Foreclosure Mess Takes A Turn For The Worse. Title insurance is no longer issued on Washington DC Foreclosures of formerly owner occupied properties! What? This was a result of actions taken by the Washington DC Attorney General last week.
Who does this apply to?
We were told that this ban applies to residential properties only and only those which had formerly been owner occupied.
A real story
A client of mine attempted to go to settlement yesterday on a foreclosed Washington DC property. Getting the loan through was difficult due to dealing with the bank selling the property, and the delays. The bank caused confusion and difficulties. But then the client was told at the settlement table that First American and Fidelity Title Insurance have suspended issuing title insurance on Washington DC properties. My client had given notice on their rental apartment. And movers were due to move them into the new home today! My client has 5 days remaining in their current apartment. What is next for them?!
What can attorney generals do?
This attorney general in Washington DC, as in many states across the country, is taking a hard look at the latest foreclosure mess and how banks are processing foreclosures. The attorney general can bring enforcement action under the Consumer Protection Procedures Act. They can enjoin foreclosure proceedings, secure restitution for “injured” homeowners, and seek appropriate civil penalties.
Why do title companies care?
As you can imagine, this kind of talk leaves a title insurer cold as to insuring this type of transaction. With all of the problems that an attorney general can cause, title companies want no part of this. As cited above, several large title insurers have stopped insuring these transactions. This does not allow them to go to settlement since no lender will allow a loan without title insurance.
What happens next?
Which state is next to make these threats? Which title insurer is next to stop insuring these transactions? Do people who don’t make their payments deserve any kind of defense against “robo-signing” and other seemingly procedural errors? Do banks deserve this because they are evil? Are the attorney generals across the country a bunch of ambulance chasers?
There are a lot of questions around this issue. All I know is that a young, first time home buyer has no place to live. They have paid money for home inspections and an appraisal.. And they have poured many hours of work into trying to make a new home. The biggest violation is the last minute surprise at the settlement table that causes cost, pain and heartache.
Do your own due diligence and please get the word out. Talk to friends who may be buying a foreclosure (in Washington DC or any area), to Realtors, and the public in general. Let’s ensure other home buyers are not left in the same bind.