Demotech Finds Losses in 2008 Worst Ever for Title Insurance Industry

The 2008 financial results for the Title insurance industry were less than stellar. In fact, it was the worst year ever recorded in the history of “Demotech Performance of Title Insurance Companies.”

See: http://www.marketwire.com/press-release/Demotech-Inc-982099.html

I can point to several reasons for this, but the one that comes to mind first is the same one in all other financial firms: the sacrifice of tested business models and underwriting to the extigency of obtaining a large volume of business to maximize quarterly returns.

Now, with property values falling and foreclsoures happening on a regular basis, all of the title defects which are glossed over in an inflating and overvalued market are being uncovered, or even created (see livinglies.wordpress.com, who details some of the underlying ownerhsip and title problems inherent in the securitization of loans – or, at least, from the processes that loan orignators and the secondary market were using).

These defects are now required to be cured – if the title insuance companies continue to use letters of indemnity to ‘kick it down the road’, these issues will simply arise down the line. (I wonder if this pratice is still routinely used, after the LandAmerica debacle that demonstrates that the title insurance companies may not be around forever to indemnify each other 10 years down the road when the title issue cannot be ‘kicked down the road.’)

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