American Land Title Association Comments on Recent Announcements Regarding the Foreclosure Process
|October 12, 2010|
The American Land Title Association (ALTA) has issued the following statement on Oct. 1 regarding title insurance on foreclosed properties:
Several lenders have halted foreclosures and the sale of real estate owned (REO) properties due to possible flaws in documentation used in the foreclosure process. This has, in turn, raised questions about the validity of title to properties that have already been foreclosed, resold and on which a title insurance policy has been issued. ALTA believes these questionable foreclosures will ultimately have little adverse impact on the new owners of REO properties or on the title insurance claims.
“If a new homeowner’s title is challenged because of a faulty foreclosure, the title insurer may have an obligation to defend the challenge,” said Kurt Pfotenhauer, chief executive officer of ALTA. “However, it is unlikely that a court will take property from an innocent current homeowner and return it to a previous homeowner who failed to make payments on the loan subject to the foreclosure.”
Though laws may vary on a state by state basis, in general, the buyer of a property that has been through foreclosure has numerous defenses available to assure their continued ownership.