Tuesday, November 18, 2008

Orlando-based title-insurance company has tips for buying short-sale properties


Charles J. Kovaleski, president of Orlando-based Attorneys' Title Insurance Fund Inc., has some advice for people interested in trying their luck at buying a home that's headed for foreclosure through a technique called a "short sale."

That's where a lender agrees to accept less than is owed when a property is sold.

The practice has been around for years but has accelerated in recent months, Kovaleski said, especially as nearly one in five U.S. mortgage borrowers owe lenders more than their homes are worth, according to a recent report by First American CoreLogic -- and nearly one in three in Florida.

For buyers interested in the short-sales market, there are deals to be had, but only if the consumer expends the effort to understand the process.

Here are some tips from Kovaleski, whose company, known as The Fund, has been in business for more than 50 years and supports a network of more than 6,000 attorney agents statewide who practice real estate law:

TIP: The buyer should understand the property in question, before starting negotiations.

TIP: Establish a time line -- if your time frame is tight, this might not be the option for you. Lenders are taking longer in excess of 60 days in many cases to approve short-sale proposals. In some cases, buyers can accelerate the bank's decision by offering to pay with cash. As a general rule, the more deficient a seller is with the lender, the longer the negotiation can take. If you begin negotiating on a short sale, talk with your real estate attorney about a contract that provides you, as the buyer, a way out of the deal if the seller does not conclude negotiations with the lender within a specified period of time.

TIP: Make sure that all paperwork is completed on time. Missed deadlines can delay the time before closing.

TIP: Know all the lien holders. Find out what liens there are on the property. All liens will need to be satisfied, including both primary and secondary holders, before a contract is approved. Holders of secondary liens might hold up a short sale until they're paid, to minimize potential losses. Check for holders of tax liens as well as mechanic's liens.

TIP: Make a reasonable offer. One that is too low creates more delay. Your real estate broker can assist by compiling a comparative market analysis, which indicates the prices of similar property in your area. Seen from the other side of the deal, the lender is trying to minimize loss on a property when dealing with a distressed borrower. While lenders aim for fair market value, there's anecdotal evidence that banks may be enticed by offers that are least 90 percent of what an independent broker figures the home is currently worth. Knowing the market value is a critical element in making an offer.

TIP: Examine the costs: Even though there may be a discounted purchase price involved in a short sale, all of the other costs remain. You should get an estimated closings statement for the short sale including expected sales price, unpaid loan balances, real estate commissions, outstanding payments and late fees which your real estate attorney can compile for you.
Source

Saturday, October 25, 2008

Title Insurance Company Comes to The Aid of Consumers By Cutting Rates 35 procent


Consumers Can Now Purchase Title Insurance Directly at ENTITLEDIRECT.com Saving 35 Percent While Monitoring Their Real Estate Closing Process

Within the last year, credit has tightened and mortgage rates have increased. Consumers buying a home or refinancing are trying to figure out new ways to save money. Even though title insurance is only one part of the real estate closing process, its cost is considerable. ENTITLEDIRECT.com has launched a new concept which gives consumers, for the first time, the ability to purchase title insurance directly and save hundreds or even thousands of dollars.

Over the last two years, Americans spent over $30 billion on title insurance when they bought, sold, or refinanced their homes.1 Many do not understand exactly how the closing process works and know even less about title insurance. Consumers just rely on their agent, broker, or lawyer to handle everything for them.

Many government regulators have openly criticized both the high cost consumers pay for title insurance and the secretive nature of the real estate closing process. The U.S. Government Accountability Office (GAO) has called for action to be taken to improve oversight of the title insurance industry and better protect consumers, stating, Consumers generally do not select their title agent or insurer, and title agents do not market to consumers but rather compete among themselves for referrals from those who do that is, real estate and mortgage professionals. This arrangement can create conflicts of interest if professionals making the referrals have a financial interest in the agent recommended.

Enter ENTITLE DIRECT. EnTitle Insurance Company, which has been underwriting title insurance for 30 years and is rated A' by Demotech, has decided to take action in improving the overall consumer experience with a simple yet effective solution an Open Closing. This digital platform, ENTITLEDIRECT.com, provides consumers with the right to choose their title insurance company, offers savings of 35 percent on title insurance and empowers consumers in their closing process.

Timothy Dwyer, President and CEO of Entitle Direct Group, states, ENTITLE DIRECT was created for consumers by consumers to address the very concerns raised by numerous federal and state regulatory authorities and well-known consumer advocates. People are paying a high cost for title insurance in a real estate process that keeps them in the dark. Whether they are purchasing a home for the first time, selling, or refinancing a home, they can work with ENTITLE DIRECT to organize the entire closing process and know what to expect at closing.

Typically, titleinsurance companies and their title agents work directly with realtors, attorneys or lenders, who order the title search and title insurance on a customer's behalf early in the closing process (and often without the customer's knowledge). This insurance is required by virtually every lender before it will lend money (for either purchases or refinances), and the consumer pays for the insurance at closing. In some states, it is customary for sellers to purchase title insurance for buyers. But what consumers don't know is that title agents may take, on average, a commission that is typically 70 percent to 90 percent of the premium! Buying direct from an insurance company eliminates significant commissions and gives the home buyers, sellers, and refinancers the savings.

At ENTITLE DIRECT, consumers are in control of the real estate process by monitoring their home closing on a daily basis (if they choose) using the Control Panel, an industry-first, which has a patent pending with the U.S. Patent and Trademark Office.

Unlike any technology previously available, it provides dynamic, interactive tools such as the ability to upload and store closing documents, as well as download a HUD-1 settlement statement. The HUD-1, which summarizes all costs, is updated in real time throughout the closing process, eliminating surprise charges at closing. Consumers can also use the Control Panel to communicate with other parties involved in the closing process and store important messages, in addition to utilizing a checklist, contact list, task list, notes, and a calendar.

Dwyer adds, ENTITLE DIRECT will help home buyers, sellers, and refinancers feel confident and knowledgeable about the closing process, freeing them of closing anxiety, and saving them hundreds or even thousands of dollars. ENTITLE DIRECT offers consumers a choice. They can either allow someone else to handle their title insurance and pay a high premium for it or they can choose ENTITLE DIRECT and put their savings to good use.

ENTITLE DIRECT is rolling out countrywide throughout 2008 and is currently licensed in 31 states.

With ENTITLE DIRECT, consumers receive: The expertise and experience of a title insurance company that has provided title insurance and services for over 30 years. A licensed, regulated title insurance company which is approved by major and local lenders. 35 percent savings on title insurance premiums compared to other title insurance companies. Ongoing, magnified savings in refinance transactions. A unique, consumer-friendly Internet experience that allows consumers to monitor and control their closing through our industry-first Control Panel. Access to the Pittsburgh-based ENTITLE DIRECT Specialist Center, where an individual specialist will be assigned to assist in the closing process from start to finish.

For more information about ENTITLE DIRECT, please visit www.entitledirect.com.

About ENTITLE DIRECT:
For too long, the title insurance industry has solicited business directly from real estate professionals, lenders, attorneys and other service providers, ignoring the consumer and avoiding any meaningful price competition. ENTITLE DIRECT is committed to opening the black box of the closing process while lowering the cost of title insurance for consumers. Combining 30 years of experience with stability and a consumer-friendly approach, ENTITLE DIRECT provides consumers with 35 percent savings on title insurance, transparency throughout the closing process, and the ability to monitor and control their own closing using the Control Panel, an industry-first digital platform (patent-pending).
Source

Saturday, October 11, 2008

Direct to Borrowers - Title Insurance for Sale Online

In the midst of the worst financial crisis since the 1930s, one that originated in the home mortgage market, it is nice to be able to report some good news. EnTitle Direct Insurance is now selling title insurance directly to borrowers online, with premiums that it claims undercut existing insurers by about 35 percent.

EDI also offers borrowers a free way to avoid what to many is the worst part of the mortgage experience -- "pile-of-paper shock." That's the shock that results when borrowers receive a stack of documents at closing, most of which they have not seen before, and which they are expected to sign while the other participants tap their fingers impatiently. EDI provides a Web-based tool it calls Control Panel to allow borrowers to control the flow of documents and information from start to closing.

I was a paid consultant to EDI in 2007 but not since, and I have no financial interest in the company.

