BofA Files Suit To Pin Title Insurer With $500M+ In Loan Losses For Providing Unconventional Lien Protection Plan

The Los Angeles Times reports:

• During the subprime loan era, it's well documented that lenders took all kinds of shortcuts -- such as failing to verify borrowers' employment or income -- to sell mortgages. Now Bank of America Corp., the nation's biggest mortgage lender, is saying the nation's second-largest title insurer did much the same thing and should be on the hook for more than $500 million in losses.

• In a lawsuit filed earlier this month, BofA alleged that First American Corp. in Santa Ana relied on home buyers to tell them about liens on their properties and other matters, rather than conducting traditional title searches. The shortcut was part of a program called QuickClose that BofA said in its suit did not require "title searches in connection with loans processed under the program." The bank said in the suit that the insurer has not made good on more than 5,000 mortgages it was supposed to protect.

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• The bank's efforts to curb its losses in the mortgage fallout are indicative of what's going on in the industry, said banking analyst Bert Ely. "Every time you have a disaster everybody sues everybody else, and mortgage financing was a disaster," he said. "You have lots of losses floating around, and companies are looking to others to eat their losses."

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• The title insurance policies that First American sold to Bank of America were uncommon in the industry, Ely said. "The American Land Title Assn. has openly opposed these types of lien protection plans," Ely said. "First American was offering a product that at least more than a few in the industry weren't comfortable with."

For the story, see BofA seeks to pin losses on title insurer (The banking giant sues First American Corp., alleging that it failed to do proper title searches. That led to $500 million in mortgage losses, the suit says).