Overview

What is title insurance?

Title insurance guarantees that buyers and lenders benefit from clean ownership title. It provides

coverage against financial loss arising from title defects and other irregularities relating to

property acquisition and mortgage finance. It, therefore, re-establishes clean title on behalf

of the owner.



Title insurance also frees investors and their lenders from having to understand and self-insure

risks inherent in complex legal opinions in various languages, formats, contexts, and degrees

of reliability.

What are the benefits?

Title insurance:

• Makes real estate transactions safer

• Facilitates and accelerates cross-border acquisition and mortgage finance

• Allows Europe-wide legal due diligence, which eliminates the need to have the same

documents translated and checked by buyer, lender or investor

• May cover cases of defective title, violations of restrictive covenants, etc., by transferring

defined risks from the real estate buyer or mortgage lender to the title insurer

• Protects investors in distressed real estate assets against both hidden, as well as known, defects

• Makes real estate, as well securitization markets, more liquid and efficient.

What is covered by title insurance?

Loss arising from:

• Defects, liens, encumbrances on legal title

• Fraud, forgery and error

• Right of access

• Zoning & permitting issues (with additional endorsement)

• Invalidity or unenforceability of insured mortgages.

What is not covered by title insurance?

Title insurance does not cover post-closing events, such as future administrative decisions

regarding zoning or permits. It also excludes pending litigation and consequential damages,

e.g., business disruption or loss of future profits.

Why have US buyers and banks used this instrument for over 100 years?

Title insurance was created to allow banks to provide the same mortgage conditions nationwide,

despite laws and regulations that vary from state to state, and even from county to county.

This is similar to the situation for multi-jurisdiction transactions in Europe.

How big is the market in the United States?

Title insurance is used for most US commercial and residential transactions. In 2007, the industry

generated premium revenues of $15+ billion.

How large and well-capitalized is Fidelity National Financial?

Fidelity National Financial (NYSE: FNF) is the world’s largest title insurance company, with revenue in 2013 of $5.96 Billion, $1.64 Billion in Title Group Claims Reserves and a $5.76 Billion FNF overall investment portfolio.

Who can use title insurance?

• Investors, developers, law firms, and corporate end-users

• Real estate funds and banks operating across borders

• Property sellers

• Distressed mortgage debt and real estate equity investors

• Issuers of commercial or residential mortgage-backed securities (CMBS/RMBS).

How does title insurance work?

• In the event of a third-party claim challenging the owner’s title or the lender’s

mortgage, Fidelity Title will be responsible for defending against the claim at its expense.

• If this litigation proves unfavorable, Fidelity Title will indemnity the policyholder for

its loss, up to the amount of the insurance.

• The premium is paid only once, at closing, and the policy remains valid for the entire

duration of ownership, without additional cost or yearly premiums.

Can title insurance also be useful to property sellers?

Sale and purchase agreements typically include representations and warranties by the seller

relating to a number of issues, including title. Sellers can replace these with title insurance

and eliminate contingent liabilities, the need for cash collateral, and post-closing challenges.

Does the title policy fall under European or US laws?

Policies can be issued in New York or in London, subject to US or European laws.

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Comment by Sossi Crilly, Crepig Adviser on July 7, 2009 at 3:12pm
Scott please post this on title insurance.

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