Title insurance premiums have always been substantially higher than those that would exist in a well-functioning competitive market, largely because this insurance is marketed to referral agents rather than to the borrowers who paid the premiums. The cost of marketing to referral agents is high.

On home purchases, the real estate agent is usually the referral agent, while on refinances, it is usually the lender.

Referral agents usually are more interested in feathering their own nests than in negotiating lower prices for consumers. While direct payment of referral fees is illegal, there are many indirect ways to pay that are legal, including making the referral agent a part owner of the title agency. EDI will also have marketing costs, but it is betting that using the Internet will cut those substantially.

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Title insurance is regulated by the states, and all but a few require that premium charges be posted with the state. In some states, individual insurers post their premiums, while in others it may be done by an individual company or by a group of cooperating insurers. In Texas, New Mexico and Florida, premiums are set for all companies by the state.

EDI plans to offer insurance in 33 states by the end of this year, and in most of the remaining states next year. It may find a way to discount prices in Florida but will not be able to do so in Texas and New Mexico until those states change their laws. Iowa is also out of bounds because a state agency there offers title insurance at very low premiums.

The Control Panel is available free to all borrowers, whether they buy policies from EDI or not. It's on the company's Web site, http://www.entitledirect.com. The core is an online folder that contains all information relevant to the transaction and that is updated as the loan moves toward closing. EDI assigns a closing specialist to each borrower to monitor the process, and will alert the borrower to any tasks that need to be completed before the closing. EDI provides a list of common tasks, and borrowers can add their own.

The company also provides sample documents for early review, which will be replaced by the actual forms as they become available. One of these is the new HUD-1 closing document proposed by the Department of Housing and Urban Development, which is shown side by side with the good-faith estimate of settlement costs that is provided to the borrower within three days of submitting a loan application. Through continuous updating of the HUD-1, borrowers will see any differences in the original estimates of settlement costs as they occur, as opposed to being blindsided by them at closing.

To my knowledge, the Control Panel is the first such tool. Whether it works depends in good part on whether the third parties involved in the process participate -- real estate agents, loan providers and perhaps lawyers. Borrowers will give them access to their folders, but whether the third parties use the tool as the principal mode of communication with borrowers and whether they download documents to the folder in timely fashion and keep them up to date remains to be seen.

My surmise is that the degree of third-party participation will depend very much on how borrowers approach these people. If borrowers raise the issue of the Control Panel after selecting their real estate agent and loan provider, many will be reluctant to change their routine. They don't have to comply because they already have the customer. To ensure their participation, I would make it a written condition of doing business with them.

Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania. He can be contacted through his Web site,http://www.mtgprofessor.com.

Wednesday, September 24, 2008

There Has Been A Lot Of Talk These Days About Title Insurance Policies In Jamaica.

While This Concept Is New To Jamaica It Is Standard In Most States Of The United States Of America, Where Title Insurance Policies Are Taken Out Against Financial Loss From Defects In Title To Real Property And From The Invalidity Or Unenforceability Of Mortgage Liens.

As I understand it, there is a very good reason why title insurance is standard in many states. Most states have a system of document recording in which no governmental official makes any determination of who owns the title or whether the instruments transferring it are valid.

Consequently, if a person acquires an interest in land, whether by purchasing same or by a mortgage, there is the risk that there may be competing claims to these interests which, at the time of acquisition, are unknown. These competing interests include liens and encumbrances on the title. There may also be no right of access to the land.

Title insurance, therefore, gives the person acquiring the interest insurance coverage in relation to the state of the title.

To purchasers, it provides coverage in the event of defects, liens and encumbrances in the title except those excluded by the policy. The owner's policy also covers losses where there is no right of access to the land and where the title is unmarketable.

To a lender providing a mortgage, there is coverage under the insurance policy. In the event that the borrower does not have good title to the property, the title is subject to defects, liens or encumbrances or is unmarketable. The lender policy also provides coverage where there is no right of access to the land.

In Jamaica, there are two systems of land ownership. Registered title and unregistered title - registered title pertains to land that is registered under the Registration of Titles Act with a Certificate of Title issued to the owner, while unregistered title pertains to land which is not so registered and there is no Certificate of Title.

In contrast to the American situation, Section 68 of the Registration of Titles Act provides that:

"..Every certificate of title issued under any provisions herein. shall be conclusive evidence that the person named in such certificate as the proprietor of or having any estate or interest in ..the land [and] is. possessed of such estate or interest."

Section 71 of the Registration of Titles Act goes further to provide that:
"Except in the case of fraud, no person contracting or dealing with or taking or proposing to take or transfer from the proprietor of any registered land, lease, mortgage or charge shall be required or in any manner concerned to enquire or ascertain the circumstances under. which such proprietor was registered."

In other words, the Government of Jamaica guarantees the Certificate of Title. Regardless of the nature of the interest in the land, once the interest is recorded on the Certificate of Title no further assurances are required.

Unregistered land is an entirely different story. Interests in unregistered land are usually transferred or created by deed of conveyance. As there is no certificate of title, on each conveyance the vendor would have to satisfy a prudent purchaser that he possesses a good root of title going back as far as 40 years or more.

This is often tedious and difficult and not all interests in the land may be captured. These issues usually pose difficulties for persons who wish to dispose of or create interests in unregistered land.

Title insurance may, therefore, prove quite useful to the owners of unregistered land. In the alternative, owners of unregistered land may wish to consider bringing their land under the operation of the Registration of Title Act to enjoy the protection it offers.

Tamara Robinson is an associate at Myers, Fletcher & Gordon and is a member of the firm's Commercial Department. Tamara may be contacted at tamara.robinson@mfg.com.jm Source


LandAmerica to Conduct New Jersey Title Insurance Operations Under LandAmerica Brand Name

LandAmerica Financial Group, Inc. (LFG:
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announces that it is now doing business in New Jersey as LandAmerica NJ Title Insurance Company. The change became effective on September 15, 2008.
This change is another step in LandAmerica's transformation of its collection of independent businesses into an integrated and unified operating company. Unifying its businesses under the LandAmerica name reflects the company's success in the marketplace and the growing recognition of the LandAmerica brand in New Jersey and across the country. LandAmerica is the only real estate transaction services company to have been ranked number one in the Mortgage Services Industry for two years in a row on Fortune's(R) list of Most Admired Companies.
Richard A. Wilson, Senior Vice President of LandAmerica operations in New Jersey, said, "While our name has changed to LandAmerica NJ Title Insurance Company, our commitment to delivering unsurpassed solutions to our valued customers in the Garden State and beyond remains unchanged. We continue to pursue our goal of making LandAmerica the premier provider of real estate transaction services."

About LandAmerica Financial Group, Inc.
LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica is recognized as number one in the Mortgage Services Industry on Fortune's(R) 2007 and 2008 lists of America's Most Admired Companies.
SOURCE LandAmerica Financial Group, Inc.

Tuesday, September 2, 2008

Donegal to acquire stock of Conestoga Title Insurance

A subsidiary of Donegal Mutual Insurance Co. will acquire from Lancaster-based Conestoga Financial Corp. the outstanding capital stock of Conestoga Title Insurance Co. and its affiliates that provide title-insurance services.

The state commissioner of insurance and the shareholders of Conestoga Financial have approved the acquisition. The transaction is scheduled to close Wednesday. Terms of the deal were not disclosed.

Donegal Mutual is an East Donegal Township-based mutual fire-insurance and casualty-insurance company. The company is a subsidiary of Donegal Group Inc., an insurance-holding company in Lancaster County.

Sunday, August 24, 2008

Title firm ready to do battle

CHICAGO - It could be the tip of an iceberg.

Ticor Title, one of the largest title insurance firms in the country, is suing Countrywide Home Loans, the nation's largest home lender, saying it shouldn't have to pay out on a title policy because of Countrywide's gross negligence.

The suit, filed last month in Cook County Chancery Court, concerns just one Chicago mortgage made by Countrywide in 2007, but the implications are enormous, say real estate and title insurance experts.

If title insurers refuse to honor their policies, "You would have chaos," predicts Chicago real estate attorney Tom McNulty of Neal, Gerber & Eisenberg. The fate of tens of thousands of troubled properties nationwide would be thrown into limbo while lenders and title insurers duke it out. Other deals would be held up because buyers and sellers would be reluctant to proceed without title insurance to protect their investment.

