-->

Love to Live in Maplewood/South Orange

A blog for The Bedroom Communities of New York City: Maplewood, South Orange, Millburn/Short Hills and Montclair, etc. for Area Residents, for future residents and for home buyers and sellers in New Jersey. Provides information on housing trends, tips for sellers and buyers, mortgage information events and happenings around town and the regional area. Local contributions are welcomed!

good homes for good people.com

  • http://www.goodhomesforgoodpeople.com

Wednesday, January 19, 2011

What is Title Insurance and Why do you need it.

After Foreclosure, a Focus on Title Insurance

By RON LIEBER
Published: October 8, 2010
    • kedin
    • Digg
    • Mixx
    • MySpace
    • Yahoo! Buzz
    • Permalink

When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

Gregg Matthews for The New York Times
John Kovalick owns this home and is unsure what will happen if its foreclosure is invalid.
This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gantlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.
Besides, does anyone actually know people who have had to collect on title insurance? It ultimately feels like a tax — an extortionate one at that — and not a protective measure.
But all of the sudden, the importance of title insurance is becoming crystal-clear. In recent weeks, big lenders like GMAC Mortgage, JPMorgan Chase and Bank of America have halted many or all of their foreclosure proceedings in the wake of allegations of sloppiness, shortcuts or worse. And a potential nightmare situation has emerged that has spooked not only homeowners but lawyers, title insurance companies and their investors.
What would happen if scores of people who had lost their homes to foreclosure somehow persuaded a judge to overturn the proceedings? Could they somehow win back the rights to their homes, free and clear of any mortgage? But they may not be able to simply move back into their home at that point. Banks, after all, have turned around and sold some of those foreclosed homes to nice young families reaching out for a bit of the American dream. Would they simply be put out on the street? And then what?
The answer to that last question may depend on whether those new homeowners have title insurance, because people who buy a home without a mortgage can choose to go without a policy.
Title insurance covers you in case people turn up months or years after you buy your home saying that they, in fact, are the rightful owners of the house or the land, or at least had a stake in the transaction. (The insurance may cover you in other instances as well, relating to easements and other matters, but we’ll leave those aside for now.)
The insurance companies or their agents begin any transaction by running a title search, sifting through government filings related to the property. They do this before you buy a home or refinance your mortgage to help sort out any problems ahead of time and to reduce the risk of your filing a claim later.
But sometimes they miss things, and new issues can arise later.
For instance, the person doing the title search may not notice that a home equity loan is still outstanding or that a contracting firm filed a lien against the owner years ago. That could create problems for you later, when you try to sell the home.
Then there are the psychodramas that can ensue. The previous owner’s long-lost heirs or a previously unknown love child could show up, saying that they never agreed to the sale of the property. Or perhaps there was fraud against a seller who was elderly or had a mental disability, or forgery of an estranged spouse’s signature. It’s rare, but it happens, and when it does, your title insurance company is supposed to provide legal counsel or settle with whomever is making a claim.
Title insurance companies would like you believe that they are the good guys standing behind you. After all, you are the customer who owns the policy.
In fact, many of the title insurance companies are more concerned about the real estate agents, lawyers and lenders who can steer business their way. The title insurance companies are well aware that most people do not shop around for title insurance, even though it’s possible to do so — say through a Web site like entitledirect.com.
While the title insurers are not supposed to kick back money directly to companies or brokers that send business their way, various government investigations over the years have turned up all sorts of cozy dealings that make you shake your head in disgust.
But since you have to buy the insurance if you need a mortgage, there is not much you can do except hold your nose.
That’s what John Kovalick did in January when he bought a foreclosed house in Deltona, Fla., for $102,000 from Deutsche Bank. But in recent weeks, he’s seen the headlines about other banks halting foreclosures and wondered whether something might have gone wrong with the foreclosure on his new house. A spokesman for Deutsche Bank declined comment.
Mr. Kovalick is not the only one pondering what could go wrong. While the banks were pressing the pause button on many foreclosures, some title insurers were growing concerned as well.
On Oct. 1, Old Republic National Title Insurance Company released a notice forbidding any agents or employees to issue new policies on homes that had been recently foreclosed by GMAC Mortgage or Chase.
Clearly, the title insurer was also worried about a situation in which untold numbers of former homeowners have their foreclosures overturned. At that point, those individuals might claim the right to take back their old homes, but they’d also be responsible for, say, a $400,000 loan on a home that is worth half that.
So what would happen next? The banks that foreclosed might start the process over again. At that point, lawyers for the people who had been foreclosed upon might take the next logical step and try to show that the banks never had the documents to prove ownership of the mortgage in the first place. The banks might settle at that point, writing checks to everyone who had gone through a disputed foreclosure in exchange for each of them giving up the title.
But if banks did not settle, or the evicted homeowners refused to settle and fought on and won, they might end up owning their homes once again and not owing the bank either.
Or banks might agree to slice a big chunk off the remaining balance in exchange for a release from any liability for the errors it made.
At that point — and again, this is what Old Republic and investors in other title insurers fear — those homeowners might actually want to move back in. But some foreclosed homes were sold by the banks to others who now live there. And those new residents would have big, fat title insurance claims if their predecessors ever turned up at their doorsteps, proclaimed them trespassers and told them to leave.
“All of these Joe Schmos who did everything legally would then be in the middle of it, too,” said Mr. Kovalick, who manages an auto repair shop and is now hoping not to be one of those Schmos.
“Now, you’d have two total disasters,” he said. “How would you like to be the judge to get that first case?”
While homeowners like Mr. Kovalick may have title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. “If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,” said Matthew Weidner, a lawyer in St. Petersburg, Fla.
Indeed, this possibility has occurred to Mr. Kovalick, who has plans to put an addition on his home and is asking how he could extract that investment if someone ever turned up on his doorstep and asked him to leave. “What do I do, take the paint off the walls and the custom blinds off the windows?”
Chances are, it will not come to that. After all, title insurers could settle with the previous residents, allowing them to walk away with a big check to restart their lives elsewhere.
Still, for anyone considering buying a bargain home out of foreclosure anytime soon, consider asking your title insurer if any special riders are available that can cover appreciation on your home in the event of a total loss.
That said, if you can possibly help it, stay away from foreclosed homes until the scene shakes out a little bit.
Some people will undoubtedly make a fortune investing in these properties in the next few months. But if your down payment represents most of what you have in the world, it’s hard to justify betting it all on a situation like this one.
Gregg Matthews for The New York Times
John Kovalick’s title insurance covers only his home’s sale price.
Your Money
Ron Lieber writes the Your Money column, which appears in The Times on Saturdays.
Ron Lieber’s Columns »

