After Foreclosure, a Focus on Title Insurance

After Foreclosure, a Focus on Title Insurance

After Foreclosure, a Focus on Title Insurance

Published: October 8, 2010

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.

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 gauntlet 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.)

Continue reading…NEW YORK TIMES


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  1. Bill McAuliffe says:

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    GlobalDealBookMarketsEconomyEnergyMediaPersonal TechSmall BusinessYour Money…Business > Companies > Federal Home Loan Mortgage Corporation.Volume
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    $0.32At close 10/11/2010Federal Home Loan Mortgage CorporationFMCC: OTC Bulletin Board Market; Financials/Consumer Financial Services
    OTHER EXCHANGES: Mexico, Buenos Aires, More ».Updated: Aug. 18, 2010

    Freddie Mac, a publicly traded company that operates under a federal charter, is the nation’s second-largest mortgage buyer. Along with its larger rival, Fannie Mae, Freddie Mac was taken over by the federal government on Sept. 8, 2008, as it faced steep losses, new questions about its accounting and a flight by investors. Many experts believe that Fannie and Freddie are likely to remain wards of the state for years.

    And, given the alarm in some quarters over the mounting budget deficit, these two giants and their vast obligations are likely to remain off the federal books although they have become one of the most expensive aftereffects of the financial meltdown. Fannie Mae and Freddie Mac have obligations of $3.9 trillion to investors who bought bundles of mortgages that the companies assembled.

    Lawmakers on both sides of the aisle have called for their eradication. But few policy makers are willing to take aggressive steps that might weaken the housing market. On Dec. 24, 2009, the White House quietly disclosed that it had, in effect, given the companies a blank check by making their federal credit line unlimited; the ceiling had been $400 billion.

    Fannie and Freddie now buy about two-thirds of new mortgage loans. Nine out of 10 new mortgages receive a government guarantee of some kind. At a conference in August 2010, Treasury Secretary Timothy F. Geithner affirmed that the government would continue to play an important role in the mortgage lending system.

    But even if the current approach to guarantees is basically preserved, Fannie and Freddie are unlikely to survive in recognizable form. Taxpayers have spent more than $150 billion covering losses that the companies incurred in recent years, largely by investing in lower-quality mortgage loans to bolster profits. The companies, once broadly popular, are now badly tarnished.

    Getting rid of them, however, would not be easy. Fannie and Freddie still own vast portfolios of troubled loans. Fannie, for example, expects to lose money on the loans it acquired in every year from 2005 to 2008 — loans that still make up 47 percent of its total holdings. The companies cannot be completely shut down until those losses are absorbed, a process expected to drag on for years. The Congressional Budget Office has predicted that the final bill could reach $389 billion.

    Read More…

    Freddie Mac and Fannie Mae buy mortgages from lending institutions and then either hold them in investment portfolios or resell them as mortgage-backed securities to investors. The two companies play a vital role in providing financing for the housing markets.
    Their roles had also been controversial, due to their unusual status. As government-chartered entities, they were able to borrow money at lower rates than their competitors, as most investors took for granted that their operations were implicitly guaranteed by the government. At the same time, as publicly traded companies, they sought to maximize their revenues and returns. Critics questioned their accounting, which they said was manipulated by executives to justify their large and growing compensation.
    Freddie and Fannie had traditionally backed the “plain vanilla” end of the mortgage market, concentrating on 30-year fixed rate loans. But as the mortgage market exploded in the middle of the decade, they found themselves losing market share to the more aggressive private lenders, and made a fateful decision to expand their lending to keep up.
    As the housing market soured, both companies reported steep losses. But the mortgage meltdown also made the companies more important. When the credit markets seized up, Fannie and Freddie regained their central role in mortgage finance after losing significant market share to investment banks during the housing boom. They issued most of mortgage securities sold in the first half of 2008, after investors lost confidence in deals put together by big investment banks.
    In the spring of 2008, federal officials eased restrictions on lending by Freddie and Fannie in an effort to calm the turmoil afflicting the mortgage markets. Officials said the change could allow the two companies to invest $200 billion more in mortgages.
    But as the year progressed, Freddie and Fannie began to look less like saviors of the housing market than like the biggest casualties of the boom’s collapse.

    Related: Fannie Mae. | Mortgages and the Markets. | David B. Kellerman..

    Company Information
    Federal Home Loan Mortgage Corp, formerly Freddie Mac, is engaged in purchasing residential mortgages and mortgage-related securities in the secondary mortgage market and securitizing them into mortgage-related securities that can be sold to investors. The Company purchases single-family and multifamily mortgage-related securities for its mortgage-related investments portfolio. It also purchases multifamily residential mortgages in the secondary mortgage market and hold those loans either for investment or sale. Freddie Mac finances purchases of its mortgage-related securities and mortgage loans, and manages its interest-rate and other market risks, by issuing a range of debt instruments and entering into derivative contracts in the capital markets. The Company operates in three segments: Investments, Single-family Guarantee and Multifamily.
    Federal Home Loan Mortgage Corporation
    8200 Jones Branch Drive McLean VA 22102
    Phone: +1 (703) 903-2000
    Fax: +1 (703) 903-2759

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