When it works smoothly, title insurance protects lenders and borrowers against losses arising from flaws in the property's title, which traces the chain of ownership. Problems can arise from forged signatures, unpaid taxes or liens. When fraud is involved and a clean title never passes to the new owner, the title insurer may be on the hook for the entire amount of the mortgage loan plus legal fees.

The case over which Ticor has drawn a line in the sand concerns a $360,000 first mortgage on a gray-stone Victorian in the Kenwood neighborhood on Chicago's South Side. The story of that loan was told in a front-page Chicago Tribune article in February, several weeks after a clothed, mummified male corpse was discovered in the boarded-up house by a real estate speculator who had purchased the property from Countrywide in a foreclosure auction.

The corpse was later identified as Randy Johnson, who had grown up in the house and continued to live there until he disappeared in late 2005.

The gruesome discovery prompted Cook County Public Administrator Michael Bender to look into the case. Bender's staff quickly determined the backdated deed that had transferred the home from Johnson's deceased mother, Arrellia Johnson, to a woman named Rhonda Evans was a fake, and not all that hard to spot.

Arrellia Johnson's name was spelled two ways, and the alleged 1996 warranty deed was created on the stationery of Recorder of Deeds Eugene Moore, who did not take office until 1999. Another warning sign: The deed was notarized by Mae Evans, who is the mother of Rhonda Evans.

Three months after the fraudulent deed was recorded, Evans sold the house to Donald Franklin of Harvey for $450,000. Franklin borrowed the entire amount in two simultaneous mortgages from Countrywide.

The public administrator, who handles the affairs of people with assets who die without wills, moved to intervene in Countrywide's foreclosure case and asked the court to restore the property's title to Arrellia Johnson's heirs. Four days later, Countrywide asked its title insurer, Ticor, to represent its interest in the case.

Ticor refused. In the suit, Ticor argues Countrywide was "reckless and grossly negligent in its underwriting of the Franklin mortgage." That carelessness is the only cause of any loss suffered by the lender, Ticor alleges.

Ticor further alleges that Countrywide "adopted corporate policies that resulted in the abandonment of proper underwriting standards as part of its effort to increase market share, and in the short term, profits."

Because the Franklin loan never should have gotten out of Countrywide's underwriting department, the suit says, Ticor "has no duty to defend Countrywide in connection with this matter and owes no other duties to Countrywide under the policy."

The lawsuit reveals some details the Chicago Tribune did not have in February that show the Evans family was even more deeply involved in the transaction than was previously known.

For instance, Franklin didn't apply directly to Countrywide. His application was made to E&I Funding, a mortgage broker owned by Rhonda Evans' brother, Edwin Evans, and his wife, Iva. The loan was transferred to Countrywide the same day, and Countrywide immediately confirmed a "lock" on Franklin's package.

On his application, Franklin described himself as a 28-year-old single man earning almost $12,000 a month as an excavator for Class Act Construction. A quick search of Class Act would have shown that firm also was owned by Edwin Evans.

Four days after it received the application, Countrywide issued an underwriting report noting Franklin's credit was "acceptable" and his ability to repay was "good," according to the lawsuit. It also called out several things that had to be resolved before the loan would go through, including verification of Franklin's employment and an explanation of where $14,500 in savings had come from.

Meanwhile, Countrywide hired Ticor Title to do a title search of the property. The housing market was still going great guns at this point, and Ticor was so busy, it subcontracted the title search to a Lombard firm called Tri-Star Title.

The title report came back clean and the loan closed in late January, even though none of the conditions that Countrywide had specified had been met, the suit says. Ticor issued an insurance policy dated Feb. 14, 2007, protecting Countrywide from "any defect" in the title.

Franklin's first payment was due March 1, but he never made it. A process server working for Countrywide couldn't find Franklin. In May, Countrywide foreclosed on the property, and in late December, auctioned the house for $93,000. It quickly refunded the buyer's money after the body was found.

In refusing to pay off on its policy, Ticor is waging an uphill battle, title insurance experts say.

"Ticor was expected to have done its job before it issued the insurance policy. Once it does that, it's a written contract and everything else is irrelevant," said Barry Epstein, a forensic accountant and litigation consultant in Chicago.

"Now they're shocked that Countrywide might be sloppy, but that's what they were supposed to check out before issuing the policy. ... If the policy is valid, they are going to have to pay," he said.

Epstein views Ticor's suit as an attempt to "pile on" the negative feelings about Countrywide among borrowers and regulators. Countrywide has been sued by attorneys general in Illinois, California and Connecticut involving its business practices, which allegedly included routinely changing loan terms on borrowers at the last minute.

Countrywide did not return calls for comment.

Meanwhile, the boarded-up house with a leaky roof is moldering through another summer, and it is likely to stay that way until the title dispute is cleared up, said Bender, the public administrator.

"The house can't be sold and the heirs won't get their money," Bender said. "This process does slow it down."

Source

Sunday, August 17, 2008

Title agencies merge

GREENE Albany-based New York Bankers Title Agency East LLC and Binghamton-based NBT Settlement Services LLC formed a strategic alliance and merged July 31, the companies announced.

The new agency is called Land Record Services LLC, headquartered at 116 Everett Road in Albany. The business also will operate from branches in Greene and Friendsville, Pa.

Title insurance will continue to be underwritten by Northeast Investors Title Insurance Co. and Investors Title Insurance Co.

My-Ly Nguyen

Title firm ready to do battle

|Chicago Tribune reporter

It could be the tip of an iceberg.

Ticor Title, one of the largest title insurance firms in the country, is suing Countrywide Home Loans, the nation's largest home lender, saying it shouldn't have to pay out on a title policy because of Countrywide's gross negligence.

The suit, filed last month in Cook County Chancery Court, concerns just one Chicago mortgage made by Countrywide in 2007, but the implications are enormous, say real estate and title insurance experts.

If title insurers refuse to honor their policies, "You would have chaos," predicts Chicago real estate attorney Tom McNulty of Neal, Gerber & Eisenberg. The fate of tens of thousands of troubled properties around the country would be thrown into limbo while lenders and title insurers duke it out. Other deals would be held up because buyers and sellers would be reluctant to move forward without title insurance to protect their investment.

When it works smoothly, title insurance protects lenders and borrowers against losses arising from flaws in the property's title, which traces the chain of ownership. Problems can arise from forged signatures, unpaid taxes or liens. When fraud is involved and a clean title never passes to the new owner, the title insurer may be on the hook for the entire amount of the mortgage loan plus legal fees.

The case that Ticor has drawn a line in the sand over concerns a $360,000 first mortgage on a graystone Victorian in the Kenwood neighborhood on the South Side. The story of that loan was told in a front-page Tribune story in February, several weeks after a clothed, mummified male corpse was discovered in the boarded-up house by a real estate speculator who had purchased the property from Countrywide in a foreclosure auction.

The corpse was later identified as Randy Johnson, who had grown up in the house and continued to live there until he disappeared in late 2005.

The gruesome discovery prompted Cook County Public Administrator Michael Bender to look into the case. Bender's staff quickly determined the backdated deed that had transferred the home from Johnson's deceased mother, Arrellia Johnson, to a woman named Rhonda Evans was a fake, and not all that hard to spot.

Arrellia Johnson's name was spelled two ways and the alleged 1996 warranty deed was created on the stationery of Recorder of Deeds Eugene Moore, who did not take office until 1999. Another warning sign: The deed was notarized by Mae Evans, who is the mother of Rhonda Evans.

Three months after the fraudulent deed was recorded, Evans sold the house to Donald Franklin of Harvey for $450,000. Franklin borrowed the entire amount in two simultaneous mortgages from Countrywide.

The public administrator, who handles the affairs of people with assets who die without wills, moved to intervene in Countrywide's foreclosure case and asked the court to restore the property's title to Arrellia Johnson's heirs. Four days later, Countrywide asked its title insurer, Ticor, to represent its interest in the case.

Ticor refused.

In the suit, Ticor argues Countrywide was "reckless and grossly negligent in its underwriting of the Franklin mortgage." That carelessness is the only cause of any loss suffered by the lender, Ticor alleges.

Its claims go further: Ticor alleges that Countrywide "adopted corporate policies that resulted in the abandonment of proper underwriting standards as part of its effort to increase market share, and in the short term, profits."

Ticor's allegations

Because the Franklin loan never should have gotten out of Countrywide's underwriting department, the suit says, Ticor "has no duty to defend Countrywide in connection with this matter and owes no other duties to Countrywide under the policy."

