An article on phillyBurbs.com (The Intelligencer) weighs in on the realities of online title searches.

Edward Gudknecht, Recorder of Deed in Bucks County, PA, raised some interesting points concerning the county’s motives when initiating the automation of its land records: “We wanted to provide this information to the public, save them a trip to the courthouse, we have to keep up with the technology. That’s a shame that (outsourcing) is happening.”

A LandAmerica executive explained that his company offshores “repetitive clerical functions,” but only “after a local searcher has completed the field work, and straightforward public records searches and online retrieval of deed.” 

I happen to agree with the LandAmerica approach to offshoring.

A less than expressive spokeswoman from First American broke the shocking news that the company has “operations worldwide.”

It was Fran Gaspari of Patriot Land Title in Limerick, Pennsylvania who wrapped up the article by sharing the wisdom gleaned from years of experience.

Fran Gaspari on the topic of offshoring title searches:

Unlike other types of insurance that protects someone from things that may happen in the future, title insurance protects property owners against anything that has occurred in the past throughout the chain of title back to William Penn.

If there’s an error in the search, title insurance will still protect the homeowner.

You’re [the homeowner] insured so you shouldn’t stand to lose any money.  You could go through years of litigation because the search your insurance was based on missed a mortgage or a lien.

 

 As many of you know, the Los Angeles Times followed in the footsteps of Forbes Magazine, this week, by pointing fingers at questionable title industry practices.  The media suspects that there are skeletons in the title industry’s collective closet and is trying desperately to find them by stabbing in the dark.  We’ve all heard the litany of renowned evils by now: the title industry is anti-competitive; title insurance is grotesquely overpriced; excessive premiums are used to fund lavish events for real estate agents, etc.

The article, written by Scott Wilson, was informative, yet flawed in that it relied primarily on the regular, and safe, sources included in every expose of the title industry.

For example:  “Title companies put a lot of time and effort into building and maintaining databases of public records that are used to conduct a title search,” said a First American executive, ” even though automation has helped speed up title searches … workers still have to look over documents turned up in a title search and decide what actions to take.”  The carefully crafted statement, though innately truthful, was misleading in that it didn’t go far enough.  

I applaud the efforts of the Los Angeles Times to educate readers, but there’s so much that could have been included in the article, yet wasn’t.

What Scott Wilson’s readers don’t know:

• an increasing number of title searches are performed by inexperienced, cheap laborers relying on potentially incomplete sources of data maintained anywhere other than on domestic soil. 
• most industry insiders believe that offshored title searches have resulted in elevated claims ratios and a rising tide of nightmarish claims experiences for consumers.
  
• a consumer-centric business model would immediately encourage much needed competitiveness in the title industry.
  
• title insurers have abandoned quality standards without regard for public policy. 
• individual states regulate the threshold of entry into the title industry and have been visibly reckless while setting standards. 
• many title agents lack the training to properly identify and mitigate title related risks.
• title companies are typically entrusted with the management of massive escrow accounts without regular audits by qualified, independent examiners.
  

If you could scan the entire American economy for money that is thrown away —  gift cards never redeemed, home gyms never used, etc. — one of the biggest piles you would find is the title insurance industry. Sixteen billion a year — that’s nearly double the size of what Hollywood movies gross in a year  in American theaters.

Be sure to read an interview with Scott Wilson on the Marketplace.

My advice to reporters with aspirations of exposing the darkest secrets of the title industry:

• That which you seek can’t be found in Santa Ana, Jacksonville, Houston, or Richmond. 
• The words spoken by oligopolists smitten with dreams of market domination make for great sound bytes, but are intentionally cloaked by ambiguities.
• Take to the streets to interview the “rank and file” of a once great and still crucial industry to learn the truth.
• Title insurance itself isn’t the problem.
  
• Look to the deterioration of protocol behind the scenes as the greatest threat to consumers.
  

We need to admit that the industry, at this time, knows very little about offshored title orders or the long term effects of the practice.  We don’t know who is physically checking indexes, reviewing judgments, drawing descriptions, etc. or that traditional principles of abstracting are being upheld.  We know nothing of the training of personnel or the credentials of management. Why haven’t we seen virtual tours of the now notorious title plants sprinkled around the globe?  Are these places “digital sweatshops” that exploit innocent youths and other sources of cheap, untrained labor?  We don’t know because we have been intentionally kept in the dark.