Bucks

Share your tales of title insurance claims and let us know how they turned out.
  • Comment Share Your Story

Related

  • Largest U.S. Bank Halts Foreclosures in All States (October 9, 2010)

Posted by Mark Slade Homes at 6:07 AM
Email ThisBlogThis!Share to TwitterShare to FacebookShare to Pinterest

No comments:

Post a Comment

Newer Post Older Post Home
Subscribe to: Post Comments (Atom)

Total Pageviews

Popular Posts

  • Chosing Your Preferred Home Style
    Home architecture style: Regional or not? Posted by Zillow: 12 Mar 2013 Edited by Mark Slade: 14 Mar 2013 Home architecture styles tend ...
  • Best of New Jersey: 78 places to eat, shop and spa within 20 minutes of Maplewood/South Orange
    Best of New Jersey: Food and Drink 32 Local Eateries/Bakeries/Drinkeries placed in this 2011 Survey and are Hi-Lighted below: We asked o...
  • Pre-Schools in the Maplewood and South Orange Area
    This question comes up all the time and I have blogged about the many facilities available to families with young children. Playhouse Pre...
  • Top 10 Things You Can Do in Maplewood
    I HAVE LIVED IN MAPLEWOOD SINCE 1997 AND HAVE LOVED EVERY MINUTE OF IT. WE HAVE A SMALL TOWN FEEL JUST 20 MILES WEST OF NYC WITH A TRAIN R...
  • The Update on Short Sales and HARP 2.0, Are you Behind on your Mortgage Payments?
    About The HARP 2.0 Refinance Program HARP stands for Home Affordable Refinance Program. It is a government-led mortgage program for und...
  • Maplewood Community Garden Registration Ends Feb. 28
    Community Garden Registration Ends Feb. 28 Garden organizers are looking to add additional sites. By Mary Mann | February 20, 2011 ...
  • Dan Richer of Maplewood's Arturo's Nominated as Rising Chef's by James Beard
    James Beard Chef and Restaurant Semifinalists Announced 2/17/11 at 09:27 AM Comment 2 Comment 2 Comments ...
  • Moving to Maplewood and South Orange Area: The Complete Guide to Child Care and Pre-Schools
    If you are a parent to very young children, one of your top priorities when moving to a new community is choosing the best preschool for you...
  • Notable Alumni from Maplewood South Orange Columbia High
    Frank Langella How many Notable alumni do you know or have heard of? Elisabeth Shue Architect Richard Meier Singer Songwriter Lau...
  • Moving to Livingston: Commuting from Livingston to NYC
    Livingston is a great community in Essex County with a great school system. They only challenge for buyers looking to move to Livingston...