The lawsuit reveals some details the Tribune did not have in February that show the Evans family was even more deeply involved in the transaction than was previously known.

For instance, Franklin didn't apply directly to Countrywide. His application was made to E&I Funding, a mortgage broker owned by Rhonda Evans' brother, Edwin Evans, and his wife, Iva. The loan was transferred to Countrywide the same day and Countrywide immediately confirmed a "lock" on Franklin's package.

On his application, Franklin described himself as a 28-year-old single man earning almost $12,000 a month as an excavator for Class Act Construction. A quick search of Class Act would have shown that firm also was owned by Edwin Evans.

Four days after it received the application, Countrywide issued an underwriting report noting Franklin's credit was "acceptable" and his ability to repay was "good," according to the lawsuit. It also called out several things that had to be resolved before the loan would go through, including verification of Franklin's employment and an explanation of where $14,500 in a savings had come from.

Meanwhile, Countrywide hired Ticor Title to do a title search of the property. The housing market was still going great guns at this point, and Ticor was so busy, it subcontracted the title search to a Lombard firm called Tri-Star Title.

The title report came back clean and the loan closed in late January, even though none of the conditions that Countrywide had specified had been met, the suit says. Ticor issued an insurance policy dated Feb. 14, protecting Countrywide from "any defect" in the title.

Franklin's first payment was due March 1, but he never made it. A process server working for Countrywide couldn't find Franklin. In May, Countrywide foreclosed on 4578 S. Oakenwald Ave., and in late December, Countrywide auctioned the property for $93,000. It quickly refunded the buyer's money after the body was found.

In refusing to pay off on its policy, Ticor is waging an uphill battle, title insurance experts say.

"Ticor was expected to have done its job before it issued the insurance policy. Once it does that, it's a written contract and everything else irrelevant," said Barry Epstein, a forensic accountant and litigation consultant in Chicago.

"Now they're shocked that Countrywide might be sloppy, but that's what they were supposed to check out before issuing the policy. … If the policy is valid, they are going to have to pay."

Epstein views Ticor's suit as an attempt to "pile on" the negative feelings about Countrywide among borrowers and regulators. Countrywide has been sued by attorneys general in Illinois, California and Connecticut over its business practices, which allegedly included routinely changing loan terms on borrowers at the last minute.

Countrywide did not return calls for comment.

Fail-safes didn't work

Etti Baranoff, a former insurance regulator in Texas and now an insurance and finance professor at Virginia Commonwealth University, has little sympathy for Ticor.

"You're the insurance company. You do the underwriting. If you sell insurance and don't do the underwriting, are you going to blame the customer? Countrywide is the broker here. I think Ticor has to be crazy to blame the broker."

Ticor's argument that Countrywide is more to blame than it is for losses from the Franklin loan is complicated by the fact that Ticor subcontracted out the work to Tri-Star, which is now defunct and under investigation for mortgage fraud.

"All the fail-safes in place didn't work," said attorney McNulty. "What should have happened was the title researcher would have seen the problem with the deed and would have reported it to Ticor, which would have reported it to Countrywide. Ticor should have said, 'We are not going to insure this title until the following questions are answered.' It wouldn't have saved Mr. Johnson's life, but it might have resulted in his body being found sooner."

Meanwhile, the boarded-up house with a leaky roof at 4578 S. Oakenwald is moldering through another summer, and it is likely to stay that way until the title dispute is cleared up, said Bender, the public administrator.

"The house can't be sold and the heirs won't get their money," Bender said. "This process does slow it down."

Bender is hopeful the case won't drag on, but other experts aren't so sure. They point out there are two deep-pocketed litigants involved. Countrywide has been acquired by Bank of America, and Ticor is a unit of Fidelity National Financial Inc., a Fortune 500 company that also owns Chicago Title.

Every court date costs the Johnson family more because the public administrator's office must have an attorney present, and those fees will come out of Arrellia Johnson's estate when it is settled.

Randy Johnson is far beyond such worldly concerns.

He was quietly laid to rest in the Homewood Memorial Gardens cemetery in April near the unmarked grave of his mother. Leak & Sons Funeral Home provided a free funeral service and hearse to the cemetery, while Cook County paid for the plot. The cost of that, too, will come out of the estate.

schandler@tribune.com

Monday, August 11, 2008

Insurance commissioner monitoring Mercury Cos. deal

The Colorado Division of Insurance is monitoring the sale of Mercury Cos.’ Colorado businesses to ensure that consumers are protected, state officials said Friday.

On Aug. 5, Denver-based Mercury Cos. announced that it had sold four local title insurance agencies — Security Title Guaranty Co., United Title Co., First American Heritage Title and Title America Inc. — to Fidelity National Title Insurance Co. of Jacksonville, Fla., a major nationwide underwriter.

The sale occurred just days after Mercury closed operations in California, Arizona and Texas.

“Our goal is to work with the new owners and the title agencies to ensure consumers’ rights are protected,” Marcy Morrison, the state insurance commissioner, said in a statement. “Purchasing a home, and securing the title to that home, is an important step for anyone, and the Division of Insurance is committed to making sure that the consumers’ interests remain intact during the transition. In the best-case scenario — a smooth transfer of files and accounts — consumers may not realize any effects of the sale behind the scenes.”

There have been issues involving Mercury companies in other states. California’s labor commissioner is suing Mercury over money that the state alleges is owed to former workers of Alliance Title Co., a Mercury subsidiary that shut down at the end of 2007.
Source

Real Estate and Credit Woes Take Toll on Title Insurers: Report

In some ways, the title insurance business isn’t really all that complex. Revenues depend primarily on just two inter-related factors: the level of house prices, and the demand for housing. And, of course, both are suffering in one of the worst housing corrections in U.S. history thus far — lower prices and shrinking demand have helped push transaction volumes down dramatically for anyone in the business of underwriting title insurance policies.

All of which leads to the obvious conclusion: the ability of title insurers to control expenses in a declining revenue environment is critical to maintaining profitability. And those companies that possess a flexible cost structure, are more proactive in expense management and have access to capital can expect to weather the current down cycle better than others, according to an assessment released Monday by A.M. Best Company.

Title insurance isn’t a highly-fragmented industry, either: five national writers control nearly 95 percent of industry premium volume.

The credit rating organization said its outlook for the title insurance industry for the balance of 2008 and for 2009 remains negative, and that “any improvement will depend largely on the length and depth of the housing downturn.”

The reasons for such pessimism are plenty. Direct premiums written for the title insurance industry were down 14.3 percent in 2007, A.M. Best said, driven by sharp reductions in premium volume for California and Florida. Further, title industry policyholder surplus declined by nearly 22 percent, largely the result of national writers; regional companies posted a modest gain in surplus, according to the report.

Pretax operating income and net income were down 64.7 percent and 69.9 percent, respectively, driven by net underwriting losses of $80 million last year. Investment income was flat, too, at $508 million vs. $509 million in 2006.

Add in mounting incurred losses, along with a loss of policy underwriting inflow, and it’s not surprising that the fortunes of the large title players are strapped directly to the deck of the U.S. housing market’s bow — the fate of the ship will essentially determine the fortune of those that ride on the ship. For more information, visit http://www.bestweek.com.

A.M. Best Special Report: Real Estate and Credit Woes Take Toll on Title Insurers

Title insurance revenues depend on both the level of house prices and the demand for housing. Thus, the ongoing slowdown in real estate activity combined with tightening mortgage market conditions and the worsening U.S. economy have been a significant drag on the title industry's revenues.

The ability of title insurers to control expenses in a declining revenue environment is critical to maintaining profitability. Thus, those companies that possess a flexible cost structure, are more proactive in expense management and have access to capital can expect to weather the current down cycle better than others. This dynamic will influence the course of A.M. Best's future rating actions as the industry works its way through the current challenging environment.

The outlook for the title insurance industry for the balance of 2008 and for 2009 remains negative, and any improvement will depend largely on the length and depth of the housing downturn.

-- Direct premiums written for the title insurance industry were down 14.3% in 2007, driven by sharp reductions in premium volume for California and Florida. Five national writers control nearly 95% of industry premium volume.

-- Title industry policyholder surplus declined by nearly 22%, largely a phenomenon among national writers. Regional companies posted a modest gain in surplus.

-- Pretax operating income and net income were down 64.7% and 69.9%, respectively, driven by net underwriting losses of $80 million.