The one thing we do know for certain: offshore title entrepreneurs lack access to the thorough compilations of information available domestically in local courthouses.

Perhaps underwriters are guilty only of failing to make a case for offshoring in the court of public opinion, but I have my doubts.  There’s clearly a general expectation that title work is completed by highly skilled, local professionals.  We live and work in an age of presumed transparency, yet title insurers incorrectly make the assumption that they are somehow exempt.

Underwriters could, if they wanted, eradicate any fallacies associated with the practice by commissioning a research project.  Title to a predetermined number of addresses could be searched by trusted domestic abstractors and their foreign counterparts.  Comparisons could be drawn and the validity of the study verified by independent sources.  The quality of a title search is quantifiable and associated risks measurable.   The question arises: at what quality low point should an abstracting source be eliminated?  In my opinion, any identified, heightened risk of claim above the accepted historical norm is a cause for concern by title agents, consumers, and regulators.  

I find any argument that offshored searches are cost effective to be misleading.  Cost effective for whom? Consumers would be more than willing to spend the extra money for a superior search product if they understood the claims dynamic.   For the most part, it appears that offshored title searches are used to increase the profitability of individual title companies who should consider charging appropriately for their professional services.

Have underwriters recently adopted a practice of instantly writing checks to accommodative the woes of their insureds who have filed claims.  I think not.  A title agent shouldn’t assume that all is well because underwriters have agreed to assume the inherent risk of offshored title searches.  Underwriters are notorious for pursuing their own agendas and time-frames while investigating claims without prioritizing the emotional and financial needs of their insureds.  A single claim holds the potential of destroying the reputation of a title company with hyper-localized business sources.   A claim is often a lengthy, nightmarish experience for consumers who are certain to publicize the fact that their title company screwed up.  It doesn’t matter that a consumer is ultimately made whole by the title insurer, the title company that issued the policy faces the distinct risk of losing business due to a loss of credibility.

Title agents need to consider other collateral damages that might surface in the “long tail” of a claim.  Though the underwriter has agreed to exculpate the title agent from any liability associated with an offshored search, there are other claims associated costs to factor into the equation.  Will the title agent be compensated fully, inclusive of possible loss of business, if required to spend time in depositions or to give testimony in court?  If, in fact, offshored title searches are more likely to cause claims than traditional searches: isn’t it reasonable to expect class action litigation or regulatory action?  Will title insurers assume the risk of the unforeseen or will title agents be left to fend for themselves?

Knowingly subjecting consumers to a heightened risk of claims is bad business that can only further tarnish the reputation of the title industry.  Underwriters have a moral obligation to fully explore the increased risks associated with offshored titles and to publicly disclose their findings.  A quality title search is the title industry’s most time honored tradition.  Who has the right to subvert its importance to perceived expediency or cost effective?  The definitive answer: no one, not even underwriters making false claims of increased profitability without liability.  Let’s not forget about the accountability of title agents and the mandate of the profession to promote the best interests of the public.  I normally advocate the rights of consumers above all else.  In the case of offshored title searches, I firmly believe that it’s a practice that promises detrimental consequences for consumers and title agents alike.

Click here to read Lenn’s post.

“I am new to your site - google-alerts linked me to you.  I have 25 years experience as a Searcher/Examiner, primarily from Southern California working for most of the major underwriters.  The Title Industry has undergone tremendous change in those 25 years, probably more so than in any other time in it’s history.  This is true of any industry, and in most cases “change” in necessary and beneficial.  However, in the case of Title Insurance, this practice of outsourcing searching/examining and policy production is not necessary nor is it beneficial.  Those types of positions have traditionally been the training grounds for higher level positions within the industry.  When I came into the industry, all of the Managers and Executives in the Title Companies had worked there way from the entry level jobs.  However, today, fewer and fewer of the Managers and Executives in the Title Industry have that background.  These new Managers and Executives are implementing changes to an Industry that they have very little understanding of, and the effects of those changes have diminished what was once a high quality, low risk product.  Today, title insurance is all about short-sighted “bottom-line” and shareholder profits.  This is an industry that is under more and more scrutiny from regulators and consumer advocacy groups.  Title Insurance is a vital product, considering the amount of money consumers are investing in real estate.  The leadership of the Title Industry, being those Executives that are trying to maximize profits for shareholders, better come to the realization that conservative underwriting practices, which can only be applied by seasoned, experienced professionals, is the only way to plan for future success and longevity.  That cannot be accomplished by outsourcing. 

