Ted Jones, chief economist for Stewart Title, said he is concerned that interest rates could rise if title companies cannot prove the actual owner of a foreclosed property.

Given the inaccuracies in foreclosure processing, coupled with the inability of lenders to foreclose without both the deed of trust and promissory note in hand, title companies could walk away from deals because they fear lawsuits. Original notes are typically sold into the secondary market and are difficult to locate.

Now I’m confused.  I didn’t think title companies had to prove ownership.  I thought title companies based their decisions on public record.  If the record says Mr. and Mrs. X own the property, then that’s who owns it. Or if the record says Lender ABC owns the property then thats who owns it.  I think there is precedent for title companies not being responsible if there is an error in the public record.  It seems a pretty big leap from the possibility of a mishandled forclosure for which a title company refuses to issue a policy to a rise in interest rates because a lender can’t get insurance.  Really? How many deals is a title company going to refuse because of a “inaccurate foreclosure proceeding”?   How will the title company know that the proceeding was faulty unless there is a complaint by the mortgagor. 

Relax Ted.  Do you really think mishandled foreclosures are going to cause interest rates to go up.  Lenders are not going to let sloppy paperwork negate their foreclosures.  If the homeowner didn’t make the payments then he needs to get out of the house.  Title insurance companies are not going to walk away from title deals.  They are insurance companies – they insure deals with the potential for problems.  It is what they do.

I am a bit concerned about the MERS situation of trying to foreclose a mortgage without the original note.  But I keep going back to the fact that if the homeowner didn’t make the payments, then he should not be in the property.  Everything else is wrangling by the attorneys trying to make a buck on technicalities.