightened review” of foreclosure processing and legal procedures.
Fidelity had reached an agreement with Bank of America prior to petitioning for an industry-wide indemnification several weeks ago. According to the Washington Post, the arrangement with BofA is still in place.
Dennis Gilmore, CEO of First American Financial had told the Wall Street Journal that his company had come to the conclusion that requiring banks to indemnify the title insurer from possible documentation errors was unnecessary “given the actions taken by lenders to remediate deficiencies and to improve their processes going forward.”
Stewart Title Guaranty said in a statement to its investors Thursday that it “stands ready to issue title insurance to purchasers of foreclosed properties from institutional lenders representing that they have followed all applicable legal processes.”
DS News Carrie Bay