Quote from @Peter Walther:
Quote from @David Dey:
Quote from @Peter Walther:
Quote from @David Dey:
As for myself, I think title insurance is both a self serving institution and a necessary evil.
99 times out of 100 it never amounts to anything, and the 1 time out of 100 that a transaction finds an issue, they use tools they have created with other underwriters, like indemnification letters or quit claim deeds to nullify the policy, to kick the can down the road or remove their liability all together.
However, the one time you need it, you sure are glad you got it.
My favorite saying about title insurance is, “it doesn’t matter if it’s right or wrong, it’s what they’ll underwrite.”
I know how to read chain of titles and find and fix most title issues, so in some of my investing strategies I will take the properties “subject to all liens and encumbrances,” without title insurance.
However, there still is a limit. I use a risk and reward methodology to determine when i consider my risk too high to go without a policy.
Voxtur’s statement regarding a fully compliant alternative kind of sounds like a red herring.
In the end, the purpose of title insurance is to mitigate the risk to the seller and also mitigate the risk to the lender.
The attorney is taking the risk based on an attorney opinion letter that takes the risk against their practice. This requires insurance for themselves.
Bottom line it still goes back to insurance.
It’s just another name but it’s still title insurance.
The way of the capitalist is to make as much money as possible and insurance companies are capitalist in nature.
I'm not sure if you're referring to the search and examination of title, but if you are, I don't know where you're getting your stats. Based on my actual experience searching and examining title, underwriting transactions and investigation and resolving title claims for a living, I can tell you I can probably find a defect somewhere in just about every chain of title.
A letter of indemnification (LOI) is used between underwriters when a subsequent search and exam finds a defect that went undetected by the prior search and exam. When they first came into fashion in the 1990s (during the time of the RTC and the great Savings and Loan collapse), so many were being issued that some underwriters had whole departments dedicated to doing nothing but issuing them. Issuing them was so time consuming, underwriters came up with the Mutual Indemnification Agreement, which set out the criteria under which indemnification is automatic and no LOI is needed. Reliance on MIAs is a daily occurrence, which I think belies your argument that identifying defects is rare.
I would appreciate it if you can tell me how you can tell by reading a deed if it's a forgery or if the grantor was incompetent at the time of signing?
Lastly, since it appears you do business in Florida, you might find the Florida Supreme Court's decision in Mayfield v. First City, which explains there can be documents that effect property that are not indexed in the public records, interesting.
Mayfield v. First City Bank of Fla., 95 So. 3d 398 | Casetext Search + Citator
I understand the desire to save time and money, but title insurance protects the insured against a covered loss caused by things that just can't be found. You can also be self-insured for the loss of the improvements by forgoing homeowners' insurance. Due to the rising cost, many Floridians are doing that also.
When I am talking about 1 out of 100, I’m speaking of an error made by the researcher or underwriter not covered as an exception thus requiring a claim that will cost the underwriter to either pay the claim or cure the issue.
I know you misunderstood my statement there, so we’ll move on. I agree, almost every file will have an issue that needs to be dealt with between the last link in the chain of title and now.
the last mortgage to be paid off would be the most likely defect.
The LOI is an example of the underwriters coming up with a mutually protective tool to “kick the can down the road,” as an issue or defect could be pushed on and on to infinity until someone actually made a claim.
To answer your question, a number of ways I have seen and identified forged docs was when they didn’t correspond to dates of death, matching signatures from one document established by verifiable source, like atty or title company created and recorded documents , (mtg other deeds, etc…) notaries verifying signatures contrary to verified information. (Notarized deed in one state when signor was in jail in another, etc)
In most cases there are tell tale signs either regarding the document or the transaction that will lead one to suspect that something is fishy and requires additional verification.
Finally, yes I am aware that there are additional items and documents that might effect title where recorded or not.
In most cases, these will be municipal in nature and will have ways to be researched.
Other than municipal issues, In Florida we are a first to record state. Subject to notification either by public notification, constructive notification or actual provable knowledge, a bonified purchaser for valuable consideration is protected.
Again, I have my limits as to what risk I am willing to take regarding taking title without title insurance. This is based on my specific risk tolerance of ROI vs PIA. (Return on investment vs pain in the… butt)
Finally, the biggest point I was making is AOL is still title insurance, either by atty or underwriter and will still end up being the same thing.
I hope this clarifies my previous post.
I don't know if that's an accurate claim or not since you failed to mention your source.