Followers

Blog Archive

  • ►  2023 (2)
    • ►  February (1)
    • ►  January (1)
  • ►  2022 (48)
    • ►  December (3)
    • ►  November (3)
    • ►  October (5)
    • ►  September (4)
    • ►  August (1)
    • ►  July (4)
    • ►  June (3)
    • ►  May (3)
    • ►  April (4)
    • ►  March (8)
    • ►  February (2)
    • ►  January (8)
  • ►  2021 (50)
    • ►  December (2)
    • ►  November (2)
    • ►  October (6)
    • ►  September (7)
    • ►  July (5)
    • ►  June (4)
    • ►  May (4)
    • ►  April (5)
    • ►  March (7)
    • ►  February (1)
    • ►  January (7)
  • ►  2020 (54)
    • ►  December (2)
    • ►  November (3)
    • ►  October (7)
    • ►  September (5)
    • ►  August (5)
    • ►  July (5)
    • ►  June (3)
    • ►  May (3)
    • ►  April (3)
    • ►  March (6)
    • ►  February (9)
    • ►  January (3)
  • ►  2019 (77)
    • ►  December (2)
    • ►  November (4)
    • ►  October (8)
    • ►  September (7)
    • ►  August (2)
    • ►  July (1)
    • ►  June (5)
    • ►  May (12)
    • ►  April (10)
    • ►  March (11)
    • ►  February (5)
    • ►  January (10)
  • ►  2018 (94)
    • ►  December (5)
    • ►  November (10)
    • ►  October (8)
    • ►  September (7)
    • ►  August (3)
    • ►  July (8)
    • ►  June (11)
    • ►  May (12)
    • ►  April (10)
    • ►  March (4)
    • ►  February (13)
    • ►  January (3)
  • ►  2017 (49)
    • ►  December (1)
    • ►  November (7)
    • ►  October (20)
    • ►  September (1)
    • ►  August (6)
    • ►  May (1)
    • ►  April (1)
    • ►  March (2)
    • ►  February (1)
    • ►  January (9)
  • ►  2016 (74)
    • ►  December (1)
    • ►  November (4)
    • ►  October (9)
    • ►  September (4)
    • ►  August (3)
    • ►  July (2)
    • ►  June (5)
    • ►  May (6)
    • ►  April (11)
    • ►  March (11)
    • ►  February (9)
    • ►  January (9)
  • ►  2015 (75)
    • ►  December (4)
    • ►  November (9)
    • ►  October (6)
    • ►  September (11)
    • ►  August (2)
    • ►  July (3)
    • ►  June (6)
    • ►  May (4)
    • ►  April (10)
    • ►  March (7)
    • ►  February (4)
    • ►  January (9)
  • ►  2014 (99)
    • ►  December (12)
    • ►  November (6)
    • ►  October (9)
    • ►  September (4)
    • ►  August (5)
    • ►  July (3)
    • ►  June (5)
    • ►  May (8)
    • ►  April (5)
    • ►  March (8)
    • ►  February (15)
    • ►  January (19)
  • ►  2013 (177)
    • ►  December (6)
    • ►  November (7)
    • ►  October (18)
    • ►  September (9)
    • ►  August (5)
    • ►  July (10)
    • ►  June (7)
    • ►  May (16)
    • ►  April (9)
    • ►  March (26)
    • ►  February (26)
    • ►  January (38)
  • ►  2012 (273)
    • ►  December (25)
    • ►  November (28)
    • ►  October (38)
    • ►  September (9)
    • ►  August (15)
    • ►  July (24)
    • ►  June (29)
    • ►  May (18)
    • ►  April (22)
    • ►  March (22)
    • ►  February (20)
    • ►  January (23)
  • ▼  2011 (375)
    • ►  December (18)
    • ►  November (16)
    • ►  October (18)
    • ►  September (11)
    • ►  August (9)
    • ►  July (18)
    • ►  June (14)
    • ►  May (36)
