Title insurance as foreclosure insurance?


I read an interesting article recently in the New York Times on the foreclosure epidemic in the United States and the role that title insurance is playing there. Because of extreme sloppiness, many American banks have halted all foreclosures while they determine whether people were wrongly put out of their homes. The problem? Many of those homes were sold to new – and innocent – buyers, who may now be put out of their homes because the foreclosure was done improperly. Where title insurance is coming into play is in protecting those new homeowners and reimbursing them (to an extent) for the expense they went to in purchasing a foreclosed home that should not have been foreclosed. As I blogged about back in May, most buyers in Ontario will have obtained title insurance with their purchase, because it is usually required by lenders. We also do not have near the problems with our housing market as the U.S. is having, thanks in large part to much more stringent mortgage rules within Canadian banks. It’s still something to be wary of, however, especially if you are buying a home through a power of sale. The bottom line: title insurance may be required by your lender, but you still have the right to discuss with your lawyer how title insurance will protect you and why he or she has chosen the particular title insurer.