Local Title Insurers Stop Insuring Foreclosure Sales

• July 8, 2011
• 4 Comments

by UrbanTurf Staff

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.com/articles/blog/local_title_insurers_stop_insuring_foreclosure_sales/3776

4 Comments

1. WhereareyouMr.Galt? said at 4:38 pm on Friday July 8, 2011:

   Does anyone else detect a pattern here??  Every time the gov’t tries to fix something in the housing market they make it way worse!  They dug the whole in the 70’s, through us in in the 90’s and 00’s and by continuing to regulate, they are now refilling the hole with US in it.  BTW U.T., multiple insurers have done the same thing in MD because of similar laws in this backwards state.  Hope and change my foot.

1. Liz said at 4:59 pm on Monday July 11, 2011:

   Another side-effect of this law will likely be that lenders will soon change their lending standards for DC to be even more stringent than jurisdictions where mediation is not required prior to foreclosure.  In other words, it will soon become difficult to sell property in the District.  Send property values rocketing downwards? Genius political move.

1. Nikki Smith said at 10:53 am on Monday July 25, 2011:

   There’s an update to this story.

   From the Post:

   The D.C. Council enacted emergency legislation [July 12] to amend a controversial clause in its foreclosure mediation law that threatened to stall the sale of foreclosed affected homes across the city.

   The change will make it easier for buyers of foreclosed homes to obtain loans, because title insurance, which protects mortgage lenders from challenges to their rights to a property, is an essential ingredient in the home-buying process. That, in turn, could help stabilize District prices by speeding the sales of homes in the foreclosure pipeline.

1. Foreclosure Attorney said at 5:37 am on Tuesday September 13, 2011:

   What if the bank turn down the foreclosed house and then the new debtor will just build a new one? Just a suggestion to stop foreclosure.

Join the discussion