Buying a foreclosed home just got harder. Old Republic National Title Insurance Company told two of the nation’s largest lenders, JP Morgan Chase and GMAC Mortgage, that they would no longer be able to offer title insurance to the companies due to the pending legal issues the companies are facing.
Title insurance is applied to loans to provide protection to the lender and the buyer. The insurance provides proof to both parties that there are no impending legal issues tied up with the title of the property. Without insurance there could be costly legal questions after the sale as to who the actual previous owner was and if all prior liens to property have been satisfied.
When JP Morgan Chase and GMAC Mortgage halted the sale of their foreclosed properties in 23 states due to the questions that arose during sworn statements that were made by representatives of the two companies during a deposition involving several lawsuits. The two representatives from JP Morgan Chase and GMAC Mortgage admitted that they signed paperwork on thousands of foreclosures without being in the presence of a notary and in many cases did not verify the supporting documents. This lack of legitimacy could open up thousands of lawsuits by the previous owners who were foreclosed upon and want to challenge their ownership of the foreclosed properties.
A spokesman for the American Land Title Association (ALTA) stated that the decision by Old Republic National Title Insurance to not provide insurance to JP Morgan Chase and GMAC Mortgages’ foreclosures may have been an over measured precaution. The likelihood of there being a flood of previous owners who were foreclosed upon backlogging the courts with lawsuits challenging their loss over some faulty paperwork is not likely due to the costs involved and the inevitable similar outcome.
Currently, Old Republic National Title Insurance is the only title company to come out publicly and make its intentions known. If other title companies decide to follow Old Republic’s decision, it could cause a delay in foreclosures across the nation.
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It is really amazing to see how some of these companies are getting ripped apart and destroyed at a time when many other companies in different fields are having the same thing happen to them. This downturn really does affect everyone eventually.
It’s a shame to see major companies still operating like this. I’m glad they are getting the plug pulled on them if they are going to operate like that.
Hi Paul,
Typical America, first borrow money without any security and coverage, then selling insured against any losses, then want not the insurance companies be part of it any more when it go to hell. The losers, as usual, it’s the American people.
In Australia, there’s a similar concept – simply called “Mortgage Insurance”
Although we haven’t had any mortgage insurers go bust yet, or begin limiting their services (like Old Republic above) there was a situation recently where a Builders’ Insurer went belly-up.
Sadly, this meant the building industry suffered badly – for several months. In fact, there was a question as to whether or not builders (who had the capital, and work, to go on with) could actually go onto building sites safely without their indemnity insurance.
hrm….
It’s certainly interesting reading about how things happen in the building industry over on the other side of the ocean
Thanks for some great reads!
Really sad to see such dispicable companies and people operating. I know america is the home of the Cowboys but this might be taking it to far. Maybe a few indians to scalp these cowboys wouldnt go a miss.
I’m in the refinance industry (we do mobile loan closings) and this is not good news. GMAC and Chase are two of the biggies, and I hate it when this kind of thing happens – just one more sign that the economy’s in big trouble!
It is quite obvious that the companies hit hardest by the downturn are in the insurance and banking sector, though I find it poetic justice since these sectors were largely responsible for the crisis to begin with. Bad for the consumers, however, who always have to bear the brunt of any recession while the big honchos go scot free.