GMAC/ALLY and others

A few days ago I mentioned here in the discussion forum that my underwriter, Old Rebublic National Title Insurance Co. had issued a bulletin advising that they would not insure any title coming out of GMAC/Ally

CHARLENE PERRY's Blog ::

The focus of my practice here is clearing title for properties coming out of foreclosure and acting as seller's liasion in many cases or alternatively, acting on behalf of buyers of properties coming out of foreclosure. I would suggest that 90% of all files in my office are foreclosure files.

As you might imagine the memo delivered to me from Old Republic threw me into a tailspin. I called Underwriting Counsel this morning and was happy to hear from them that they are working on new bulletins that will further clarify their position. I was concerned with the fact that I have already issued commitments to my clients on some properties that were being/had been foreclosed by GMAC or others.

Maryland is not one of the 23 states where GMAC has halted their foreclosure actions YET. The affected states are:

Connecticut
Florida
Hawaii
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Nebraska
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
South Carolina
South Dakota
Vermont
Wisconsin

I don't think that there is much doubt that Maryland and other states will be added to this list. We already know that other big lenders have taken the same course and have halted their foreclosures in these same states due to possible "technical errors" in the execution of the affidavits submitted in the foreclosure filings. JP Morgan/Chase has halted foreclosure actions and there are rumors that Citi, B of A and others may follow suit.

For some time now I have commented here and on blogs at http://activerain.com about the shoddy work being done by these foreclosure firms. I never particularly addressed the specific allegations that are being talked about today, but generally, these mills are dangerous to those of us in the industry and potentially disasterous to the consuming public.

It does not surprise me that the underwriters are running scared but I am surprised that it took them this long to see the "writing on the wall". How many claims do you suppose have already been filed alleging wrongdoing in these mass foreclosures? I can only imagine what the claim rate is going to be now given all the media attention that this issue is getting today.

I take great pains in underwriting these foreclosure files in an effort to insure that the ultimate buyer is not buying into a problem, but with all of the foreclosure files that I have reviewed I can honestly say that I never checked the signatures on the hundreds of affidavits to see whether the same person was signing on behalf of several different entities in the same capacity every time.

Naturally, my underwriting of these files will be even more stringent now. I will now have to go back to every single document I have on file for various entities which provide the necessary signing authority, make sure there is no overlap of names from entity to entity, etc. Even with more stringent underwriting of these files there is no guarantee that there won't be claims filed alleging fraud on the part of the foreclosure mills here in Maryland.

We can only do so much as title insurers and abstractors. What is our liability in these cases? Is it our place, as title insurance producers, to investigate the validity of the signature if we have been provided with a document from the foreclosure attorney with a list of persons named therein who have "signing authority" on behalf of the note holder/assignee in the foreclosure case? Are we to go back and forth between several dozen different "signing authority" documents we have on file from many different entities to insure that no one name appears on the same lists? How can we best protect ourselves if we choose to focus on title clearance in the foreclosure market?

Because of the large inventory of homes available on the open market that have been foreclosed upon it is inevidible that all of us will be underwriting files coming out of foreclosure. How many of us will balk at handling any transaction that is coming out of foreclosure. As always it is the consumer that will suffer in the end. And there is no end in sight.

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	I was surprised...
	I was surprised that underwriters took this drastic step. Slade and I discussed it when he first said that he heard that underwriters may refuse to issue policies on properties coming out of foreclosure. I told him that I didn't think it would happen (guess I was wrong). There were a few reasons for my line of thought. First, is the volume of policies foreclosures generate (and the associated premiums). I didn't think they would be willing to give up the revenue. In Ohio, preliminary judicial policies are required for most foreclosures. Many of the foreclosure firms have their own title company for this purpose and when you generate that kind of premium dollars, underwriters tend to get pretty lenient. Second, there is the general attitude of the underwriters toward title defects - insure over them and issue indemnity letters to anyone who asks for one (maybe a slight exaggeration, but it is too common). Third, I have my doubts that any of these affidavit issues will result in a homeowner getting a home back, particularly if purchased by a bona fide purchaser for value. Perhaps if the bank bought it back and still holds it, it would be a possibility. But, most likely, if it were sold to a BFP the court would probably award monetary damages to the wronged homeowner rather than take the home back for them. All said... I don't think there is a great risk of loss on a title insurance policy in most cases. If the bank has to pay some homeowners that they improperly foreclosed on, I don't think they would have a title claim because it would be the result of their own fraud. But... I could be wrong.
	by Robert Franco \| 2010/10/01 \| log in or register to post a reply

	Maybe you weren't wrong, Robert
	Fidelity just affirmed your view on the issue, and basically made the same argument. And Old Republic softened their policy too.
	by Slade Smith \| 2010/10/01 \| log in or register to post a reply

	Thank you...
	Apparently, ALTA has also issued a similar statement. I feel better now.
	by Robert Franco \| 2010/10/02 \| log in or register to post a reply

	Liability of the court?
	I agree with Robert, if anyone should have liability in these cases it should be the lender and foreclosure attorney who committed the fraud not the title company who insured based upon the presumption of an honest, diligent and responsible court. But that is the white elephant no one seems to be talking about. The judges and courts who are also rubber stamping these foreclosures without verifying information or caring. I've heard stories, especially coming out of Florida, from homeowners who have tried to defend themselves against foreclosure and have come up against judges who didn't care that the attorneys were not filing the proper forms or providing proper notices or any of the other legal technicalities that have been put in place to allow a defendant the time and opportunity to defend themselves. The title industry must be able to rely on the validity of a court order to foreclose just as soundly as they rely on the validity of documents in the recorders office.
	by Cheryl Hartzman \| 2010/10/04 \| log in or register to post a reply

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