Massive Mortgage Mess Update: Title Companies Stop Insuring Foreclosed Properties

Tyler Durden's picture

Today's latest chapter in what is now known as the new 3M: the Massive Mortgage Mess, is that Fidelity National has told lenders to halt foreclosures, and to stop sales of bank owned properties. The reason, and this should be no surprise to anyone, is "possible document flaws." Fidelity is merely the next of, well, all. And while the WaPo reports that the John Walsh, acting director of the OCC has reached out to seven lenders including Chase, Bank of America, Wells Fargo, Citi, PNC Bank, U.S. Bank and HSBC, to review their foreclosure processes in light of the Ally and JPM Chase situations, the news of the day comes from the NYT that Old Republic National Title has stopped insuring title to Ally-foreclosed properties "until further notice." And once the insurers lost faith in the product they are supposed to have 100% confidence in it is game over: virtually no foreclosure transactions will take place going forward. We hope RealtyTrac will provide an update on what they may be seeing in foreclosure trends in the past two weeks : we are confident these have plunged off a cliff across the land.

From the NYT:

As more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.

Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.

GMAC declined to comment, and Old Republic representatives did not return calls.

As we have long expected, this merely means that as the foreclosure pipeline gets clogged beyond repair, and as mortgage losses accumulate at an exponentially growing pace, stocks of financial companies will likely surge as very soon their survival will become a binary bet on TARP 2. Very soon the investing public will realize that they are worth either nothing or infinity, which is what we affectionately call the Fed's price target for the US financial sector.

h/t Keith

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Henry Chinaski's picture

This thing could morph into some kind of October surprise...

NOTW777's picture

yeah - huge increase in ipad sales, high end retail

DarkMath's picture

Totally. Kind of makes me want to just stop paying my mortgage and roll the dice. Shit, I'd be like getting an extra paycheck every month. This could be the stimulus we've all been waiting for.

Dow 36,000 baby.

NOTW777's picture

wonder if some politican doesnt suggest all mortgages just zero d out

hambone's picture

Who cares about actual's time to ramp stocks into EOD!!!

whatsinaname's picture

will the headline read - Foreclosure drop 50%, housing market stablizes and hits bottom. Buy Buy Buy.

curbyourrisk's picture

Exactly....why would anyone pay their motgage at this point....  This means savings to the moon and that easily means DOW 20,000 by Christmas!!!!

DonS's picture

Whats interesting in that Fidelity, LPS (Lender Process Services) along with Stewart, SMI, FAF First AM et al are directly involved with the workflow process that is responsible for the way in which the affidavits are signed, They do all the back end work, provide the necessary info so that the banks can than sign were appropriate.

The documents are generated by  going through a workflow que or engine, where the required title/property info is researched by these title companies and then automatically populated (by the title company via a web  based platform) into a template on the banks side, then the finally document is printed for bank signature and notarization. This process has been going on for 8+ years.Typically the bank requires no verification of the title companies research and relies on the info they provide as fact. The Quality Assurance Review, in the banks view, stands solely on the shoulders of the title companies.


This is the same workflow process that is done for releases of mortgages, assignments, modification (to an extent). These are massive workflow processes. I know first hand.

MachoMan's picture

It makes no sense to stop providing insurance for loans because you're worried about the validity of the documents filed causing fraud on the court when you're the one drafting the documents/ensuring the right parties are in the action...

StychoKiller's picture

True!  Sounds like the Title Co.s are in total CYA mode.  They sense that lawsuits are heading their way, and they're cutting off the fuel supply to the Sh!tstorm heading towards them.  Their belief is that the banks took their (Title Co.s) valid data and somehow corrupted it, but I'm betting that the Title Co.s probably received said data from an untrustworthy source, and the cookie jar has their fingerprints on it too!

unemployed's picture


   Makes you wonder if they can't document for  foreclosures, how they can document for normal mortgage payoffs whether for sale or final payoff.   Repeat for the Title companies.

Freebird's picture

This is a complete farce...

SheepDog-One's picture

Its on like Donkey Kong Ver. 2.9.

bugs_'s picture

Going to need to nationalize the entire thing so nobody can sue.

Freddie Foreclosure was down in after hours trading.

Rahm's picture

I hear the blades ramping up to overdrive...

More handouts... bring in the helicopter!

Bluntly Put's picture

Never waste a good crisis.

faustian bargain's picture

Rahm E. announced he's quitting, finally. Have fun with that, Chicago.

StychoKiller's picture

What WILL Obamatron do now?  It's SO hard to find good Decepticrats these days!

cluelessminion's picture

What a mess.  I can't help but feel envious of those people who own these homes;  I spent all these years packing my lunch so I could pay my bills and they default and end up getting a free house.

SheepDog-One's picture

Just move into whatever vacant house you feel like soon.

kaiserhoff's picture

+69 squatters.  We don't need no stinking badges.