Okay, I’ll get off the soapbox and let someone else have a turn.  I’m glad to see there are so many other people out there that seem to share my opinions on this issue.”

Key Points as Talking Points:

• The title industry has undergone tremendous change in the past 25 years
• Change is necessary; Change is good
  
• The practice of offshoring title searches and policy production isn’t necessary … nor is it beneficial
• Title searching was once the training grounds for industry execs … it’s no longer true
• The change agents are corporate decision makers who don’t truly understand the industry dynamic
• Title insurance is, or should be, a low risk, high quality product that consumers … and real estate agents … and lenders can trust
• Title insurance is a vital product
• Conservative underwriting practices ensure the industry’s success and longevity
• Offshoring is not the answer to the industry’s profitability and credibility woes

Historically, title agents were presumed to be title experts. Exactly when and how did things change so drastically? When was the last time you heard the phrase “core title services.” The offshoring of title searches has created the potential of a paradigm shift of unparalleled precedence for the title industry … and consumers.

I’ll always remember the day that MdLandRec.Net was launched in January, 2006. It’s a free site that allows anyone who opts for a password to access Maryland’s automated land records. As a professional title searcher, I felt the way a dinosaur might have felt watching a fiery ball crash into the earth’s mantle. Clearly, change was at hand.

At first, I saw the potential of using the site to “set up” searches and the benefits that might accrue to trained, knowledgeable title searchers.

Questions immediately ran through my mind:

• Did the new site offer a glimpse of the future of title searching?
• Could a title search now be completed from home or office with an enormous savings of time and effort?
• Could a title searcher now avoid the need to travel to the courthouse each morning and the expense of parking?
• Was it now possible to apply sound business principals to the task of title searching increasing both efficiency and profitability?

Shortly thereafter, an alternate stream of questions came into focus:

• Would title company employees have the ability to sit at their desks and gather accurate title information by simply entering names and dates into fields on a computer screen?
• Was the traditional role of the title searcher instantly altered?
• Would the need for title searchers be eliminated in the not so distant future?
• Would title insurers encourage the use of “MdLandRec.Net” by agents when preparing commitments and issuing policies?
• Would E&O carriers agree to insure title company employees who perform searches on “MdLandRec.Net”, but otherwise lack abstracting experience?

Before long, it became apparent that my title searching career was in jeopardy. I was receiving far fewer orders than in the past and they were all horribly difficult. At first, I assumed that underwriters had hired experienced title searchers to work from home or a local processing center. Never, did I assume that title plants would be established on foreign soil.

I believe it to be a generally accepted fact that title searches prepared overseas are inferior to those prepared domestically. With that being said: how can we be an industry of experts without a foundation of reliable information to craft our product?

Yesterday, Lenn Harley addressed the dilemma from the perspective of a seasoned real estate agent in a post titled Offshore Abstracts? Is That Anything Like Vicarious Sex? Pay particular attention to the comment stream. Well intended real estate agents assume that the title work they refer is being conducted locally. I hope it’s true, but I have my doubts considering the well documented love affair that exists between title underwriters and their offshore operations.

The question at hand: Does ALTA have a responsibility to speak out against the offshoring of title searches?  It’s my contention that ALTA’s board has a duty to prioritize the issues negatively affecting the majority of its membership. 

One would think that the disintermediation of domestic abstractors is a topic worthy of concern, even mild hysteria, among the rank and file of the title industry.

Even though the voting was initiated at a rapid rate, the number of responses fell off quickly.   Only 35 of you voted.  The bottom line: 32 respondents felt that ALTA should take a stand against offshoring while 3 respondents felt otherwise.  This site has enough traffic to warrant a much greater response.

Title-opoly receives daily visits from foreign locations that can originate only through search engine hits.  The visits are attributable only to your unlicensed and untrained colleagues in India, the Philippines, Panama, Israel, etc. who are trying to assess the mood domestically.  I’m referring to the “key board title novitiates” who are living the good life at the expense of your reputation and future.

I’m assuming that they find great comfort, financially and emotionally, in the obvious complacency of the American title industry.  Foreign title “professionals”, for want of a better word, have every right to bask in their certain job security because the title industry in this country is afraid of a fight.  The once great title profession is afraid to take a stand against anything, even the contrived developments leading to its premature demise.

