Largest US Title Insurer To Demand Indemnity And Foreclosure Warranty From Banks

Tyler Durden's picture

Submitted by Tyler Durden on 10/20/2010 14:55 -0500

The good news: title insurers may be getting back into the game. The bad news: they will demand indemnity and warranties from the issuing bank assuring their paperwork is sound before backing sales of foreclosed homes. At least this is what the largest title insurer in the US, Fidelity National, will do going forward (which makes one wonder just what exactly FNF’s job function is if the mortgage issuing bank, such as BofA, now caught in too numerous RoboSigning scandals to mention, essentially takes over the title guarantee process…) From Bloomberg: “An indemnity covering “incompetent or erroneous affidavit testimony or documentation” must be signed for all foreclosure sales closing on or after Nov. 1, the Jacksonville, Florida- based company said in a memorandum to employees today. The agreement was prepared in consultation with the American Land Title Association and mortgage finance companies Fannie Mae and Freddie Mac, Fidelity National said.” And what happens if the bank is once again caught to be, gulp, lying? Who foots the bill then? Why the buyer of course. All this does is to remove the liability from companies like Fidelity National and puts it back to BofA, which is already so much underwater it has no chance of really getting out without TARP, contrarian Goldman propaganda notwithstanding.

More from Bloomberg:

“It’s just the prudent thing to do,” Peter Sadowski, executive vice president and chief legal officer for Fidelity National, said in an interview. “It is important for the servicers and the lenders to represent to us and to the people we are going to be insuring that there are no problems.”

Bank of America Corp., the biggest U.S. lender, agreed to a similar contract with Fidelity National on Oct. 8, the same day it extended a freeze on foreclosures to all states amid concern by federal and state officials that lenders are seizing homes without properly reviewing documents. The bank plans to start resubmitting foreclosure affidavits next week. Attorneys general across the country have opened a joint investigation into foreclosures, saying they will seek an immediate halt to any improper practices at mortgage lenders and loan servicers.

Title insurers use their records and public documents to verify a seller is the home’s true owner and that the property is free from liens. They collect a one-time premium at the closing of the purchase and pay costs that may arise if someone disputes the new owner’s right to the property.

The indemnity agreement requires lenders to protect title insurers at their own expense from “any and all liability, loss, costs, damage and expense of every kind” if errors arise in foreclosure procedures, according to the document.

The expenses may include attorney’s fees, a decrease in the property’s value and inability to sell the title, Fidelity said in the document. The lender must also notify the insurer in each case that a foreclosure complies with state laws and regulations, according to the agreement.

The indemnity agreement is available for use by all title insurers, Fidelity National said.

The American Land Title Association, which is nothing but a lap dog for the bankers, of course applauded this development: after all there are millions in pending foreclosures to be done.

“This is a standard all lenders should follow,” said Kurt Pfotenhauer, chief executive officer of the American Land Title Association, a Washington-based trade group. “The sooner that indemnification agreement is adopted market-wide, the more confidence investors can have in this foreclosure market.”

At this point it is only a question of who can kick the massive mortgage fraud can the farthest down the road, before it all comes crashing down. In the meantime, we can get back to more important things: like record banker bonuses due to be paid in a few months (of the pre-TARP 2 version).

 

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