Old Republic won’t underwrite Chase or GMAC REO property

7 Oct

Well this news may have a ripple effect.  Apparently problems with errors or mistakes in the foreclosure process may have lead to a decision by Old Republic Title (a large title insurance company) not to underwrite title insurance for the purchase of REO (bank-owned) property owned/foreclosed by J.P. Morgan Chase or GMAC Mortgage (now owned by Ally Bank).

Although this situation could resolve in the future, apparently Old Republic has issued its own internal edict that until the objectionable issues have been resolved, they won’t underwrite title policies for Chase or GMAC properties.  Since most home purchasers need financing from a lender, and since lenders typically require a title insurance policy with coverage for the lender, when a major underwriter like Old Republic stops underwriting Chase or GMAC properties, there may be a dramatic chilling effect, and it might deter other insurers from underwriting those deals as well.

For the sake of the flow and movement of the residential real estate market and to avoid further price deterioration and market stagnation, let’s hope these issues can be corrected in short order.  The problem appears to be significant enough for GMAC and Chase to temporarily halt foreclosures in 23 states until issues related to the foreclosure process are resolved.

You can find articles identifying more details about this issue at the New York Times, here: http://www.nytimes.com/2010/10/03/business/economy/03foreclose.html?_r=2&scp=1&sq=old%20republic%20national%20title&st=cse, and at CBS Moneywatch, here: http://moneywatch.bnet.com/saving-money/blog/home-equity/old-republic-title-wont-insure-chase-foreclosures/2868/.

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.

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