-- Investment income was flat, at $508 million vs. $509 million in 2006.

-- Incurred losses have been rising during the recent period of declining revenue and profitability. The industry's combined ratio (known as composite ratio) increased by approximately 4.5 points.

BestWeek subscribers can download a PDF copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at www.bestweek.com.

Nonsubscribers can download a PDF copy of the full special report (8 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from our Website at www.bestweek.com. Call customer service for more information, (908) 439-2200, ext. 5742.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

Sunday, August 3, 2008

Law tries to limit ties between agents and financial service providers

Real estate agents are clearly the most influential people in every real estate transaction, and their power is not reserved for buyers and sellers. It extends to all professionals involved.

That position of influence becomes magnified in a slower housing market. Everybody is desperate for deals. And, while real estate agents typically offer beneficial referrals, consumers should always remember that they have a choice when picking the various players in the home-buying process -- appraisal, credit report, title report, escrow company, mortgage company, etc. These choices often start with the selection of a title company in the standard purchase and sale agreement. This may seem like a "who cares" decision, but the competition is fierce.

How much do title companies want to be the company of choice in your purchase and sale agreement, commonly known as an earnest-money agreement? A few years ago a title insurance company offered to furnish a real estate brokers' office if all of the agents in that office wrote in the title insurance company's name in the appropriate spot in the earnest-money agreement. Another company offered a broker the use of billboards in public places for carrying the company's name atop preprinted earnest-money agreements. A third company offered all-expenses-paid fishing trips.

As a result, Washington state passed a law in an attempt to curtail gifts to people who have considerable control over the selection of people involved in a real estate transaction. The total value of allowable annual gifts to "producers" was raised from $12.50 to $25, eight years ago -- probably to keep pace with the bump in price of Mariners bleacher tickets.

The intent of the regulation is to safeguard a choice for consumers. Consumers have a right to choose escrow and title companies and to know why lenders prefer certain appraisers and credit companies. And all reps -- agents, loan, escrow, title -- should choose services in the best interest of their customers and not themselves.

"I don't think the abuses are as rampant as they used to be," said Joe DiPaola, real estate attorney, broker and former in-house litigation counsel for Coldwell Banker. "But it's impossible to monitor everything that's going on. Everyone accuses the other guy, but there really are no white hats out there."

Obviously, competent representatives will ship their business to the company that can get the job done. It's a tough, competitive and highly lucrative business that often continues to snowball. Real estate brokers say third-party providers constantly are offering goodies while the providers contend that they will quickly be dropped if they don't continually offer incentives.

Last year, the Washington State Insurance Commissioner's office investigated 12 title companies in King, Snohomish and Pierce counties. Its report found "all the major players in the greater Seattle title insurance market were routinely breaking state laws that limit and restrict the use of incentives and giveaways to steer business."

One company spent $11,000 on tickets and expenses at two Seattle Sonics basketball games, investigators said. One agent spent $6,000 for cocktails during the 18-month period under investigation, and another company picked up a single restaurant tab for more than $3,300.

A more glaring example of how bold third-party providers can be in capturing the business of productive real estate agents occurred in California. The California Department of Insurance uncovered numerous instances of suspected illegal rebates by Southland Title Corp. and its subsidiaries, Southland Title of Orange County and Southland Title of San Diego.

The investigation found fraudulent and/or fabricated invoices and expense reports in excess of $47,000; providing food, beverages and entertainment in excess of $174,000; providing gifts and gift certificates in excess of $62,000; and providing business support services in excess of $218,000, all to benefit real estate agents and brokers. And -- get this -- the firm was fined $1.5 million for similar violations just two years earlier.

A few years ago, when residential real estate was the only shining light in our economy, I received a call from a national title insurance company asking about advertising rates for my nationally syndicated radio show.

Before I could refer the call to an account executive, the title representative said, "We don't have much money left in the budget because our main target is Realtors and not consumers."

Consumers still have a choice, even though third-party providers continue to jockey for the agents' attention. But attractive enticements to real estate agents in western Washington could slow this year due. Who really covets a Mariner ticket this year? And, the Sonics have left town.

Contact Tom Kelly at www. tomkelly.com

Financial Title closes its 57 offices

Financial Title of Citrus Heights has closed all 57 of its California offices, including some in the Bay Area. But a state official said its customers will continue to have their titles processed by the company's insurer and shouldn't be greatly inconvenienced.

First Title and its insurer - First American Title Insurance - notified the California Department of Insurance of the closings Wednesday morning, according to the agency's spokesman, Darrel Ng.

He said he wasn't able to comment in detail about the reasons for the closings, but said it stemmed from financial considerations and not any enforcement action by the department.

"With the lower volume of housing sales, it's part of the normal business cycle for there to be a reduction in the number of companies needed to service that," he said.

Ng said state officials have been sent to Financial Title offices to ensure that all title transactions will continue to be processed appropriately by First American Title Insurance. He added that Financial Title's customers may have to fill out some additional forms and could experience some delays, but shouldn't experience any major problems.

Officials at Financial Title's headquarters and several Bay Area locations did not return calls from the Mercury News seeking comment.

Ng said Financial Title is the second title company he is aware of to close its offices in recent months. In December, Alliance Title of Campbell shut nearly 200 branches after it unexpectedly went out of business. Contact Steve Johnson at sjohnson@mercurynews.com or (408) 920-5043.

Wednesday, July 30, 2008

What Is Title Insurance For And Why Is It Important To Have It

Purchasing a home can already be a stressful and confusing process especially when it comes to understanding all the different closing costs associated with it. When you buy a home or you refinance your mortgage you will be required to buy title insurance before the closing on the new mortgage. The title insurance is there to protect the mortgage lenders from any third party claims on the property, in other words it protects them from any losses that could happen if there is a dispute on the title. There are two different types of this insurance that you need to know about.

The first type of title insurance is the one that the mortgage lenders requires you to get to protect them from financial losses should there be an unexpected problem related to the title of the property. This type of insurance will not protect you, the homeowner. This is what the second type is for because it will protect you instead of the lender.

The insurance for you is not required but it is a very good idea to have it and is usually a standard offering with any good real estate lawyer. It can save you hundreds, even thousands of dollars if the title is disputed after you bought the home. It will also save you in lawyers fees as your lawyer will not need to do any extra lengthy and comprehensive title searches. In most cases the cost of the title insurance would be less expensive then having your lawyer doing and exhaustive search. The title insurance for the lender will expire after the mortgage has been repaid. The homeowner title insurance will last for as long as you own your new home.

When you first apply for refinancing or to buy your home the lender will have a title search done to make sure that you are the owner and that it is not listed as a third party. You will be charged a fee for this search. The reason they do this is to find out if there are any liens that have been placed on the property such as property taxes.

This is why you want the title insurance for you and not just the lender. You have to protect yourself in case there are any unforeseen problems in the future. If you don't have this insurance and the attorney overlooked something when they did the title search, you could be held accountable if an existing lien shows up later. For example, if a lien is found later and you don't have this insurance then you could be held responsible for any work done on the property before you bought the home.

So, with title insurance you will have to get the lender covered but you also want to protect yourself and get the same type of insurance. That way if something does happen in the future you will not be held responsible. Having this type of insurance is a good idea for every homeowner to have. So, make sure you get the insurance you need now.

Fray Gray Jr. specializes in Orangeville real estate and is a professional realtor for Royal Lepage RCR Realty. For those looking for homes in Orangeville or Alton real estate please feel free to contact Frank Gray for all of your real estate needs.

Tuesday, July 29, 2008

Ratings Recap: Am. Merchants, LandAmerica, RSUI Indemnity

Standard & Poor's Ratings Services has withdrawn its 'Api' (public information) financial strength rating on American Merchants Casualty Co. - a sister company to Endurance Specialty Insurance Ltd., Endurance American Specialty Insurance Co., Endurance Reinsurance Corp. of America, and Endurance Worldwide Insurance Ltd., all of which have 'A' financial strength ratings. "The withdrawal eliminates possible confusion concerning the assignment of a pi assessment to a part of this interactively rated group," explained credit analyst Taoufik Gharib. "Maintaining a pi assessment might wrongly imply that Standard & Poor's has access only to public information." S&P added that the withdrawal of the assessment should not be viewed as expressing a negative opinion on American Merchants Casualty Co. "given that its financial information is included in the assessment of the overall group's financial strength rating."

