[quote=faterikcartman]UR — I can’t imagine title companies covering this sort of thing. Have you read the exclusions lately? Anything that isn’t a public record located at X, Y, or Z is probably not going to be covered. Nor can I imagine most ever getting near this sort of coverage via a standard policy.[/quote]
At the theoretical level:
There are 3 basic types of ownership clouds that title covers:
-physical:
where you find out the lot line goes through your living room.
-ownership:
Where a long lost heir claims he owns part of your house.
-lien holder:
There is a lien holder interest (like mortgage or abatement) that was never taken care of and has the potential to cloud the new owner’s interest. This the type that concerns us.
At a practical and anecdotal level:
Speaking as someone who has asked this question of my escrow peeps, I am not terribly stressed out about it.
I have not seen this type of challenge regarding security or ownership interest up close myself.
That does not mean it has not happened on a deal I have done.
It just means that any ruckus was sent directly to the right people (the escrow company and the title company) and not to me (if it happened).
Per my short sale escrow officers, it does happen sometimes (though seldom) that a lender is not compensated correctly at the time of sale (eg: the payoff comes in $1000 short) and nobody notices until after the close and recording.
Per them, it then ends up as either a small write off (the bank says “oh fuck it, its only a grand”) or the escrow company eats it (assuming the mistake is primarily theirs) or the lender puts in a claim with the title company (who pays all or part of it).
They insure the new buyers ownership and the old owner’s conveyance.
I have never heard of a lender coming after a ex-borrower-cum-seller or after a new buyer or even attempting to undo a sale.
I suppose it is possible but it ranks along with ranks (along with FHA short refis) as a unicorn.