Bananamerican's picture

if there's a chance in hell this will bring down the Bank$ I'll be cool with it....

-a renter

NotApplicable's picture

There is no way these people will be allowed to stay in these homes free and clear. While they may be benefiting short-term, they will always be living under the threat of a new fedgov cure, in order to make things "fair" (that 4-letter F word).

They start out as over-leveraged debt slaves, but will be transferred over to the political slave class, where they will learn what leverage can get them in terms of bondage.

JLee2027's picture

There is no way these people will be allowed to stay in these homes free and clear

Court Rulings in Florida, Missouri, and (I think) Ohio say otherwise. Who you gonna pay when the only legal owner is yourself?

StychoKiller's picture

Lot's of law and legal precedent falls by the wayside under Martial Law!

Saxxon's picture

notapplicable, agreed. 'A pox on both their houses' is a Shakespearean term reserved for unilateral malfeasance.  Completely, whoeheartedly agree that when this shakes out the people who are chortling with glee for not paying the Man will be living in Fed tent cities with a wrecked credit record.

And if somehow those same deadbeats wind up in the long run better off than people like myself, who are busting ass to work harder and be smarter and pay bills; then in my humble opinion the wheels will have completely fallen off in this country and we will have officials swinging from lampposts.

ViewfromUndertheBridge's picture

and in the tent next to them will be someone who bought a foreclosed house from a bank for hard-earned cash...only to have another bank demand later on to be paid and then THAT bank turfed them out when they couldn't pay and THAT bank could produce the note...

You are falling for the "deadbeat" argument that the banks want you to. This goes way deeper than that my tent-wary friend....

Good luck

centerline's picture

There is just no way it could down like that.  It would be straight-up anarchy.  What will likely happen is that we all will suffer for it together.  Everyone gets f***ed.  

cossack55's picture

Anarchy is the first stop on the road to Liberty. 

SheepDog-One's picture

Right, theyre faced with any further move they make resulting in certain anarchy. Its all Farcism.

Citxmech's picture

The thing is, who actually has the title?  If the Bank's title is voided - I'm not sure if the purported "buyer" would automatically get clear title [by what mechanism?] 

Arguably - title could go back to the original seller, albeit a clouded title now because of the lien the buyer could levy on the property for all those mortgage payments and reliance costs...

For properties that have been flipped multiple times - this might never be straightend out without some kind of title reset legislation...


JLee2027's picture

Welcome to the Great Reset. No legislation required.

Dirt Rat's picture

...title reset legislation...


Whoa, you're asking the government to get back in the land patent business.

OpenEyes's picture

And, those who have a mortgage on a rental property can roll the dice for double-payout by walking on the mortgage while collecting rent.  Even those with only a primary mortgage could consider renting out their home for whatever amount they could attract and move to a rental with a lower monthly nut, or even double-up with another family member.  This could all get really strange really fast.  I just can't believe that they'll get away with it in the end though.  

Zerohedge fan's picture

that's why I bought 20 000 ft2 mansion in Fl.

paid $50/sf2

It is just wealth transfer, nothing else.

All you need is good timing.

Life is beautifull.

American dream. Wow!

We've only just began:

Ragnarok's picture

QE2, TARP2, Stimulus 2................  R.I.P.  USD

Mr Lennon Hendrix's picture

So this is the Black Swan before the who bought gold with doelarrs when it was less than $10K-$25K before the doelarr was worthless Black Swan before the Treasurie Black Swan?

SheepDog-One's picture

At this point Im certain it wont be 'the markets' that do us in but some massive outside force. Review Tylers 'Stuxnet' articles...what if one morning the markets simply didnt open due to the worldwide infection by this Israel produced weapons grade computer virus, and didnt re-open for a long time or ever due to the ensueing world war?

Mr Lennon Hendrix's picture

You could be proven correct, as I agree that the "M"arket "M"akers do not want anyone to know.....the economy is a giant hoax.  Problem/reaction/solution wouldn't go over very well if this was revealed.

cossack55's picture

OH, quit teasing me with my long awaited event.  The freakin sooner, the freakin better.  Drool, drool.

Conrad Murray's picture

"What the hell do you mean all of the money in our accounts is gone?!  We're the goddamn government!"

Mr Lennon Hendrix's picture

Haha!  Yes with so many swans we may need to color coordinate this. 

SheepDog-One's picture

Heather grey is nice! Just off-black but intriguing.

the not so mighty maximiza's picture

If you cannot get title guarantee insurance any buyer will walk away. 

Bob's picture

Market to stop dead in its tracks.  Hopefully, somebody digs out the entire corrupt mess in lurid detail before the Government Cover Up, I mean, Emergency Action to "protect the integrity of the markets" by covering all losses and Barry declaring that we must not look back, but "focus on the road ahead."