Major Title Insurance Company Declares Ally/GMAC REOs Uninsurable Until Further Notice!

A recent story in The New York Times on the ongoing turmoil due to the dubious documents being used by loan servicers and foreclosure mills in foreclosure actions against delinquent borrowers contains this gem:

• 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.(1)

• 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.

Source: Document Flaws Have Put Brakes on Foreclosures.

(1) See Use Of Special Addendums & Bank-Designated Title Agents When Dumping REOs Mark Wave To Unload Defectively-Titled F'closed Homes Onto Unwitting Buyers? for an example of the business practices that one lender is allegedly engaging in when reselling foreclosed homes to the general public.