Refining defense of title insurance

I spent many months of this last year or so defending title insurance as a product.

I need to refine that argument and defend title insurance as a product only when it is issued in combination with a full traditional title abstract and examination.

The need for this refinement would have seemed ludicrous just a few short years ago when title insurers for their own safety would have demanded nothing less. Now, however, we find ourselves at odds with title insurers and standing in defense of quality must argue our case directly to the public and help them understand. Let’s start with a few simple definitions.

How do you define a full traditional abstract? Each state based upon peculiarities of custom, law and recordkeeping will have some variations, but suffice it to say that a full traditional abstract is a courthouse search performed by a professional fully trained human who is intimately familiar with the records of the county in which the real estate resides.

The records related to that parcel are searched backwards in time to a point that eliminates likely claims. In my market - western Pennsylvania - the custom for a residential property is a minimum 60 year period. This represents the lifetime of a party likely to raise issues. Commercial transactions or searches involving mineral rights would likely go back even further.

The fully trained human abstractor performs a preliminary examination of title as they search and expands the search to other areas of interest such as the Register of Wills as needed to give the final examiner a full report. The prothonotary office is checked for any suits or judgments against buyer or seller and the tax office as also checked.

The abstract report includes a chain of title, copy of the current deed and any other deeds that contain items of interest. Some abstractors provide copies of all deeds in the chain and this can be quite helpful when the final examiner is pondering a problem. The abstractor also includes mortgage, liens or encumbrances, all exceptions, copies of plans or tax maps, lots and lots of information.

You could write a book on what should be included in a full abstract but the point I am trying to make here is that a full traditional abstract must be performed by a trained professional and it takes time and costs some money but it’s worth it.

How do you define a full traditional examination? Well, the abstract of title is just one part of the examination process. While the abstractor is busy at the courthouse, the examiner is obtaining lien letters from municipal agencies and tax authorities. The examiner is also checking the federal Pacer system for federal issues and bankruptcies and the state child support system for arrearage liens - and of course, the terrorist list. All of these letters and system checks cover potential unfiled liens or title issues that won’t appear in the courthouse records.

Once the file is complete, the examiner combs through and pieces together a puzzle of sorts. I like to start with the sales agreement. It’s already been reviewed by other members of my staff but I check it again to see if there are proposed new easements or other items that might have been missed. I also look to see the form of warranty deed the parties have agreed to and whether there were any buyers listed who need to be released from the transaction.

Then I review the plotting. We plot every parcel for which we have a metes and bounds description. I compare this plotting to available maps.

I review all of the lien letters making sure all outstanding balances have been noted and checking to see that the names, addresses, and tax map numbers all match our abstract.

Finally, I review the abstract. We review every piece of paper provided - looking for exceptions, outsales, life estates - whatever. Yes, the abstractor has done a preiminary review but it’s our job to doublecheck the work and give it our final stamp of approval.

As I have reviewed each document I make notes for our staff concerning any matters which must be corrected before a title insurance policy can be issued. These may be simple matters such as mortgage payoffs or they may be much more complex.

[Holy moly - just this week we have a title with 50/50 split ownership in two different trusts. One 50% portion has an unsatisfied mortgage from private individuals who are now deceased. One of them shot the other before committing suicide raising the slayers act. So now, we have to deal with two estates on that one 50% portion to get a satisfaction and we have also inheritance tax issues on the other 50% portion because the settlor died. YOI!]

Once all of this examination is complete, I create a title insurance commitment which identifies the proposed insureds, the property, the items to be resolved prior to the issuance of a policy and the exceptions to the coverage. We fax a copy of the commitment to the mortgage lender along with a closing services letter and taxes. We mail a copy of the title commitment to the buyer along with a copy of our plotting, maps, and any restrictions or odd exceptions that might be if interest.

That’s one heck of a lot of work. It takes time. It takes expertise and a commitment to quality.

A consumer who buys their title insurance from my office following this kind of procedure is buying a very different product than the one offered by the “new” kind of title agent though THE PRICE IS THE SAME.

The “new” kind of title agent gets a short report or instant report on the current owner, does little, if any further examination, may or may not actually create the title commitment themselves. Many get it downloaded, ready to sign. They never heard of plotting and can’t understand why we’d care and I’d bet my life they wouldn’t give the consumer copies of any documents to review before closing.

This “new” kind of title agent doesn’t look for title problems and so doesn’t find title problems and so doesn’t correct problems before issuing a title policy.

The consumer is PAYING for examination but getting none.

Yes, the consumer is insured, but they paid for preventative protection and didn’t get it. This means that they are exposed to increased risk. That is something they did not bargain for.

I argue that these “new” title agents are not bargaining in good faith and that they are selling a less than adequate product to the public.

I ask, respectfully, that those in power, look at the qualifications of the abstractors and the examiners. I ask that they look at the methodology and systemic procedures used to create title insurance and consider whether or not we have a need for organized reform.

I will, as always, defend title insurance as a product, but only in tandem with defense of full traditional abstract and examination of title………

…..and payment in full for services rendered……

heh heh - bet you thought I’d forget that part.

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