Many of you are barely holding on while hoping for an early spring this year.  I know because readers send emails describing their plights.  Most of you have greatly reduced the size of your staffs.  Some of you have downsized from the “brick and mortar” needed in the past.  Some of you are flipping burgers to make ends meet.  Well, spring “ain’t” happening this year, or next year for that matter.

Even if lower interest rates, subprime resets, or economic conditions were to spark a refinance frenzy, small to mid-sized title companies wouldn’t benefit as they did in the past.  The underwriters have quietly positioned themselves to harvest refinance orders by partnering with the monstrous sources of business.  We’ve stupidly placed wealth and power on the lap of five underwriters, trusting them to be the stewards of our industry’s future, while they in turn have invested their resources overseas.  Pathetically, it’s the same money remitted to them in the form of domestic policy premiums. 

All the while, ALTA, the ostensible leadership of this industry, hasn’t said or done a damn thing to protect the hard-working, blindly loyal members who subscribe each year.

In a comment to a recent post, Sam, the regulator, made a relevant and interesting remark.

Sam said:

“As an insurance regulator, this [the offshoring of title searches and processing functions] may have gone past the critical mass point. reigning in this practice may be putting the toothpaste back in the tube. No doubt the industry will push back strongly. They have divested themselves of their local resources and made substantial investments in Manilla, Bangalore, Israel, Ahmendabad, Kolhapur and any other place that can operate 24/7/365.

As a title professional, this is a grim marketplace scenario, reminiscent of the American auto industry in the early 1980’s.”

Sam’s right … you know.  All industry related lobbying targets the interests of the big players even though you foot the bill.

What’s it going to take to piss you guys off?  What’s it going to take to convince you that some fights need to be fought?

As a community service and a courtesy for ALTA, I’ve decided to include a link to Monster.com.  It’s also intended for all underwriter personnel who are in any way related to agency operations.

Some months ago, readers were asked if they would provide a copy of a title search to a buyer if asked to do so.  The not so overwhelming majority of respondents, 68% to be exact, said that they would.  The remaining 32% said that they would not.

The obviously loaded question was aimed squarely at the practice, now widely accepted, of offshoring title abstracts to foreign sources.  The issue seems to tear at the very fabric of the title industry.

Fran Gaspari raised a couple of interesting points.  He suggests that the title commitment is his work-product and the abstract a part of an ongoing process.  Fran also raised the issue of hand-written abstracts being illegible, an all too frequent occurrence due to a reluctance by abstractors to automate their reports.   It was a pet peeve of mine when examining titles and a problem tolerated by title companies for far too long.

In the past, I wouldn’t have found it prudent for a title company to pass along a raw title search, voluntarily or upon request, to a consumer.  It could after all create unnecessary liability or pure nuisance should a consumer choose to compare the abstractor’s work to the final form of the commitment or final policy.  A title search is but a single element of an intuitive investigative process that is a title examination culminating in an indemnity contract.  Now, I have to take the position that a traditional title search is a testament of sorts to the professionalism of any title company.

The whole notion of searching titles from India, and other such places, just feels wrong to me.  I’ve spent time enough rummaging through land records and probate courts to understand that title research conducted from a distance couldn’t possibly be as complete or as accurate as research performed locally.  It’s about a truth greater than the competency or training of the abstractor.  Court houses enjoy a well deserved reputation of not revealing secrets without a struggle.  There’s a need for local abstractors who have the experience and judgment to “sense” when minutia in a title seems other than it should be.  There’s a need for abstractors to have established relationships with clerks who have a way of producing files or records that are needed to piece together the numerous variables of a difficult title search. 

Most disturbing to me is the fact that title searches are delivered from abstractor to title company in the form of a commitment.  At first blush the practice seems to point to convenience and business efficiency for the title agent, but let’s not be hasty.  If commitments are produced offshore as part of a title search, regardless of the degree of accuracy, the process that is a title examination will be disintermediated along with the independent title agent.  We must not allow the practice of offshoring title research to become the established norm for the industry.  If it does, and it might, what need is there for licensed title professionals?  The traditional duties of the profession other than title examination can be parceled between regional centers setup by underwriters and the army of mobile closers who stand ready to have documents signed at anytime and anyplace. 

