Title insurance

This morning I heard an interview with Michael Brissenden – the ABC US correspondent. He was talking about the foreclosure crisis in the US. At one stage he mentioned something called title insurance. I was quite taken aback by this because I thought that property rights would be secure in the US. But apparently not.

Title insurance exists in the U.S. in great part because of a comparative deficiency in the U.S. land records laws. Most of the industrialized world uses land registration systems for the transfer of land titles or interests in them. Under these systems, the government makes the determination of title ownership and encumbrances on the title based on the registration of the instruments transferring or otherwise affecting the title in the applicable government office. With only a few exceptions, the government’s determination is conclusive. Governmental errors lead to monetary compensation to the person damaged by the error but that aggrieved party usually cannot recover the property. The Torrens Title system is the basis for land registration systems in many countries.

Over at The Drum Brissenden argues that title uncertainty is undermining property values and property sales in the US. Hardly surprising. It seems lemons are now dominating the US property market and no wonder prices are collapsing.

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22 Responses to Title insurance

  1. JC

    Sinc..

    Title insurance used to be a great little earner. Chicago title or whomever used ti send their to to a closing and collect a fee for pretty much doing a search on the property.

    I twas virtually risk free business. .. until now.

    I think the problem stems from the fact that unlike here if there is faulty transfer the innocent last party doesn’t get turfed out of the home. That can happen in the US i believe even a long way back up the title.

    Of course the US banking system would always find its way into a ditch even on a flat surface those salt lakes in Utah.

  2. JC

    Look can i just say that Brissenden doesn’t know what he’s talking about and ought to spend more time doing what he does best which is kneeling to Obama and wanking it up for the Demolition party while demonizing the GOP.

    So far I think one home has been found to have faulty title.

    Procedural errors will not be used to screw up the fact that the bank or whomever will eventually get hold of the property.

  3. Infidel Tiger

    Apart from wine, The Torrens Title is the only good thing to come out of South Australia. They’ve been trying to introduce it to various Asian countries with limited success.

  4. I remember reading in the last few years how lack of certainty in land title in developing countries is one of the big impediments to economic growth because of the difficulty in lenders getting good security for any significant loan. Hence the need for the s micro-financing movement, which has its place but also its limitations. (A good solid legal system for enforcement of securities helps too, of course.)

    Yes, Australia does two things really well – land title and voting systems. (I can never believe the fights that go in the States over the integrity of their voting systems.)

  5. JC

    Yes, Australia does two things really well – land title and voting systems. (I can never believe the fights that go in the States over the integrity of their voting systems.)

    Doofus, we’ve had the similar problems here when the vote is close by a 100 votes so don’t get carried away with some sense of false superiority.

    The real big difference in the US is that the GOP normally requires at least 2 to 3% more votes to counter Demolition party cheating that goes on.

    ———

    America’s title transfer system isn’t that bad. A lot of this has to do with the media hamming it up and everyone getting nervous.

    Look if Citibank’s paper work is fine then there is reasonable assurance the rest are too because Citi is always the prime suspect in a banking fuck up. They seem fine at this stage.

  6. Keith

    Hmm ‘irregularities’ in titles.
    Try fraud, pure and simple.
    Foreclosure proceedings have been suspended in virtually the whole of the US, mainly because the title insurers are refusing to extend coverage, knowing a lot of titles have suspect procedural provenance. AG’s in many states are now instituting proceedings against many title processors and banks. Here come the handcuffs, and long over due.
    FBI was indicating their suspicions of fraud in the housing market as early as 2004.

  7. JC

    Keith…

    Of course the title insures want to take a rest before we find out what’s happened with the foreclosure procedure.

    But there may be a doc missing or whatever, however the people in this loop haven’t paid their loan for 2 years in some cases. It’s no longer their home no matter how much kicking and screaming they do and if they want to challenged the foreclosure they can do so but it wouldn’t be a good idea as they will end up in a bankruptcy court where the bank can then sue to take everything.

  8. Infidel Tiger

    Steve is right. We have the best voting system and title system in the world. Any move away from paper ballots should be resisted with armed force and a coup detat.

