Yesterday, Old Republic National Title, one of the biggest title insurance companies in the country, announced that it will no longer insure titles for two of the United States’ biggest lenders, JP Morgan Chase and GMAC/Ally. Both lenders have recently placed moratoria on their foreclosures, preforeclosures and some REO property sales as they investigate whether affidavits of foreclosure that were used or being used to take possession of the properties in question were properly verified. The recent “robo-signer” fraud has called the validity of a number of these transactions into question.
If the foreclosures were not, in fact, legitimate, then the loss of the home was not necessarily appropriate and any subsequent sale would be potentially negated. As a result, Old Republic does not feel confident insuring titles with liens from Chase and GMAC/Ally, and is “dodging” the issue entirely by refusing to insure these titles. Since most lenders will not issue a loan without title insurance, this means that there will be a number of foreclosed, empty homes sitting on the market that simply cannot be sold while the investigations on behalf of lawmakers and the lenders themselves determine if those evicted homeowners still actually own the homes.
This is bad news for the housing market, mortgage broker Dean Wegner told Fox News Phoenix. He says that this will create nervousness among all potential buyers in the market. “They’re saying [that they] don’t like foreclosure transactions [in] 30 percent of the market,” he explains. This could shrink the buyer pool at a time when creating demand is crucial. At least one Old Republic agent, however, says that the entire thing has been blown out of proportion and disputes the claim that Old Republic is not covering GMAC/Ally and Chase mortgages. He remained anonymous, but claimed that “at least in Arizona, all foreclosures from every lender are insured.”