The process of examining titles is the essence of your profession!

Consumers deserve the peace of mind afforded by thorough title searches prepared by competent, local abstractors.  Consumers need to know if they’re involuntarily electing for a work product, meaning the process that culminates in a title commitment, that’s substandard and more likely than available alternatives to cause exposure to liability at a future date.  Any title industry practice that heightens the statistical possibility of claims should be treated as a crime against society.

As an industry observer, I have to assume that ALTA has a mandate to protect the interest of all title companies, large and small.  I have to believe that the rank and file of the industry is comprised of small to mid-sized title companies.

Why then has the leadership of your professional trade association remained quiet in regards to this crucial and time sensitive issue?

Does anyone disagree with my premise that the forced extinction of local abstractors will ultimately result in the demise of independent title agents?  Feel free to voice dissenting opinions.

It’s time for another poll.

To protect its members and the public at large, should ALTA take a stand against the offshoring of title searches? 

I’ll keep the poll in the sidebar until midnight of Friday, January 5, 2008.

Sam, the regulator, said it, not me.  The guy had the unadulterated nerve to mention the concept of “core title” practices on a title industry forum. 

Doesn’t Sam know that it’s no longer vogue for today’s settlement service provider to worry about nonsense like quality of work-product? 

In 2007, a title examination is properly defined as the act of entering a street address in a field on a computer screen.  A commitment is something attached to an email from the Philippines that the lender needs, but doesn’t know why.  The licensed title professional doesn’t know either.

The notion of “core title’ practice has been conveniently swept beneath the locked door of the closet where “litigation free” homeownership is kept. 

An entire generation of decision maker in our industry has never laid its collective gaze upon a title search or the interior of the local land records. 

The disintermediation of the local abstractor is the beginning of an evolutionary tract that will result in the certain extinction of the independent title agent. 

My questions to title agents:

• If you’re no longer in the business of identifying and mitigating title risks, what exactly is your professional purpose?  Why are you needed?
  
• Are you truly protecting the interests of your clients, yes I said clients, when you take the cheap and easy route of buying a title search that’s produced overseas and delivered in the ostensible form of a completed title commitment?
• Have you considered your own legal liability when a tsunami of title claims hits our domestic shores due to the mindless offshoring of title abstracts to unqualified sources?

Sam: Thanks for bringing a crucially important issue to the forefront.

Title agents:  You better wake up and it better be soon!

Recently, I’ve published a number of posts dealing with the outsourcing of title work to India and other foreign locations.  The volumes of comments by title professionals prove that we are a concerned group.  I’m always impressed by the intelligent and relevant responses made by Title-opoly readers.  The comment thread often reads like an article in the Harvard Business Review.

The core theory on which title insurance is based is the elimination of all known defects as revealed by an exhaustive examination of title.  Homeownership should come with the assurance that the threat of litigation is statistically unlikely, almost non-existent.  The willful use of unpredictable  sources of title information for examination purposes raises any number of important questions.  I was taught that an abstractor has an obligation to rely on every available index and known source of title information.  In my mind, to do anything other transforms title insurance into a casualty product rather than an indemnity contract.  The outsourcing of title orders overseas hasn’t necessarily taken place long enough to establish a claims and litigation pattern.

I have to raise the question:  If a title policy is prepared using an unreliable search, isn’t it in the consumer’s best interest not to purchase an owner’s title policy?  

My reasoning:  The title policy severely limits the scope and dollar amount of the insurer’s liability.   Title insurers should be prepared to suffer losses if they want to cut corners with searches.  New developments in abstracting standards will greatly change the nature and volume of claims.  A consumer might be well advised to litigate, without the limitations of a policy, in an attempt to reach for the deep pockets of insurers and possibly receive additional punitive damages. 

Please feel free to disagree.

I like Rhonda Porter’s idea that regulated labeling, or disclosure, might be an appropriate measure to aid consumers, and their attorneys, to make proper choices regarding the purchase of a title insurance product.

Rhonda also raised the valid point that most of us posses only localized abstracting expertise.  Her particular knowledge comes from working with title plants on the west coast where a high degree of automation has existed for some time.  It might make sense for a consumer in Washington state to purchase a title policy when the search was outsourced overseas.   In Maryland, I don’t think it does.

