Nice thought, but if the debt is uncollectible it doesn't much matter.  I think the bigger problem is that these companies (the ones notorious for not paying) don't care - they'll just move on the next abstractor on the list.

I think we are just seeing the tip of the iceberg here.  Ohio (and presumably other states) is expected to see housing prices decline by as much as 6% in the Cleveland area and 3% in several other cities.  When you consider that 95% to 100% financing has become so common, that spells disaster. 

Hypothetically, X bought a home two years ago for $300,000 with 5% down he owes about $285,000.  If the house depreciates by 3% it is worth only $291,000.  Then when X wants to sell it, he incurs a 6% commission to the realtor which would be $17,460.  So, assuming X gets an offer for the full value he sells the home for $291,000 less the commission of $17,460, he clears $273.540.  That is not enough to pay off the mortgage so he would have to come up with another $11,460 out of pocket. And of course, that doesn't take into account any "other" closing costs.

If X cannot sell that house, he cannot buy another house.  This will cause the housing market to grind to a near halt.  Of course, this is not good news for any of us in the title industry.  But what makes it worse, is the clients that the abstractors work for are VERY likely to go out of business leaving the abstractors with unpaid invoices.  So... not only will the abstractors have even less business to divide among the many of them, but work that they have already done will never be paid. 

I think the housing bubble is nearing that "BURST" that some have been predicting for the past couple of years.  The National Association of Realtors has been among the few organizations predicting more good times, but they have an obvious bias.  The better people "feel" about the housing market, the more likely they are to pay more for their next home, which makes it possible for the realtors to add their 6% commission to the selling price.

Is it really that bad?  Well, our county has hit a record number of listings, but they aren't selling very fast.  I believe that part of the problem is that people aren't willing to pay the asking price for the homes and the seller can't come down because they have to pay thousands of dollars in commissions.

The only bright spot for the title industry in all of this is that as the creative financing options, such as interest only loans and ARMs, have caused payments to increase on many borrowers who now find that they cannot afford their home nor can they sell it because of the phenomenon described above.  This means that there are many more foreclosures, which require title searches.  I have talked to many abstractors around the country that have been noticing the volume of foreclosures increasing in their areas.

Best,
Robert A. Franco
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