    • ►  April (44)
    • ►  March (88)
    • ►  February (53)
    • ▼  January (50)
      • 2011: The Year a House Again Becomes a Home
      • Otteau Valuation Group: tracking mortgage rate tr...
      • Otteau Valuation Group: "Home Sales Begin to Stab...
      • Columbia High School Maplewood/South Orange NJ
      • 6 Reasons You Should Google Your Address
      • The Fed’s Statement And What It Means For Mortgage...
      • One of the many reasons I Love Maplewood So Much!
      • Today's Average Mortgage Rates-for excellent credi...
      • Solar Panels in Maplewood
      • mortgage rates 1/25/2011
      • Get Your LOCK!
      • The Real American Idol – HOMEOWNERSHIP!
      • Keller Williams Realty Signs Deal with CitiMortgag...
      • Why Some Houses Sit While Other Houses Sell
      • Distressed Inventory to Step Out of the Shadows
      • Owners and Renters Agree: Owning a Home Is a Smart...
      • Home Resales Blow Past Expectations; Put Talk Of “...
      • If you are looking to buy, GET MOVING! If you are ...
      • 3 Simple Tips for Creating Your Ideal Income
      • Average Mortgage rates today 1/19/11
      • Research Shows Changing Market, Evolving Buyer Pre...
      • Homebuilder Confidence Survey Leaves Hints For Hom...
      • If you are thinking of Selling you home, you shoul...
      • What is Title Insurance and Why do you need it.
      • Tax Deadline Moved To April 18, 2011
      • Buy Or Rent: 2011
      • Reverse Mortgage Programs can help Seniors buy a home
      • How FICO Scores can affect Mortgage Rates
      • New Art Installation in Maplewood
      • SLEDDING and the SNOW
      • Mortgage Rate Trend next 7 days
      • Dan Green Interview With First Business TV | Jan 1...
      • Mortgage Rates: Closing Costs Creep Higher After T...
      • Essex and Union Counties NJ Housing Trends
      • Mortgage Definition : Escrow Real Estate Taxes And...
      • Forging meaningful Relationships with Clients that...
      • Will Foreclosure be Erased and the Impact on 2011
      • The 2011 Political Arena: How Will It Impact Real ...
      • Mortgage Rates Over-React As Job Growth Returns To...
      • Maplewood — Maplewood Township
      • Rent vs. own ratio to flip in 2011? - Fortune Finance
      • Waste Management Customers to Get Monthly Bulk Pic...
      • Explaining Loan-Level Pricing Adjustments (Featuri...
      • Interest rates dropped 3 basis points
      • KELLER WILLIAMS HITS THE CITY, as in NYC!
      • Interest Rates Are Up, Price changes are uncertain...
      • The Power of Community
      • Buying wins over Renting, Hands Down!
      • Mortgage Rate Roller Coaster : The 2010 Amusement ...
      • GREAT METAPHOR FOR 2010's MORTGAGE INTEREST RATE C...
  • ►  2010 (20)
    • ►  December (20)

About Me

Mark Slade Homes
View my complete profile

Show/Hide Layers

crest

crest
Faithful and Bold

Free Search for Homes

For More Information about Homes and Mark Slade

  • more about Mark Slade
  • http://www.maplewoodandsouthorangehomes.com
  • http://www.goodhomesforgoodpeople.com
Picture Window theme. Powered by Blogger.