To my knowledge, Chicago Title has the only significant title plant at its disposal in Maryland.   I find the starters provided by the company to be a good starting point for a search, but generally unpredictable and often unreliable.  The starters are simply past policies and are only as good as the office that wrote them. An abstractor has to know enough to delve deeper when the exceptions appear inappropriate.  I’ve seen starters for condo units that took a blanket exception to all condo documents and plats of record without referring to them specifically. That doesn’t work for me and it shouldn’t work for any underwriter interested in preserving the notion of homeownership as we’ve known it in the past.

I have to keep open the option that underwriters have secretly amassed vast sources of information in this state and have made the resources available to adequately trained outsources.  There’s also the possibility that underwriters have bought access, from local jurisdictions, to more reliable indexes than are available to the public at large including local abstractors.  I’m just hoping, and praying, that no one is stupid,or greedy, enough to attempt a Baltimore City abstract using only the on-line site with which I’m familiar.  

A reader named Sam made any number of important comments including:

“I appreciate the other points of view and agree that outsourcing has it’s drawbacks. We see errors on a daily basis and try to have the “cookie cutter” work go to our offshore vendors as that is what they are good at.”

Another reader, Shelley, raised the question of the technical qualifications of abstractors trained overseas.

She wrote:

“Property owned since 1980. I discovered a ‘slight’ discrepancy in the property description. I ended up having to search back further (using a real-live searcher located IN the court-house) and together we discovered my present owner’s property was “accidentally” sold, along with the adjacent lot (previously owned by PO) to a builder and financed with an over $1M mortgage. We now have to get new deeds and mortgage releases, etc etc. I wonder if this would have been discovered in India; or otherwise online. So far, I don’t think any bulldozers have torn her house down yet.”

We can’t forget about certain nuances, like mortgage releases, that are sometimes difficult to hunt down for even the most seasoned abstractor working inside of a courthouse.   I predict that underwriters will be writing volumes of letters to indemnify over unreleased mortgages by builders and developers in subdivision resales.  Attorneys will figure out a way to capitalize on the situation by refusing to close without actual releases and charging heavily for their curative services.  I saw it happen in the western part of Virginia several years ago.

One of my favorite comments was made by Title911, who wrote:

“I recently worked with a First American Company that uses this oversea’s method. So I have personal experience with this process. It puts much more burden on the already over burdened Title Officer to check and recheck every detail.”

Rebecca Levinson said:

“How very scary. I worked for a title company underwritten by Fidelity and cannot imagine how this decision came to pass.”

Gary Sloane opened my eyes with the following statement:

“I agree the final title product cannot be any better than the search from which it is created, and the idea that a search would be done overseas strikes me as ridiculous…but I work for a midsize title co. that is fairly old fashioned: We have a company that actually looks at information on paper in county buildings and such. And no, it’s not Mayberry, we’re in Chicago … there are problems that face small to midsize title companies that far exceed the abstract issue.”

I’d like to thank everyone who added so much to this discussion by commenting.  In addition to those already mentioned,  many familiar industry pundits including Diane Cipa, Tim Killcoyne, Robert Franco, and Fran Gaspari weighed in with great advice worth visiting.

A development with potentially detrimental consequences for Maryland’s homeowners and the state’s workforce has been revealed in The Economic Times, published in India. A recent article titled “Winning the title bout in style” (copy attached) tells the story of a certain entrepreneur, named M Sanjay Kanth, who owns a Bangalore-based company that provides real property searches, among other services, to the American Title Industry. Three of this nation’s largest title insurers, First American Title, Fidelity National Title, and Stewart Title, are outsourcing domestic title searches to India. The methodology employed in processing the orders is every bit as disturbing as the loss of jobs locally and across the nation.

Automated ownership records are an invaluable resource for title professionals, but have limited application from a risk management perspective. Substantive research must be conducted at courthouses where it’s customary for trained abstractors to compare title indexes to other sources of information. The secondary sources of information are often handwritten ledgers maintained by clerks at various desks scattered around administrative buildings. Admittedly, the process is draconian, but it’s all that exists in most states and very accurate once the idiosyncrasies are learned. It takes years of supervised abstracting experience for a candidate to qualify for errors and omissions insurance.

As I’m sure you’re aware, Maryland was the second state to automate its land records, in 2006, and make certain information available online, without charge. While the site is a tribute to human ingenuity and the marvels of technology, its search qualities lack the accuracy and predictability needed to prepare an owner’s title policy. Its possibilities are eclipsed by its practical limitations. Title research conducted on-line has the heightened potential of producing catastrophic results for innocent consumers with the degree of risk exposure varying by individual state and jurisdiction. 

