By Dave Krieger
The title insurance companies have shifted the blame … to the lenders. What did you expect? Just visit the county courthouse and examine the records of a given homeowner who has a MERS mortgage or deed of trust and you’ll still find problems in the chain of title.
On October 1, 2010, when Version 1.1 of the book was launched onto the Internet, the strategy was based on previous information (of the previous six months) that title companies were going to be “exposing” themselves to unnecessary risk by guaranteeing title insurance to properties whose titles were slandered or clouded. This meant that one could get a homeowner’s indemnity policy with conditions and exceptions and use it to potentially create prima facie evidence in a quiet title action. This method actually “stuck” in one case that appears to be headed for settlement soon. Insider information has revealed that a federal judge has seen this author’s work (as have some bank attorneys) and they were impressed with the clarity and understanding put forward in the author’s assessments.
Lewis Diuguid from the Kansas City Star viewed the book as “insightful”. Yet, this is no ego stroke. This is frank discussion is about the continued problems that homeowners and investors will face as they attempt to defend foreclosure actions from banks who are now offering “new and improved” versions of their old “assignments”. This author watched the change in strategy by the title companies shift from “erring on the side of caution” to “oh, we’re not worried … if there’s a problem, it’s the bank’s doing, not ours … we don’t think we’re liable.”
What that did was apparently appease investors. Fidelity National Title stock went up as a result of the October 28, 2010 announcement.
In the October 28th article put out by the Washington Post, Ted Jones, director of investor relations for Stewart Title stated that his company was not asking for indemnification protections from lenders at all; stating they would still continue to issue policies to buyers of foreclosed properties, as long as lenders confirm they have followed all applicable legal processes. This still does NOT solve the problems that still lurk in county courthouses all over America.
Back when the author was interviewing attorneys for his research, front line foreclosure attorney Mark Mausert in Reno, Nevada did in fact believe that foreclosure actions “slander title” to property. From the author’s research, MERS is still the weak link and MERS is still the key cause of the problems that continue to plague our country’s 400-year-old county land recordation systems. It does not preclude the fact that there are clouds on title because the chain of title is broken because of the lender’s failure to record its security interest at the time it acquires a property through the transfer or assignment of a mortgage. The only thing the latest title company shift in policy does is change the evidence strategy up a bit.
Insofar as preliminary analysis goes, the author still sees issues with title policies, even though their purpose is to guarantee marketable title. Fidelity National Financial, Inc. is the umbrella company for Fidelity National Title, Chicago Title, Commonwealth Land Title and Alamo Title.
There are safeguards in title policies under Schedule B and certain exceptions are made under the “Conditions” section of a policy. If a title company doesn’t want to cover a specific exception, it will state that exception in plain English. Parts of the exceptions cover items that aren’t found in the chain of title. That basically shifts the financial burden off of the title company and puts it on the homeowner based on the amount of exposure to liability because of a defect.
The sudden change in policy doesn’t change the strategy to file quiet title suits. It just means that the title companies have figured out they’re not as liable as they thought. It also doesn’t mean that you won’t see lenders handling foreclosed properties making bona fide purchasers sign indemnity agreements holding the lenders harmless from all liability connected with the condition of title. Defects in title still exist because of MERS and its subscribers’ failure to properly make use of our land recordation systems at the county level.
According to attorneys the author deals with, the quiet title actions (coupled with declaratory judgment motions) are still in vogue. There is still a mess in the county recorders’ offices all across America and homeowners in foreclosure still have a key strategy to make the lenders prove they have their “ducks in a row”.
This may only shift slightly the idea that a “declination” by a title company to insure a property won’t still be a possibility. If there is enough compelling evidence, a smaller title company may still issue a commitment letter stating that they won’t insure because of slanders and clouds on title. Smaller title companies still don’t want the exposure and the author feels they will still err on the side of caution. This still doesn’t stop the evidence pool of MERS illicit transfers.
Because of the comments by FNF’s Peter Sadowski (the chief legal officer) that Bank of America has an agreement that the lender must sign warranties on every foreclosure sale, it does not mean that the homeowner will not have issues at the courthouse. It’s not what the title company says, it’s what they don’t say that worries me. This is why quiet title actions are individual actions and not class actions. Every homeowner’s situation has different twists to it and each has to be analyzed. Attorneys retain me to do this because it is sometimes very time consuming analyzing these documents.
As a result, I am going to be holding seminars on how to do document analysis. Much of this comes from experience and testing the chains of title to see whether they have cause to pursue legal alternatives. This will basically be paralegal stuff; however, attorneys may want to take advantage of this opportunity to strengthen their skills at spotting defects within the chain of title. These seminars are being scheduled on a city-by-city basis as the opportunity arises.
On one recent case the author has been working on, even with the filing of a quiet title action looming, Chicago Title still issued a commitment letter on a property in foreclosure where they were told there were three potentially-flawed documents that could be impeached as a result of chain of title issues caused by improper assignments and robosigning activity.
Despite this singular incident, the lenders will be responsible for the title insurance companies’ costs of suit if a homeowner decides to bring a quiet title suit or wrongful foreclosure action.
The author suspects there has been some serious communication between members of the American Land Title Association regarding the strategy of “covering the kiesters” in this change of stance. At closer looks, it may become apparent to some that “they got to the title companies, didn’t they?” They’re all in on it, right?
This brings the author back to the old adage, “Why buy something you don’t need?”
Sellers get title insurance because they want to give the new buyer peace of mind. The lenders want to put buyers in homes wherein the buyer will be able to make the monthly mortgage payment and the title insurance has to be in place “just because”. The title companies want the blame placed where it belongs … not on them. After all, they aren’t the ones who slandered title, are they? This still does not mean that title companies are going to insure every property that is brought to them for review, at least not without some sort of corrective action if something is “out of whack”. The smaller title companies will still continue to deny coverage of properties where they see potential exposure. The bigger title companies can obviously take on more risk because they can spread their losses out over a wider coverage area; thus the reason for their change in stance over one month’s time.
Bottom line … your county’s recordation system is still losing revenue because of MERS and its subscribers’ failures to properly record; chains of title are still flawed; the title companies want the blame shifted where it belongs (which to me intimates they wish to appear to remain “totally oblivious” to the MERS stench) and line up behind ALTA … ahhh … there is peace in the valley once again? A lot of us knew it would be just a matter of time before the title companies figured out where they stood.
However, it still doesn’t let the E&O carriers off the hook for wrongful foreclosures and this new posturing doesn’t eliminate all of the errors caused by 12 years of debauchery by corporate, electronic infiltration. That fight isn’t over yet … and neither is the coming onslaught of quiet title actions!