Standard & Poor's Ratings Services has placed its 'A-' counterparty credit and financial strength ratings on LandAmerica Financial Group Inc.'s (LFG) title insurance operations (LandAmerica) on CreditWatch with negative implications. S&P also placed its 'BBB-' counterparty credit rating on LFG on CreditWatch with negative implications. "The CreditWatch placement follows the announcement of unfavorable operating results by LandAmerica's peers and news on macroeconomic factors that affect title insurers, such as mortgage originations," explained credit analyst James Brender. "This information suggests it is very likely that LFG will report a quarterly loss in 2008." S&P added that it also "believes the environment for title insurers will remain challenging until 2010 due to declining mortgage originations and rising claim rates."

Standard & Poor's Ratings Services has withdrawn its 'A-' counterparty credit and financial strength ratings on RSUI Indemnity Co. and its affiliate Landmark American Insurance Co. at the Company's request.
Source

Americas Watchdog Expands Its U.S. Investigation of Title Insurance Companies/Home Builders

Americas Watchdog and its National Mortgage Complaint Center are expanding their national investigation of title insurance companies over billing U.S. homeowners. The focus on this investigation will be national or regional U.S. home builders setting up phony title insurance companies and actual title insurance companies charging junk mortgage fees when a consumer gets a mortgage to finance or refinance a home. According to Americas Watchdog, "We think U.S. home builders and title insurance companies gouge most U.S. consumers with junk mortgage fees and we are talking the gloves of on what we see as a multi-billion dollar problem." Homeowners who feel like they were over charged can call the National Mortgage Complaint Center anytime at 866-714-6466 or visit their web site at http://NationalMortgageComplaintCenter.com.

(PRWEB) July 29, 2008 -- Americas Watchdog and its National Mortgage Complaint Center are expanding their investigation into national or regional home builders setting up phony title insurance companies. Americas Watchdog is also expanding its national investigation of title insurance companies gouging U.S. consumers with junk title/closing fees in home mortgages or refinances in 2006 & 2007.

Thus far, Americas Watchdog has determined that many U.S. home builders were setting up phony title insurance companies, that did little more than spin title insurance policies to actual title insurance companies at a greatly reduced price. There was no cost savings benefit to the consumer. The specific focus on these investigations are home owners who purchased a home from a home builder in California, Nevada, Illinois, Arizona, Florida or any other U.S. state in 2006 and 2007.

The group is also looking at title insurance companies in these, or other states, that may have gouged consumers with title insurance fees or fees associated with closing a home loan, or a refinance. Consumers wishing more information, or a free audit of their HUD-1 Settlement Statement, can call Americas Watchdog's National Mortgage Complaint Center at 866-714-6466, or visit their Web site at http://NationalMortgageComplaintCenter.com.

According to Americas Watchdog, "Everyone has heard about predatory mortgage lending, but few have heard about predatory real estate title insurance fees or practices. We are not only suggesting it happened, we can prove it, and we are now expanding the net, so the greedy home builders and greedy title insurance companies get punished severely. We also want to hear from title insurance company insiders, or home builder insiders about the sleazy practices, that cheated millions of Americans, with over inflated title insurance policies, or title fees/closing fees for nothing."

The group asks, "Whats the second biggest real estate list in the world?" According to Americas Watchdog, "Its the tens of millions of U.S. homeowners who were gouged by a title insurance company, a title insurance company acting as an escrow company, or a U.S. home builder acting as both." Americas Watchdog calls the biggest list in the the world, "U.S. homeowners who were cheated by a bank or a U.S. mortgage banker with a no cost mortgage."

*Note: U.S. banks or Mortgage Bankers have no disclosure requirement to explain, or show a homeowner, a huge kickback they get for inflating a homeowners interest rate or monthly mortgage payment (called a Yield Spread Premium). According to Americas Watchdog, "Rep Barney Frank (D) & U.S. Senator Chris Dodd (D) have done zero to require banks to disclose this huge kick back, to millions of unsuspecting U.S. consumers. Its just business as usual in Washington, DC."

According to Americas watchdog, "We are trying our best to clean up the U.S. mortgage business, and the U.S. title insurance business, but with Washington DC, and most state Insurance Commissioners corrupted with campaign donations, the consumer hardly has a chance." Americas Watchdog's home builder/title insurance project is aiming to expose massive consumer abuse for U.S. voters, prior to the U.S. national and state elections.

Again, consumers who used a home builders title insurance company or homeowners who feel like they were cheated, or over charged by a title insurance company should contact Americas Watchdog's National Mortgage Complaint Center at 866-714-6466 or visit their Web site at http://NationalMortgageComplaintCenter.com

Americas Watchdog is all about consumer protection, and corporate responsibility.

Saturday, July 26, 2008

Executive Title Insurance Services, Inc. Changes Name to Stewart Title

FORT MEYERS, Fla., Jul 25, 2008 (BUSINESS WIRE) ----With 11 locations, Executive Title Insurance Services, Inc. has served the title industry needs of southwest Florida for the past 27 years. Today Executive Title announced the change of their name to Stewart Title, the parent company who has owned the company for eight years. Stewart is an international company with more than a century of underwriting expertise, financial strength, innovative technology, superior service and consistent real estate closings.

"We have been a part of the Stewart family for many years, and are excited to officially become Stewart Title in our name as well," said Doug Stevens, senior vice president, Executive Title Insurance Services, Inc. "With an established reputation for superior client service and expertise in the industry, this is thrilling new change for our company."

"Although their name is changing, they will continue to offer title policies backed by a title underwriter company which has shown 33 years of consecutive growth in policyholder's surplus and reserves," said Stewart Morris, Jr., president and co-chief executive officer of Stewart Information Services Corp. "This will enable Executive Title to offer their customers a peace of mind difficult to find in today's volatile market."

Executive Title will operate effective immediately under the new name Stewart Title, with a branding campaign to promote and support the name change to follow.

About Stewart Title

Stewart Title Company is a wholly owned subsidiary of Stewart Information Services Corp. (NYSE:STC), a customer-driven, technology-enabled, strategically competitive, real estate information, title insurance and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries throughout the United States and international markets. Stewart also provides post-closing lender services, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at www.stewart.com.

SOURCE: Stewart Title Company

Thursday, July 24, 2008

Fidelity National Financial starts title insurance business in Mexico

Fidelity National Financial, a provider of title insurance, specialty insurance, claims management services and information services, has opened its title insurance operation in Mexico, which is named Fidelity National Title de Mexico.

Juan Arroyuelo has been appointed vice president and general manager and Gerardo Martinez has been named as a vice president and CFO of Fidelity National Title de Mexico. Additionally, Luis Unikel, a former risk manager at GE Real Estate, has been named as a vice president and chief underwriter. Fidelity Title Mexico has its principal office in Mexico City.

Raymond Quirk, president of Fidelity National Financial (FNF), said: "We believe Mexico presents a great opportunity for FNF to expand its direct operations to serve the vibrant Mexican market.

"Our local management team is experienced in Mexican title insurance and highly regarded by the Mexican real estate community. They will provide the same level of industry leading service that has earned FNF the loyalty and respect of our thousands of customers for so many years in the US."

http://www.datamonitor.com

Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon
Source

Saturday, July 12, 2008

Insurance for Art Collectors Covers Ownership Disputes

By KATE TAYLOR
http://www.nysun.com/arts/insurance-for-art-collectors-covers-ownership/81553/

It's a collector's nightmare:

(Heuichul Kim)">

Heuichul Kim

SALESMAN Gifford Miller sells art title insurance through a company he formed called Liberty Art Title.

You buy a valuable painting from a reputable dealer and hang it on your wall. Years later, you learn that the painting was once stolen, decades before you bought it. The original owner sues you, and before you know it you've both lost your investment and racked up tens of thousands of dollars in legal fees. You can sue your dealer to try to recover your loss, but that drags the legal mess out even longer.

Disputes over ownership of artworks are common, often protracted, and costly. Well-publicized cases involving theft and Holocaust restitution have drawn attention to the risks involved in not knowing every place your art has been. But collectors can find themselves dragged into court over less sensational issues, too. A dealer may have sold a work he didn't have the right to sell, or he may have failed to pay a consignor. Perhaps the seller of the artwork is an heir and, later, other heirs come forward to challenge his right to sell the piece.