The following disclaimer must be acknowledged before entering Maryland’s automated site:

“The Clerk of the Circuit Court assumes no responsibility for this site.  This website should not be used as a sole source for searching title. Researchers must check all indices including those at the courthouse.”

The disclaimer speaks for itself and exists for good reason.

Untold numbers of Maryland residents who work as abstractors will soon become unemployed if they haven’t already. The exact count is impossible to estimate as the group has failed to organize formally. The elimination of domestic abstracting jobs is not a legitimate example of disintermediation as the involuntary void is creating employment opportunities overseas. Accurately compiled title research using every available resource is as important today as it was in the past.

The questionable motives of title insurers who encourage the use of unreliable data to produce title policies clearly raise public policy implications. Litigation free homeownership is a fundamental premise of a culture dependent on real property as a source of financial and emotional security. Title insurance theory has as its conceptual core the avoidance of losses through skilled risk evaluation and mitigation. Thorough research provides the functional underpinning for a properly drafted title policy and the legitimacy of property rights at time of transfer.

Last November, James R. Maher, the Executive Vice President of the American Land Title Association, wrote a highly publicized letter refuting a scathing indictment of the title industry by Forbes Magazine.

In part, Mr. Maher wrote:

”Title insurance is much more than an insurance policy—it is the very extensive process that occurs before the policy is issued to ensure, to the extent that it can, that the title to a specific property is free and clear of defects. Issues with title are found and corrected by title professionals in one out of every three residential real estate transactions … For most Americans, their home is the single largest financial investment they will ever make. There are literally dozens of ways in which the title to their property can be jeopardized. The title insurance industry exists to ensure that title issues don’t affect their homeownership rights—before and after a purchase.”

The abuse of abstracting protocol has historically resulted in title claims for trusting home purchasers.

During the past year, the troubling behavior of title insurers has attracted the concerned, sometimes angered, attention of elected officials, government authorities, litigators, and media. The Government Accountability Office, this past April, released an unfavorable report pointing to the societal risks imposed by the oligopolistic nature of title insurance markets. Indisputably, industry leadership has strayed from a mandate to guard the property rights of this country’s citizens and lending institutions. Title insurers must be held to the high standards of accountability dictated by any position of public trust. The public deserves no less. Nothing other can be tolerated without imposing unnecessary costs, emotional and financial, on the American public.

The concerns raised by the developments described herein far exceed the scope of a single letter. A dysfunctional title industry contributes to a broad range of problems for communities and families. I ask for the opportunity to meet with you in person to further discuss these very important societal issues currently affecting your constituents.

Sincerely,

There’s been a great deal of spirited dialog on this site over the past several days.  It was sparked by a post about the “off-shoring” of title work by title insurers.  I’ve known for nearly a year and a half that  Maryland’s title work was being done somewhere other than the land records.  Maryland flexed it’s cyber automation muscle in the form of a site launched in January, 2006.  Soon thereafter, there were visibly fewer abstractors at work in courthouses.  I wanted to believe that abstractors were working from their homes, or title companies were trying their unqualified hands at in-office abstracting, or business levels (title orders) were off due to economic reasons.  I realized, though, that any abstractor with an inkling of self respect, or survival instinct, knew better than to rely solely on a new site that proved itself inaccurate from the start. 

It’s now evident that title insurers, and other large players, have been stealing jobs from skilled Americans, like thieves in the night, and placing abstract orders at foreign points around the globe.

The question arises, how important is an accurate title search when preparing an owner’s title policy?  We know nothing of the qualifications, or backgrounds, of these “so-called” abstractors.  How much confidence do you have in their abilities?  How reliable is their work-product?  Have title exceptions lost their importance in title insurance theory?  Are title insurers not concerned about consumer rights and class action litigation?

Title professionals, share your thoughts on the matter by responding to the poll shown in the sidebar. 

The question is simple and straightforward.  Your response is completely anonymous.  If you work for an underwriter, no one will know of your participation.

Question:  Would you purchase an owner’s title policy if the title search was conducted by an “overseas” source? 

You can answer until midnight of August 13th.  I’ll post the results shortly thereafter.