I believe I understood your statement, I just disagree with it based on my experience, subject to change pending identification of your source. I also disagree the seller's unsatisfied mortgage is a defect in title. Conveying title to the buyer without satisfying the mortgage might create a defect in title.
An LOI is not mutually protective, the MIA is. I do agree both are kicking a can down the road. I also believe relying on either, without disclosing the matter to the insured, could be seen as a fraud on the insured, though most others in the industry disagree.
In truth I have relied on some of the same methods to try identifying forged instruments, though I wouldn't bet much money on getting it right. Additionally, if you're checking all the prisons and jailhouse records in the country for indicia of fraud, I can't imagine how long your search takes.
My crystal ball is cloudy.
The point of the decision is that the prior mortgage was in fact recorded and therefore constructive notice, even though it was not indexed. Generally, an unrecorded document does not burden property acquired by a BFP.
I think the term you're looking for is Florida is a notice state, as opposed to a race state or a hybrid race/notice state.
An AOL is not title insurance since to write insurance you need to meet a states very restrictive requirements to do so and be issued a license.
It clarifies your post, yet does not make it correct.
To be clear since we are splitting hairs, 1 out of 100 is a euphemism for a vast majority do not require claims because people like you do your jobs correctly. If this is not the case, we may need to deal with the purpose of having you researchers around in the first place. JK. I can absolutely tell from your posts that you are meticulous at what you do.
Maybe I am being a little idealistic when I think that your industry does their job.
(PS a mtg is defect on clear title if it has to be cleared in order to provide a clear title without exceptions. Again this is a splitting of hairs because we ARE actually in agreement with this statement, but since you wanted to point this out I am addressing it.)
Regarding LOIs, I appreciate your thoughts on this. However you being an idealist doesn't make me wrong. LOI as a systematic tool is most definitely mutually protective tool as are tools like it. Today First American gave you the LOI tomorrow they get one right back from Old Republic on a different file. And as you said, most of the industry disagrees with you about notifying the potential claimants, which makes my point all the more. (MIA I'm not familiar with, May be a brainfart but I don't know what this one stands for, so I may know it by another name)
Yes regarding deeds and such, I have a clearer crystal ball than most but having done this for over 25 years and being a part of over 2000 individual transaction (yes I am aware you've been doing it longer and have probably done more as a title abstractor so I'm not saying the numbers for competition just to point out my track record with my strategy is working out pretty well so far) I have come to the realization that usually if one thing ends up stinking, one should have probably noticed other issues as well that would have set off your BS meter.
And yes, thank you for clearing up my mistaken word. This of course didn't nullify my point.
Finally, you are correct. AOL is not title insurance as defined by an insurance policy covered by an underwriter and bound by an attorney or title insurance broker. (yes that's what they are)
AOL is title insurance as an attorney is placing his name, license, and assets behind his review of the title to INSURE the lender that they are protected.
This in itself will not end up being sufficient if they are wrong even 1 out of 100 times. Therefore they also have E&O insurance to also cover their claim.
If this type of coverage becomes more mainstream, the e&o will not be enough to cover and they will have to up their coverage, which will most likely end up being sold and covered by new products for attorneys, underwritten by names such as First American, Old Republic and WFG.
"New product," same old programs.
I stand by my statements.
I confess, I have been accused of being pedantic more than once in my life, however I believe all I'm doing is being as accurate as possible when writing or speaking. I also confess, I have been wrong more than once in my life and when I'm shown facts that demonstrate I'm wrong, I change my position.
I can't quote stats on the percentage of searches and exams that results in claims mainly because I don't anyone knows. What I can tell you is that enough errors occur to keep a lot of claims people busy.
I don't understand why you believe a voluntary lien placed on property owned by a borrower is a defect in title, but ok.
I guess you could argue a LOI allows the Indemnitor to avoid a claim and the Indemnitee to collect a premium so perhaps mutually beneficial. The systemic use of LOI is certainly mutual back scratching. I previously wrote that because so many LOIs were being issued (again, indicia of how many missed defects in title were being identified) the industry developed Mutual Indemnification Agreements (MIAs) which set out criteria that when met, provided automatic indemnification, eliminating the need for a specific LOI. When a discovered defect does not meet the criteria, an LOI can still be requested and provided.
Sorry, you can argue AOL's are insurance all day, but they're just not. An attorney does not insure the letter addressee, it assures them.
As I wrote earlier, there is legislation pending in Washington that will prohibit GSEs from relying on AOL's so I doubt they will become mainstream. I suspect they will recede from use in real property transactions and will be reserved for the narrow niche that they are used in now.
