Post Foreclosure Title Insurance IssuesBanker Resource
September 14, 2012 — 1,779 views
Banks that have seized property during the foreclosure process are increasingly running into problems when properties lack title insurance. This issue often significantly increases the amount of time it can take for a property to sell and prevents the bank from recouping any financial losses realized when a homeowner has defaulted on a mortgage.
Title insurance issues often arise when an insurer is unwilling to issue title insurance on a property that has been foreclosed upon. More insurers are becoming wary of providing title insurance for foreclosed properties, and some banks are having difficulty finding an insurance agency that can offer this service.
Banks hoping to sell a foreclosed property without title insurance will find that people interested in purchasing the property will not be able to secure financing if the property lacks title insurance. Most mortgage lending companies include title insurance on the property in question as one of the major requirements prior to approving financing for the purchase of a home.
A lack of title insurance may also lead to problems if past homeowners claim that they were illegally evicted. The absence of paperwork related to title insurance can lead to a ruling in the former homeowner's favor, and the new homeowner will be forced to vacate the property. While this occurrence has been relatively rare, new homeowners that are forced to leave because of title insurance issues are often unable to receive any form of compensation for the home purchase.
The possibility of serious complications related to the purchase of a property that has been foreclosed upon has made it more difficult for banks to sell these properties and regain some of the money lost during the foreclosure process.
Banks may help ease problems associated with title insurance issues by utilizing the assistance of company attorneys in ensuring that the proper documents have been filed in relation to a foreclosed property. Following the proper foreclosure process and having legally verified documentation that the foreclosure was justified is the first step to keeping old property owners from causing problems for future homeowners.
Increasing the number of successful foreclosure sales through the use of diligence and research could lead to a greater chance of obtaining title insurance from an insurance agency. Banks would benefit from obtaining insurance with ease through quicker foreclosure sales and a decrease in the amount of time it takes to receive funds from new homeowners.