Sales of foreclosed houses in the District ground to a halt for months as the city’s investigation into the foreclosure process scared away title insurers who didn’t want the risk associated with the property.
And although the D.C. Office of the Attorney General is now sorting out the confusion, the stalemate has left some prospective homebuyers embittered and frustrated.
“For lack of better words I’m in limbo until this gets straightened out,” said Kevin, who declined to give his last name because he is still trying to buy the home.
He has been living in a hotel since he moved to the region for a job three months ago.
“I can’t place the blame on the title insurers,” Kevin added. “It used to be a risk-free type of insurance — now everyone’s make claims against the title.”
Todd Ewing, president of Federal Title & Escrow Co., said the attorney general’s investigation into the filing process behind D.C. foreclosures led insurance underwriters to believe the risk of insuring the title on a foreclosed home would be too high.
“Quite frankly we’re just turning away that business,” Ewing said. “The requirements and the extent of work that has to be done to insure title is beyond what we can profit out of the transaction.”
The Office of the Attorney General said that’s not the intent of its investigation it started in October — in fact, it has not overturned any foreclosures.
Bennett Rushkoff, a lawyer in the office, said while they are monitoring foreclosures filed after the Oct. 26 start of the attorney general’s investigation, it’s a different story for homes that foreclosed before that date.
This month the office issued a statement saying it “would not challenge the validity of completed foreclosure sales.” However, people who lost their homes still have access to the documentation to verify they were rightly foreclosed upon.
“I think we’re assuring insurers that, yes, we were questioning the procedures followed, but the remedy is not to overturn completed foreclosures,” Rushkoff said.
He added that the clarification has begun making its way to title insurers and some have begun moving forward again.
However, the investigation still means title companies as a whole need to run a tighter ship.
“I think before it was common for some insurers to issue insurance without determining whether the foreclosing noteholder actually held the note,” he said. “And I don’t think they’re going to do that — at least not in D.C. — anymore.”