A new insurance product, art title insurance, is meant to protect both buyers and sellers against these kinds of problems. At the moment, only one company, called ARIS, offers it. Founded by a lawyer and a former AON executive, ARIS has underwritten more than 300 policies since it started selling insurance in June 2006, covering works of fine art valued at between $20,000 and $4 million. (They do not offer insurance on antiquities.)

Like a real estate title insurer, ARIS both commits to defending the policy holder's title against any challenges and indemnifies the policy holder against his loss if a challenge is successful.

The primary difference between this and real estate title insurance is that there is no central registry of art transactions. So while a real estate title insurer only has to search the public records to underwrite a policy, ARIS has to comb the spotty (and sometimes intentionally obfuscatory) records and recollections of dealers, auction houses, and collectors. That partly explains why art title insurance is so much more expensive than real estate title insurance. With both types of insurance, a purchaser pays a onetime premium for a policy that lasts for the life of ownership. The chief executive of ARIS, Lawrence Shindell, said that so far, premiums have ranged from 1.75% to 6.75% of an artwork's value, depending on the risk. (Mr. Shindell declined to identify any particular works that ARIS has insured.) Real estate title insurance premiums vary by state; in New York, title insurance on a $1 million house costs roughly $4,500, or 0.45%.

An art lawyer, Thomas Danziger, who has done business with ARIS on behalf of a client, said he believes that art title insurance is a "terrific" idea, while noting that "[w]hether any single company survives and does well is hard to know." He and his partners in his law firm, Danziger, Danziger & Muro, thought several years ago of trying to offer title insurance, but they didn't have the time or resources to devote to it. "They clearly saw the opportunity here," he said of ARIS.

One recent high-profile title dispute involves a Norman Rockwell painting that the director Steven Spielberg purchased for $200,000 in 1989. In 1997, his assistant discovered that the FBI listed the work as having been stolen in 1968. Mr. Spielberg notified the FBI, which notified the owner of the painting at that time, who subsequently sued both Mr. Spielberg and the dealer who sold it to him. Although the dealer agreed to take the painting back, Mr. Spielberg is still trying to recover almost $50,000 in legal expenses from the dealer and the original owner, who themselves are still locked in a legal battle concerning the painting's ownership.

Where outright theft is not involved, courts generally find in favor of good-faith purchasers, but the legal defense can still be costly. In 2003, the collector Peter Brant was sued by a Swedish heiress, Kerstin Lindholm, regarding a Warhol painting called "Red Elvis." Ms. Lindholm claimed that the dealer who sold Mr. Brant the painting had misappropriated it when he was supposed to be merely transporting it for exhibition. Last year, a Connecticut court finally ruled that Mr. Brant is the painting's rightful owner because he bought it in good faith from a legitimate dealer — although the dealer himself was sentenced to three years in prison in Sweden for his conduct in the case.

When a potential client comes to ARIS to purchase insurance for a work they either own or are planning to buy, ARIS searches the public records for any liens against the work. It checks the artwork's stated provenance, which may contain gaps or outright fictions, Mr. Shindell said. ARIS may contact previous owners, press dealers for information, and in general "stress-test" the provenance, by making sure, for instance, that a gallery said to have owned the work at a certain time actually existed then and dealt in that artist's work.

Mr. Shindell declined to say how many staffers ARIS has doing this research, but said that they include people with backgrounds in law, insurance underwriting, and art history. He said that the process of underwriting takes an average of between two and three weeks, though ARIS hopes to make it more efficient as time goes on.

Because of the research ARIS does to ferret out potential title challenges, the fallout from the collapse of the Salander-O'Reilly gallery could have been prevented if all the buyers had purchased title insurance, the former speaker of the New York City Council, Gifford Miller, who now sells ARIS's policies in New York through a company called the Liberty Art Title Agency, said.

"In a world in which [purchasing title insurance] was adopted as a standard practice, it would be extraordinarily difficult for somebody like Mr. Salander to be successful at what he's alleged to have been successful at," Mr. Miller said.

And although it is often the buyer in a transaction who would purchase title insurance (or ask that the seller purchase it on his behalf), sellers may also have uses for it. Buying title insurance before putting a work on the market protects the seller against the chance that someone will come out of the woodwork with a claim — which is not uncommon if the work has not been for sale or on public view for many years.

This could be particularly important in the case of an estate that sells art at auction to pay estate taxes. If a claim subsequently emerges, the estate may not have the money to refund the purchase price, as the auction house would require it to do, but a title insurer would put up the money and then defend the title.

"In a world in which provenance — or, more precisely, title — is a real risk for collectors, there's a need for a product like title insurance to allow investors to protect their investment and ensure that their transactions are final," Mr. Gifford said.

Of course, there are skeptics. The author of the Art Law Blog, Donn Zaretsky, said in an e-mail that he would be concerned about what he called the adverse selection problem — namely, that "the people who buy the coverage are more likely to be people who have a reason to be concerned about possible defects in title (and may in fact be acting on information they have but the insurer does not)."

ARIS attempts to protect itself against this risk. It excludes from its coverage losses arising out of situations that the collector was aware of but did not inform ARIS about. It also excludes losses arising out of bankruptcy proceedings, Mr. Shindell said, because this is another avenue for potential fraud.

Still, the biggest challenge ARIS faces may simply be getting people in the art world to change their habits. An art lawyer at Flemming Zulack Williamson Zauderer, Dean Nicyper, said that he thought that title insurance, if widely adopted, would create more stability in the art market. But, he added, "people in the art world have a way that they've done business for years, and they have a difficult time adjusting to anything new."

In a sense, too, marketing title insurance involves calling people's attention to something they may prefer to ignore: namely, how difficult it is to determine the complete history of ownership of a work of art.

"Our job is, for better or for worse, to point out that the emperor has no clothes," Mr. Miller said. Still, he said, "I think it's inevitable that this gets adopted by both the auction houses and the vast majority of the legitimate art market. The question is how long it takes, and what is the pricing when it occurs."

Title insurance not a necessity for homeowners

We're deeply concerned that The Vancouver Sun's view, expressed in the June 25 editorial, Rising real estate fraud makes title insurance essential, is causing unnecessary panic among B.C. homeowners.

The Land Title and Survey Authority reported that over the past 18 years it processed 15 million transactions. In that time, two claims related to land ownership fraud were resolved and only 14 claims related to mortgage fraud were filed.

Contrary to your assertions, the authority says there's been no increase in the number of fraud cases and that cases of attempted fraud are rare. We're not aware of any cases in B.C. that required an innocent owner to pay off a fraudulently obtained mortgage. Typically, when a homeowner is asked to pay for title insurance on a mortgage, that insurance protects the lending institution, not the homeowner. Realtors have a high level of confidence in our land title system and believe the wholesale promotion of title insurance adds unnecessarily to the cost of homes in B.C.

W. Dave Watt

President, Real Estate Board of Greater Vancouver
Source

Sunday, June 15, 2008

God Bless America And Title Insurance

The easy part is God Bless America.

Each time I hear that phrase I think of my experience of going into East Berlin through barricaded "Checkpoint Charley". We were on a tour setup by our hotel manager. The Communists wanted to show some Americans how they had built up parts of East Berlin. As we entered the communist side our bus was boarded by the military. They took our passports and wallets and counted our money. Upon returning our wallets we were informed if we didn't return with all of our money we wouldn't be allowed to re-enter West Berlin. We assumed they were afraid we would give money to locals that they would use to buy their way out. Wow! I wanted the tour to go back to the West side right then.

With that said, how so on God Bless Title Insurance. From previous posts on this blog I have seen some not so loving statements regarding title insurance.

However, I can cite several home owners now are very happy they have title insurance. From speaking with the legal department of one of the major insurers I summarize this stressful situation: Homeowners purchase a condo in a 100 unit building. Within a month of completion about 60 move in, more than half with a mortgage in place. A few weeks after closing on their new homes a 1.6 million dollar lien is placed on their units by the general contractor.

Now the interesting part of this scenario, according to the title staff attorney, (our attorneys are invited to pipe in here) is that the lien will go into first position clouding the title. The home owners are protected only due to the fact that the lenders policy, additional coverage required by lenders, provides the additional insurance in case of such a lien. The standard policy often purchased by the cash paying homeowners does not provided a shield from the lien.

So all 60 that were served this lien are thanking someone, God or who knows, perhaps even the wicked lender, for this additional coverage and the assurance the rich ole title company is on the hook for the 1.6 million.