  9. Keith

    JC, no noone gets a free home out this.
    However, the unconscionable ramp job in house prices had it’s basis in unjustified mortagages made on a faulty basis. The MERS blow up simply proves the banking industry’s criminality – the “odd missing document” is not the problem. The systematised absence of notarised and signed documents however is. And now the banks are submitting affadavits that the titles are sound. If they’re so sound they should produce them, instead of pulling this dog ate my lunch nonsense. Meanwhile the REMIC/MBS/CDO structures are quaking and ready to implode. Unsound structures will always collapse. No one seems to notice that the TARP, etc paid the banks the full value of all US mortgages outright, yet the banks are still not whole and the mortgages are still owed. We are probably close to another derivative crisis.

  10. JC

    Dude, the rise oof the real estate market was a bubble. There was no widespread criminality in this. There were some of course.

    The banks that closed down their foreclosure operations have started to re-open as of yesterday.

    I think you’re reading Zero Hedge and getting worked up about it.

  11. Rodney

    I like the idea of borrowing against virtual real estate.

  12. Peter Patton

    IT

    Yes, I just took a shower on a small investment in a SA truffle farm.

  13. Infidel Tiger

    Truffles in SA? They’re successfully growing them in south west WA now.

  14. Peter Patton

    Not too successful in SA, I’m afraid. 🙁

  15. Andrew Reynolds

    Sinclair,
    The US uses what we call old system titles – frequently without a central registry, or with an optional one. To illustrate the problem with this: many of those properties had been bought or even homesteaded more than a century ago. The chain of title might go something like:
    1. Property originally sold by the State or homesteaded by one person, who then sold it on.
    2. After buying it (so it does not appear on the sale document) the purchaser then agrees to sell half the value to his mate as they set up a mine or farm together.
    3. Mate dies intestate – and with unknown relatives.
    4. Owner neglects to mention the half share he sold when he subsequently sells the property.
    5. Innocent party buys property, thinking he has full rights – and with a “clear” chain of title back to original owner.
    6. Relatives of original partner can claim their 50% of the property at any time.
    That’s why property insurance is needed. One good reason for government – title certainty by legislation.

  16. JC

    Andrew:

    Property transactions and ownership is a pretty cut and dried thing over there.

    There’s rarely been any confusion regarding title. It does work and the government hasn’t been required.

    The title company does the job pretty well and therefore the less need for government interference.

  17. Torrens title is one of Australia’s gifts to the world; every country that can afford it (initial set up costs are quite high) is implementing it forthwith. Old System Title (which is based on medieval notions of mortgage-as-transfer) is a complete disaster by comparison.

    Subject to the caveat that one reform of Old System title is to halt title investigations at, say, thirty or sixty years, Andrew’s description of what happens in Old System title countries (especially in areas where the system has not been reformed; some US States have even adopted Torrens) is accurate.

    It is a pain in the ass, and creates a lawyers’ picnic.

  18. Ken Nielsen

    But sl, law students are now denied the fun of going through parchment documents looking for a good root of title and working through metes and bounds…
    Character building it was…

  19. Keith

    So fraud is decriminalised these days ? I await the outcomes of the investigations.

  20. Keith

    Class action pending
    A rotten game explained. And this is just one thread of the corrupt web. Securitized mortgage debt now adds up to about $2 trillion. Not that significant really.

  21. JC

    Keith..

    Are you getting this shit from Zero Hedge? If you are can I advise you to stay away from that website as countless otherwise healthy people suicide after just one read.

    Did you read your link? If you haven’t go back and take a look and see what it says.

    It basically says that Mr.& Mrs Blogs were at one stage thinking they were getting a loan modification and then the bank foreclosed on them and they’re very angry. Why were they getting a loan mod you may ask. I’ll tell you. They weren’t paying their mortgage possibly for a year or two.

    So while they were negotiating with the bank to modify the loan the bank for some reason changed it’s mind and went for foreclosure.

    Now think of it like this. Think of it like rape avoidance. Say you’re out on a date with a gal. You end up in bed and just at that moment she says no, she not going to go on. So of course you stop, get your clothes and and leave pissed off.

    The bank in this case is the gal. She’s been so badly mishandled of late that she just doesn’t want to go on and is perfectly entitled to just say no.

    In this case the Blogs get really pissed go see a lawyer and sue her… I mean the bank.

    There’s no fraud.. no nothing. The bank just wants its money back and rather than being financially raped a second time just says no.

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