Now on a scale of balance, my freedom is of course my greatest gift of value - but were this my home at risk, I would be shouting God Bless Title Insurance.

Posted by Larry K Cragun

Saturday, May 31, 2008

Diamond to manage state title insurance offices

Richard Diamond of Brookline has been promoted to Massachusetts manager of First American Title Insurance Company. He will oversee the day-to-day operations of First American’s state offices, which provide services to attorney agents, lenders and real estate brokers in the commonwealth.

Diamond joined First American in 1988. He has held numerous positions, most recently as vice president and regional information technology director for the Northeast Division since 1998.

He is a member of the National Title Standardization Committee, the American Land Title Association, Title Technology Committee and the East Coast Title Technology Group for First American Title. He is a periodic guest lecturer for Massachusetts Continuing Legal Education in Boston, and a member of the Massachusetts Continuing Legal Education Technology Committee.

Diamond currently serves on the Executive Board of Massachusetts Title, the oldest title insurance company in the United States. He speaks regularly throughout the country about IT trends and how technology can help title processing for agents of First American.
http://insurancetitle.blogspot.com/2008/01/title-insurance-for-limited-liability.html
http://insurancetitle.blogspot.com/2008/05/questions-about-title-insurance.html


Wednesday, May 28, 2008

Making Sure Your Art Is Yours

For collectors, buying title insurance can offer peace of mind or a full settlement if it turns out their artwork has a murky past

by Tatyana Gershkovich

On May 8 the champagne was flowing at the Manhattan galleries of Bonham's auction house in anticipation of the upcoming spring sales. The mood was confident, as both buyers and sellers anticipated a successful season. While many of the guests were members of long standing in the close-knit art world, there were also some newcomers, and it's not quite clear how welcome some of them will be.

"Here come the ARIS people!" is how Lawrence Shindell says he and his team were greeted when they arrived. Unlike most of the other attendees, Shindell deals not in art, but in insurance. The former lawyer is chairman and CEO of ARIS Title, which he founded in 2000 with Judith Pearson, his sister, who has an extensive insurance background. Based in Manhattan, ARIS offers a new product called "art title insurance," which is similar in concept to real estate title insurance. Both protect the policyholder against loss in the event of an ownership dispute.

The global art market is flush with cash, having grown by 95% between 2002 and 2006, from $25.3 billion to $54.9 billion, according to a survey by the European Fine Arts Foundation reported in ARTnews magazine. Annual private art sales alone total $25 billion to $30 billion, according to the magazine, and despite global economic insecurity, auction houses continue to set records. A 1976 triptych by Francis Bacon sold on May 14 for $86.3 million and became the most expensive work of modern art ever sold at auction.

Aesthetic Passions vs. Brass Tacks

For buyers, art isn't just about making money. It's a place for investors to have a good time, socialize, and indulge their aesthetic passions. But this rosy atmosphere, says Shindell, can also lead to reckless investing practices, such as the purchase of a work with a questionable title.

"The problem of art title has existed for some time. It was first illustrated in the context of claims of art seized during World War II, and over time as each title dispute presents itself the art market becomes more aware and risk-averse," Shindell says. "This is combined with the increasing complexity of art transactions that involve investment funds, lending against art, people generally regarding art as an asset, and the increasing value of art. Today, the financial risk of transaction is much more acute and much more in need of risk management."

Last year's highly publicized title dispute involving director Steven Spielberg has become a cautionary tale for collectors. In 1989, Spielberg purchased a Norman Rockwell painting, Russian Schoolroom, that, unbeknownst to him, had been stolen from a Missouri gallery 16 years earlier. If Spielberg had had art title insurance, Shindell argues, he would have been able to avoid the whole mess because either his company would have uncovered the painting's origins during due diligence or it would have reimbursed the director the full cost of the painting. Without it, Spielberg was not only out the $700,000 value of the painting but also his legal fees.

The FBI estimates that $6 billion worth of art is stolen each year. But Jane Jacob, a board member of the Appraisers Association of America, a nonprofit organization based in New York, estimates the number to be even higher, somewhere between $7 billion and $9 billion.

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Art lovers view Monet's 'Waterlilies' displayed on May 9, 2008 at Christie's in New York. DON EMMERT/AFP/Getty Images

Private and Unseen

"The stolen art industry is second only to gun trafficking and drug-running. They say it's tied into that, and I believe that's exactly true," says Jacob, who is also president of Jacob Fine Art, an art appraisal and advisory firm in Chicago. She added that because the majority of art sales are private, many stolen artworks disappear for years and reappear only when they enter the public sphere as part of an auction, exhibition, or publication.

For years the best defense for a buyer was hiring experts to trace a work's history, but it was often just as easy to forge a provenance as it was a painting.

Moreover, finding reliable papers for older works or works seized by the Nazis, for example, was almost impossible.

Jacob looked into the possibility of art title insurance in the 1980s, when issues of provenance in art became topical because of emerging claims on art seized in the Holocaust. At the time, Jacob dismissed the idea. "It didn't have any teeth in terms of financial backing. It was conversational, but there was no entity to take it on," she says. She has since changed her mind, realizing during the past two decades that there is a need for an art title registry. "Fifteen years ago, provenance or chain of ownerships wasn't on anybody's radar, but now it's on everybody's tongue," she says.

Financial backing was not the only obstacle to attracting clients. For example, Hiscox, a syndicate of Lloyd's of London, sells art title insurance policies, but its annual renewal model didn't appeal to customers in the U.S.

A One-Time Premium

"Customers worried that if someone did bring a title dispute, the policy would not be renewed the next year," says Steven Pincus, managing director of insurance brokerage DeWitt Stern Group. Pincus recently learned about ARIS and says he was excited to introduce his clients to the product. ARIS offers a policy that doesn't need to be renewed. A one-time premium, between 1.75% and 6.75% of the artwork's value, buys a life-of-ownership policy that can be passed on to heirs. The insurance doesn't guarantee authenticity of the work, but prior to underwriting a sale, ARIS uses its private research database to provide vetting services and investigate the background of the artwork. In an ownership dispute, ARIS will cover legal defense expenses and the cost of the artwork if it is lost.

Art title insurance through ARIS has been available for purchase since June, 2006, and it has underwritten more than 300 policies. ARIS clients include private collectors, dealers, art funds, and major museums and investment entities, and the values of the works insured have ranged from $20,000 to $4 million. (ARIS has been approached on a $100 million transaction that hasn't yet taken place.) Shindell says that in its second year of existence the company has seen a 300% increase in business, and he anticipates that in five years, "certainly in the U.S. and portions beyond it, it will be difficult to transact something that doesn't have title insurance."

Not everyone is convinced there is enough demand to make art title insurance standard practice.

"This title issue has been around for a long time, and we've wrestled with it for a long time. While it sounds like a good idea, from a pricing standpoint it's not something that a large number of people can afford," says Mark Schussel, vice-president in charge of public relations for Chubb Insurance. Chubb offers protection against "defective title," under its broader valuable-article coverage. In the case of a title dispute, this policy will cover up to $100,000 in legal fees but will not compensate the policyholder for a lost artwork.

Plenty of Objections

Art dealers are sometimes reluctant to purchase art title insurance, citing their slim profit margin, says Shindell. Using real estate as his example, Shindell argues that the premiums will go down as more people purchase title insurance. Robert Koo, who consults with Bonham's auction house on art succession and philanthropy, says that peace of mind regarding ownership is worth the investment, especially considering that its cost is often a fraction of what an art buyer will pay in sales taxes on the transaction.

Cost concerns aside, art owners may choose not to purchase insurance for other, more personal, reasons. ARIS protects client confidentiality, but some owners, who don't want anyone to know about their collections, will even refuse to buy risk insurance—insurance on damage and theft. Art dealers also worry that purchasing title insurance will make clients think they are not doing their job in vetting the works. Others are simply used to doing things the old-fashioned way—on good faith and a handshake.

"The art industry is large and unregulated," says Charles Dupplin, chairman of Hiscox's Art & Private Client Div., which reinsures ARIS. Dupplin says he is surprised by the amount of attention ARIS has already managed to attract, but he predicts that art title insurance will become a more commonly used tool "in an industry, that like any good industry, consists of both gentlemen and of knaves."

Tatyana Gershkovich is an intern at BusinessWeek.com